Carbon reduction initiatives spur debate

SBB 25 April  The merits of the European Union’s Emissions Trading System and other carbon reduction initiatives generated a spirited debate during Platts Steel Business Briefing’s third-annual Green Steel Strategies conference in Berlin.

A panel including; Steve Rowlan, Nucor’s gm of environmental affairs; Baroness Worthington, a member of British Parliament and founder of Sandbag; Christopher Beauman, senior adviser to the European Bank for Reconstruction and Development; and Mike Romano, vp of strategic accounts for NALCO; discussed the challenges of operating under current and proposed mandates.

Worthington argued a number of European steelmakers are “sitting on a large set of allowances” under the EU’s carbon trading scheme, as emissions have been below previous estimates.

Some say that’s simply due to reduced steel production amid the recessionary economic climate, and when one panelist questioned whether steel producers believe in the initiative, Worthington fired back: “It’s not whether you believe in it or not. It’s not a ghost or God. It’s actually a functioning policy that’s in place right now to bring carbon [emissions} down.”

Many involved in European carbon trading argue there should be intervention to prop up the sagging carbon price (a result of surplus emissions), such as a set-aside of allowances, as low prices do nothing to spur investment into new technology.

European steelmakers have told Platts SBB there should be no “manipulation” of the market, which is just designed to cut emissions.

Rowlan said cap-and-trade initiatives like those in place in Europe and being considered in the US put steelmakers at a cost disadvantage to competitors in regions without such policies. “To an industry that wants to be competitive, it is all about cost,” he said. “How does the steel industry survive?”

Beauman conceded higher costs “are inevitable” in the effort to reduce global CO2. “The question is at what spread and at what fairness?” he said.

Still, Romano said unproven and costly technologies like carbon sequestration aren’t the answer in the near term. “The technologies aren’t coming to the forefront in the next five years,” he said.

Eurofer: Europe’s carbon reduction scheme ‘heavy burden’ for industry

Europe’s energy intensive industries continue to complain about the future cost of carbon credits. Issues of cost and the effectiveness of current regulation is legitimate. A life cycle approach to emissions is still not part of European policy and sometimes costs can lead to less investment in new, cleaner technologies. But ultimately the effect of the weak economy will have a far greater effect on invesment in European industry.

SBB 20 April Europe’s approach to reducing steelmakers’ carbon emissions presents “a heavy burden to the competitiveness of the industry” that ultimately restrains investment in new facilities and technologies aimed at achieving the same goal, according to German Steel Federation president Hans Jurgen Kerkhoff.

Kerkhoff, speaking at Platts SBB’s third annual Green Steel Strategies conference in Berlin, said while the European Union’s carbon reduction targets are ambitious, their impact is lessened as other regions around the world have not committed similarly to the effort. And the cost of such measures – which will total billions of euros annually – take funding away from important technological advances that many producers already are undertaking.

The German steel industry on its own realized a 2.4% year-on-year reduction in carbon emissions in 2011, but a steel life-cycle assessment approach should be the focus of emissions initiatives going forward, he said.

“Instead of regulatory investments, we should give more priority to technological developments,” Kerkhoff said, adding that his organization is “in constant political discussions in Berlin, as well as Brussels,” home of the EU. “Climate protection begins with steel,” Kerkhoff said. “Steel is the basis of sustainable value creation. A sustainable economy can only grow up with and out of industry.”

Echoing Kerkhoff’s sentiments, Danny Croon, environment director for Eurofer, said in a separate presentation that the industry views Europe’s carbon measures as “unilateral and disproportionate” to other regions of the world.

European mills see differing profits from carbon credit sales

In the current period of the European Emissions Trading System, steelmakers have been left with a surplus of carbon credits. This surplus may be reversed as restrictions on emissions become more stringent from next year onwards but for now these credits are a tempting way to bolster ailing balance sheets. However, the key to getting the most out of these credits is a proper strategy and some steelmakers are achieving almost double the return per credit as others, as this story from Platts Steel Business Briefing’s Daily Briefing shows.

SBB 19 March – SSAB sells surplus carbon credits as emissions fall

Sweden-based steel producer SSAB saw greenhouse gas emissions at its European plants decline in line with production last year to 5.5m tonnes of carbon dioxide. The company also took the opportunity to bolster its balance sheet by selling 4.1m surplus carbon credits.

SSAB earned SEK 275m ($40.47m) from the sale of carbon credits last year. This would suggest it earned just $9.87 for each of the credits.

The company sold most of the credits towards the end of the year when SSAB’s blast furnaces were running at low utilisation levels, a SSAB spokesperson says. Carbon credit prices fell sharply in Q4, Platts SBB notes.

ArcelorMittal earned an average of $18.6 per credit last year, indicating a more sustained sale of credits through the year, analysts suggest.

As part of the European Emissions Trading System (ETS), steelworks must report their greenhouse gas emissions and hand over one carbon credit for each tonne of carbon dioxide equivalent emitted. In the current trading period (2008-2012) steelmakers have been given sufficient carbon credits to cover their emissions. In fact they have received more than they have so far used as the allocation was calculated before the 2008 financial crisis and so actual emissions have been lower than previously expected.

SSAB was granted 36.7m credits for 2008-2012 and now has 7.5m remaining to cover emissions this year. SSAB could therefore have more credits to sell unless it increases its European steel production by around 36%. Platts SBB calculates.

SMA recognizes innovation, sustainability and safety efforts

SBB 16 May The Steel Manufacturers Association recognized a number of companies and individuals Tuesday at its annual members conference in Washington, DC, highlighting achievements in US minimill steelmaking innovations, safety, environmental stewardship and community involvement.

SMA chairman and Nucor president John Ferriola presented the 2012 SMA Achievement in Innovation award to CMC Steel Arizona for CMC’s partnership with Danieli Corp to build the first continuous cast/roll/cut-to-length micro mill, which enables cost-effective steel production at smaller steelmaking facilities.

The Don Daily SMA Achievement in Safety award was given to CMC Steel South Carolina and SSAB Alabama for what the SMA called their “leading role in promoting safety improvements in the EAF steel industry.”

SSAB Alabama and Keystone Steel & Wire received the 2012 SMA Achievement in Environmental Stewardship and Recycling award for their extensive recycling programs that promote the principle of sustainability. SMA’s member companies account for over 75 percent of total US steel capacity, and utilize a feedstock almost entirely composed of recycled scrap metal.

The 2012 SMA Achievement in Community Involvement Award was presented to Evraz Pueblo, CMC Steel Alabama, Nucor Decatur and Nucor Tuscaloosa. Evraz Pueblo was recognized for assisting veterans, who comprise a quarter of the facility’s workforce, with re-entering civilian life and finding employment within the steel industry. CMC Steel Alabama was recognized for relief provided to the Birmingham community following tornadoes there in April 2011. Nucor Steel Decatur and Tuscaloosa were also recognized for April 2011 tornado relief efforts.

EU OKs compensation for big energy users hit by power costs

European steelmakers have oft bemoaned the costs of emissions trading systems. This includes the indirect costs from higher energy prices as weell as the direct costs of emitting greenhouse gases. Now the European Union has agreed to allow some compensationfor higher electricity prices. Although this will not eliminate the added costs to steelmakers, it should, if memebr states provide the cash for compensation, mean that the future of EAF steelmakers in Europe will be decided by market conditions, not by environmental regulation.

SBB 24 May The European Commission has adopted a framework under which member states may compensate high energy users, including steel producers. This is in response to the higher electricity costs expected to result from a change to the EU Emissions Trading Scheme as from 2013.

The regulation will allow subsidies of up to 85% of the increased cost faced by the most efficient companies in each sector from 2013 to 2015, a cap that will gradually fall to 75% in 2019-2020.

However, European steel industry body Eurofer says that is grossly insufficient and will not restore the level-playing field with competitors outside the EU.

At first glance, the most impacted products (EAF steel and downstream) would be covered by a maximum 50-60% of the indirect CO2 cost, should member states give the maximum they are allowed to as per guidelines, a spokesman for Eurofer told Platts Steel Business Briefing in an emailed response to questions on Wednesday.

“Given the current economic situation and the state of public finance in the EU, we don’t expect member states to give away much,” he added.

China’s steel industry tops 20m UN carbon credits

Earlier this year, China’s steel industry earned its 20 millionth carbon credit. Projects such as the Clean Development Mechanism have helped steelmakers, especially in China and India, to find financing for energy efficiancy investments. With India introducing its own energy efficiency certificate trading suystem and China looking at various ways to price carbon these kinds of scheme are likely to continue aiding investment. To hear what other factors are driving investment in the steel industry come to SBB’s third annual Green Steel Strategies conference in Berlin on 19-20 April.

Platts SBB 10 February The total number of Certified Emission Reductions (CERs) issued to the Chinese steel industry crossed the 20 million mark this week, Steel Business Briefing understands. 33.5m CERs have now been issued to steelmakers globally.

820,320 CERs were issued to China’s Jinan I&S on 8 February, taking the company’s total issued CERs to over 5.9m. The market value of CERs has fallen to around €4/t currently but Chinese steelmakers have mostly entered into contracts with a price of around €7-8/t, analysts tell SBB.

CERs are issued by the UN’s Clean Development Mechanism to projects which lower greenhouse gas emissions. One CER is given for a reduction in greenhouse gas emissions equivalent to one tonne of carbon dioxide.

Jinan I&S earned the latest batch of CERs from a plant it has built to generate power from waste gases at a blast furnace and coking oven at its plant in eastern China’s Shandong province. The plant reduces CO2 emissions by over 2m t/y.

China and India dominate CER issuance in the steel industry, accounting for over 97% of CER granted to the industry. Jinan I&S is the second biggest beneficiary after India’s JSW Group.

Australia may not meet renewable energy targets

As government’s manage the transition to greener economies, a balance has to be struck between encouraging investment in renewable energy and ensuring the economic, as well as the environmental, sustainibility of domestic industries. Considering the significant lobbying from all sides, it is hardly suprising that the implementation of carbon pricing mechanisms is rarely smooth. To learn more about how the steel industry will be affected by developments globally, see SBB’s third annual Green Steel Strategies conference in Berlin on 19-20 April.

SBB 10 February Low wholesale electricity pricing, coupled with low Renewable Energy Credits (RECs) prices, places Australia at risk of missing its renewable energy target, carbon analytics research firm RepuTex tells Steel Business Briefing.

“We believe that wholesale electricity prices would need to at least double to encourage further investment in the wind sector in order for Australia to meet its renewable energy target, even allowing for the introduction of carbon pricing,” RepuTex executive director Hugh Grossman says.

Australia’s carbon tax will be implemented in July at a fixed rate of $23/tonne and increase 2.5% annually until 2015 when it will move to an emissions trading scheme.

The government intends to assist steelmakers in Australia, likely to be one of the hardest hit industries, with the introduction of its Steel Transformation Plan. The STP is expected to protect the sector from around 94.5% of the carbon price, but it is not yet known how this will change if the price increases.

Melbourne-based RepuTex believes Australia is at risk of missing its renewable energy target, which calls for 20% of electricity to be generated from renewable sources by the year 2020. It forecasts the actual figure is likely to be closer to 16-17%.

Currently just under 10% of electricity demand in Australia is met by renewable sources, mostly through wind and hydroelectric generators.

“Wind generators create RECs to encourage generation from the sector, but the Office of the Renewable Energy Regulator is forecasting an average 2012 price for RECs of just under $35.24/MW/hour, significantly lower than in recent years,” RepuTex said.