Posts Tagged ‘Australia’

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.

BlueScope quick to access government finance

Alongside tough regulations to reduce greenhouse gas emissions, incentives are being made available to steelmakers to enable them to invest in more energy efficient, sustainable technologies. For information on how steel can transform itself into a more sustainable and environmentally friendly industry, see Steel Business Briefing‘s third annual Green Steel Strategies conference in Berlin on 19-20 April. For more information, click here.

SBB 12 December On the day the Australian government’s Steel Transformation Plan (STP) officially took effect, sheet and plate producer BlueScope Steel said it would tap the scheme for A$100m (US$100m) in “assistance.” The assistance package was announced by Canberra in August to help the country’s steel producers transition to the new carbon tax due to start in July next year.

Melbourne-headquartered BlueScope noted that the STP came into effect on 9 December and it would apply for an “early advance of $100m of payments allocated to it under the STP.”

In a statement, BlueScope chief executive Paul O’Malley said the STP advance, along with a capital raising and the restructuring of the company’s Australian operations, would help it “return to profitability and growth.”

“We believe the federal government’s Steel Transformation Plan is tangible evidence of the importance the government places on having a viable, competitive and innovative domestic steel industry in this country,” he said.

BlueScope put the No.6 blast furnace at its Port Kembla works, south of Sydney, on care and maintenance in early October, along with a hot strip mill near Melbourne, as part of its strategy to exit loss-making exports.

The flat steel producer has reduced crude steel capacity to 2.6m tonnes/year, which will primarily target the domestic construction sector. However, BlueScope’s target markets of home and high-rise property construction continue to contract and much of the new large-project work in Australia uses steel imported from Asia, Steel Business Briefing notes.

Canberra helps steel makers in new carbon tax regime

The argument that there is little the steel industry can do to radically cut greenhouse gas emissions in the next few years is valid. Australian steelmakers have used it to ensure that the proposed carbon tax there has only a minimal effect on the industry in its first phase. However, the protections are intended to run out in time, and the industry will have to begin looking for radical solutions to its emissions now if it wants to avoid heavy costs at a later date.

SBB 12 JulyAustralia’s steel industry has emerged relatively unscathed from Canberra’s new A$23/tonne (US$24.6/t) carbon tax, which takes effect in July 2012. Both BlueScope Steel and OneSteel welcomed the government’s decision to protect the sector from 94.5% of the new carbon price.

As part of a new steel transformation plan (STP), the Australian government will commit A$300m to the sector over four years to help steel companies transition to the new carbon tax. Canberra has also called for an independent review to assess the impact of the tax and other factors on the country’s steel sector.

BlueScope chief executive Paul O’Malley said the STP on carbon “removed one significant hurdle” for the steel producer, which is already battling high raw materials prices, weak domestic demand and the high Australian dollar. O’Malley lobbied furiously against an earlier version of the tax, saying it would have cost BlueScope some A$500,000 to A$1m over the first eight years.
OneSteel chief executive Geoff Plummer said steelmaking technology constraints meant there was little the sector could do to reduce emissions. He said the STP would allow the company to remain competitive for the next four years.

The $300m compensation package still needs to be signed off by the Greens, who hold the balance of power in the Australian senate, but is likely to be passed in its current form.

CLSA steel analyst Scott Hudson told Steel Business Briefing that the financial impact on the steel companies in the near-term looked “negligible.” However, there was some uncertainty around how coal producers may eventually pass on tax-induced cost increases to their customers, he said.

UK Steel condemns ‘crazy’ carbon floor price

The coalition government in the UK promised to be the ‘greenest ever’. After facing much criticism for not living up to this claim, it has recently pushed a number of policies to improve its green credentials. However, according to some, the measures have been rushed, are poorly planned and may not succeed in greening the economy. On top of this, of course, they may add significantly to the costs of steelmakers in the UK.

SBB 10 May The UK government’s planned carbon floor price (CFP) would cost more than necessary to achieve its goal, Ian Rodgers, policy director at UK Steel, tells Steel Business Briefing. Furthermore, it could fail in its goal of providing certainty in carbon credit prices, he adds.

The CFP is intended to guarantee the carbon credit costs of electricity producers in the UK from 2013. These are expected to be passed to consumers, including steelmakers.

The goal is to encourage investment in renewable and nuclear power; investors want to know their future costs in order to estimate when investments will see a return. However, new nuclear capacity will not appear for many years. It is “crazy” that energy intensive industries must pay in 2013 to secure a price in 2020, Rodgers says. It would mean UK steelmakers facing additional costs compared to Europe, he warns.

The scheme may not provide certainty in carbon prices, analysts say. The amount electricity producers pay will be set two years in advance based on exchange-traded futures contracts. The futures contracts price reflects current spot prices plus carry and inflation, not the future spot price, says Emmanuel Fages, head of carbon and energy market analysis at Orbeo. Fluctuation on the spot or futures markets could cause much higher or lower carbon credit costs.

Also, unlike a contract, a tax could be scrapped by a future government. A contract-based approach between government and electricity producers would provide greater certainty, Rodgers says.

The CFP is a signal to investors that it is serious about encouraging investment in low-carbon electricity generation, the treasury insists to SBB.

BlueScope hits back at Canberra carbon tax claims

The move by the Australian government to introduce a carbon tax, to be followed by an emissions trading scheme, has been met by even more vociferous opposition from steelmakers than Europe’s ETS. As this article suggests, the actual costs remain unclear.

SBB 3 May BlueScope Steel has rejected claims from Australian federal treasurer Wayne Swan that Canberra’s proposed carbon tax would only add an extra A$2.60 (US$2.70) to the cost of a tonne of steel.

Swan said at the weekend that a carbon tax would have around 1/20th of the impact on the price of steel that Australia’s soaring dollar was having. He noted that the Australian dollar – which briefly passed the A$1.10 versus the US dollar barrier on Monday – had cut Australian steelmakers’ earnings by A$50/t in 2011.

Movements in the dollar “have a far greater impact on these industries than a potential carbon price,” Swan said.

But the country’s largest steel producer accused Swan of trivialising the impact a carbon tax would have on its business, with chief executive Paul O’Malley calling the “latest attack” on Australia’s steel industry “simply unacceptable.” He said the total estimated cumulative cost to BlueScope over the first eight years of the scheme – due to begin in 2012 – would be between A$500m and A$1bn.

“It is nothing like the incorrect A$2.60 per tonne of steel which is based on very selective use of data that counts only part of the cost, in only the first year,” said O’Malley on Monday. “According to the government’s own data, in the first year alone the cost could be up to $39m,” he said.

BlueScope has been reeling from soaring raw materials costs, the high A$, a flat domestic construction sector and import competition, Steel Business Briefing notes.

Carbon tax ‘could end steelmaking in Australia’

As the Australian Labor government pushes forward its green agenda it has come under fire from industry, in particular the steel industry. Debate on the issue continues and the impact on the industry is not yet completely clear. However, BlueScope’s assessment is certainly bleak.

SBB 18 April Australia’s proposed tax on carbon dioxide emissions could cost BlueScope Steel $400m and end steel production in Australia, claims Paul O’Malley, ceo of the country’s largest steel producer. However, proponents of the tax say the added cost will be minimal.

Australia intends to impose a carbon tax from 1 July 2012 as a prelude to an emissions trading scheme three-to-five years later. Although no price has yet been announced, the government’s top climate advisor has suggested A$20-30 (US$21-32/t) per tonne of CO2, Steel Business Briefing understands.

The success of Australia’s mining industry has blinded the government to the country’s weak manufacturing sector, O’Malley says. “If you tax the local steel producer, you are basically saying we want to encourage imports of steel and hide the carbon overseas.” A tax on steel imports into Australia would be necessary to ensure domestic steelmakers can compete locally, he added.

However, the government suggests the industry is overestimating costs. Imposing a A$20/t tax on carbon dioxide emissions would add only A$2.60/t to the cost of steel, claims climate change minister Greg Combet.

The Australian Workers Union argued on Friday that the steel industry should be exempt from the tax and has threatened to withdraw support from (Labor) prime minister Julia Gillard if any steel jobs are lost. The Greens, which hold the balance of power in the Australian senate, have acknowledged that the carbon tax is likely to result in job losses.

Climate change in Australia hits met coal production

How much of the flooding in Queensland is due to climate change? Quite a lot I would say. So we could almost say that the higher quarterly prices facing the Japanese and others and the higher global spot prices (up to $230-240/t) in coking coal prices are due in part to climate change. Of course, strong Chinese imports have also helped!

SBB 9 March The worst flooding in outback Queensland for 120 years could result in a coking coal production loss of up to 10m tonnes, industry sources estimate. Though the heavy rain has not so far fallen directly in the Bowen Basin – the state’s metallurgical coal producing region – rail lines used to transport coal to the port at Dalrymple Bay are under water.

Anglo American Metallurgical Coal spokeswoman Jacqui Strambi told Steel Business Briefing that the met coal industry estimated that output of 5-10m t had been lost due to the flooding. The Blackwater railway system, the state’s second largest transporter of coal after the Goonyella line, has been closed for more than a week. The Moura line is also closed, while other rail links are operating at reduced capacity. SBB understands that Anglo American halted operations at two of its Queensland mines.

A spokeswoman for major producer BHP Billiton-Mitsubishi Alliance said there had been no impact to date from the weather on production at the company’s operations in the Bowen Basin. But there had been reduced rail service since February because of earlier rain.

With the floodwaters in Queensland still to subside and more damage to infrastructure expected, tighter supply of coking coal could push spot prices closer to $240/t from around $230/t currently. In its latest commodities report, Macquarie said new export supply from US producers could come on stream in the third quarter of this year but prices are likely to be “extremely tight” in the April-June quarter.

Australia exported 135m tonnes of met coal last year and is forecast to ship 150m t in 2010.