Switch to EAF could save struggling EU mills: Laplace

As Europe seeks ways of maintaining its steel idustry in the current economic climate, one suggestion could make steelmaking more sustainable both economically and environmentally. More EAF-based steelmakign could significantly reduce greenhouse gas emissions per tonne of steel. But for this to be sustainable it would require far more significant closures of basic oxygen furnace capacity.

SBB 25 May – The construction of electric arc furnaces at currently idled integrated steelworks in Europe could be a way to secure a future for these sites, Marcel Genet, managing director of consultancy firm Laplace Conseil, told the SBB Steel Markets Europe conference this week in Brussels.

Genet said that closing completely an existing plant has a high financial cost and a strong impact on the relationships with clients. For that reason, Genet believes some of the 8-10 integrated sites currently closed or at risk of closure in Europe could benefit from the construction of electric arc furnaces. This would preserve the existing finishing lines at the site and lower significantly the investments compared to the cost of modernising some of the integrated steelworks equipment.

Europe has a plentiful supply of scrap and the price of scrap would not be impacted by the addition of 20-30m t/y of new EAF capacities. Genet noted that a number of scrap suppliers already price their scrap based on the iron ore prices.

Genet reported two contrasting examples of uneconomic integrated works in France during the 1980s. While the Neuves Maisons works in northeastern France was re-converted to EAF operation and is now producing under the control of the Italian Riva group, the works at Mondeville in Normandy ultimately faced closure after having decided to stick with the integrated route.

Laplace Conseil proposed a similar solution for the ArcelorMittal works in Liège, Belgium, back in January, as reported by Platts SBB. Crude production at the plant was halted permanently a year ago.

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.

Carbon leakage is a threat to Europe, says TK executive

The move towards pricing carbon dioxde emissions has caused concern that the competetiveness of the industrycould be reduced. These concerns have been further excacerbated by reports in the mainstream media that claim the industrywill profit fromthe ETS.

SBB 18 April So long as it is only in the EU that the steel industry needs to buy emission allowances, carbon leakage will remain an issue for the industry, Dr. Hans-Jörn Weddige of ThyssenKrupp told Steel Business Briefing’s recent Green Steel Strategies conference in Brussels.

The sector is expected to be 19.8% short of permits in phase 3, according to Eurofer, assuming the European Union continues to target a 20% cut in emissions by 2020, compared with 2005. It is a myth to view steel producers as having a huge allowance surplus from the 2008/9 crisis as quoted numbers often omit waste gas emissions and can be very misleading, he added. This assessment was supported by financial analysts at the conference.

Moreover, steel is essential for a CO2-lean European Union. The view that Europe needs to move from brown to green industries is also a myth: the issue is to promote a sustainable industry more generally, and for that steel is central. “It is the brown trunk that gives the green tree its competitive advantage,” Weddige commented.

He also argued against the view that technology options can “easily” save the day. They are still decades from commercial realisation. Governments need to provide a predictable, long-term framework for R&D and investment to speed up the process. Paying more for allowances will decrease the financial capacity for innovation of steel companies, Weddige pointed out.

The EU’s carbon market should focus on effectively allocating allowances – it should not be seen “as money making machines for speculators.” The “market needs time and stability” to work efficiently.

Steel must better communicate ‘green’ message, execs say

Although the steel industry has much experience in lobbying, it has failed in communicating more broadly. Partly as a result, environmental policy, and funding for environemntal projects, has been dominated by the power sector. If the steel industry wants greater support for its green investments, it should consider how to spread its message more effectively and to a wider audience.

SBB 12 April The global steel industry must do a better job communicating strides taken to reduce carbon output and touting steel as the “green” material of choice for key markets such as construction and auto manufacturing, officials said last week in Brussels.

“The steel industry has not been a sitting duck,” McKinsey & Co principal Michel Van Hoey told Steel Business Briefing’s Green Steel Strategies conference. “The advancements it has made have been quite impressive.”

Whether it’s promoting the high recyclability of the material, new high-strength lightweight auto steel production or significant carbon reduction initiatives underway, few outside the industry are aware of steelmakers’ achievements.

Van Hoey encouraged them to also communicate better with each other, forming additional partnerships on emissions-reducing technologies and taking a more vocal role in shaping greenhouse gas regulation.

American Institute of Steel Construction director of sustainability Geoff Weisenberger pointed to a recent study pitting a steel-framed building against a comparable concrete one to see which had a lower overall environmental impact. “The steel building outperformed in almost every category,” Weisenberger said, adding however that the differences measured in each category didn’t reach 15% or better. Still, one way to think of steel’s win is if the matchup were a sports series – steel won 4-1, with all games close victories.

Still, few are informed of such wins, and the steel industry needs to do better at collecting and distributing “green” data, increase collaboration with designers and architects from the blueprint stage on and improve the environmental performance of fabricators and others downstream, he said.

Border tax could stop carbon leakage, not global competition

In the absence of a binding international agrement on climate change regions are likely to continue developing their own regulations separately. However, this means regions which pursue stricter regulations will also have to protect the competetiveness of their industries.

SBB 11 April Border adjustments to compensate for the added costs to the European steel industry of the Emissions Trading System (ETS) would be World Trade Organisation (WTO) compliant, argues Susanne Dröge, head of global issues at the German Institute for International & Security Affairs.

Speaking at Steel Business Briefing’s Green Steel Strategies conference in Brussels on 5-6 April, she warned steelmaking capacity could still move to other geographies because of international competition.

A border adjustment on imports would be legal if applied to all regions and on a basis that refers to a non-discriminating standard. For example, using a ‘best available technology’ standard to ensure regions and producers with lower emissions levels are treated fairly, according to Dröge.

A border adjustment on imports and exports would be necessary to combat carbon leakage from the EU. However, working out the exact details of these adjustments would be a long and complicated process, she suggests. Export adjustments are also more difficult to handle under the WTO, she adds.

It is also important to note that the EU steel industry will still face competition from emerging markets. Although China is not a low cost producer compared to CIS, Latin America and the Middle East, it does have low investment costs, fast construction times and a number of other advantages. Meanwhile, the EU continues to face significant steelmaking overcapacity.

Compared to these factors, the effect of the ETS is minor. The EU may therefore see steelmaking capacity decamp to emerging markets even without carbon leakage, Dröge suggests.

‘Green’ steel technologies costly, time-consuming: execs

Any significant reduction in emissions from te steel industry will requirethe widespread use of greener technologies. However, breakthrough technologies are still years from commercial development and very expensive.

SBB 11 April Technologies aimed at reducing steel’s carbon emissions require significant time and capital to develop, mill executives and experts on the topic contend.

Speaking during Steel Business Briefing’s Green Steel Strategies conference in Brussels on 5-6 April, Jean-Pierre Birat, head of the Ultra-low CO2 Steelmaking (ULCOS) program with ArcelorMittal’s global research and development unit, said the industry has worked to reduce emissions for more than 20 years – well before the EU, US and others undertook similar initiatives.

The EU is requiring steelmakers to reduce greenhouse gas emissions by 21% from 2005 to 2020. “We are fighting, running against time because we are told we must have a solution by 2020, which is a tremendous constraint,” Birat said.

Mills have been working on ULCOS technologies, such as the HIsarna project at Tata Steel Europe’s IJmuiden plant in the Netherlands. The €60m (US$86.6m) pilot project features an internal “melting cyclone” that involves direct insertion of coal, ore and oxygen to help reduce CO2 emissions by 20%. If carbon sequestration also is employed, CO2 can be reduced by 80%.

However, even with a commissioning this month, the HIsarna plant’s industrial scale demonstration phase would run from 2014-2018. “We cannot expect any of this technology to be capturing CO2 in a way that makes sense before 2020,” Birat said.

And, as CO2 efforts drive up costs in developed regions, end users could simply buy elsewhere. “They’re going to get it from markets where they can make it cheaper,” Nucor’s GM of environmental affairs Steve Rowlan said.

Carbon markets may exacerbate steelmakers’ costs

European steelmakers are expecting costs from the Emissions Trading System (ETS) to increase. By how much they will increase depends largely on what happens to the price of carbon. However, just as steelmakers have limited experience of the carbon markets, market traders and analysts have little experience of the steel industry. Dialogue between the two sectors could be beneficial to both sides.

SBB 11 April Both the European and global carbon markets could significantly increase costs for EU steelmakers, while at the same time reducing the potential for offsetting those costs, speakers at Steel Business Briefing’s Green Steel Strategies conference in Brussels argued.

European Union Allowance (EUA) prices are expected to rise to around €40/tonne by 2020, according to forecasts presented by Carine Hemery of carbon market analysts Orbeo. Moreover, the amount by which steelmakers can cut their costs by offsetting with UN carbon credits, called Certified Emissions Reductions (CERs), could fall from around €3-4/t currently to just €1-2/t in 2013-2020, she adds.

The December 2011 contract, which has the most liquidity, has consolidated slightly over the last week to €16.97/t on 7 April on the London-based European Climate Exchange (ECX). The December 2011 CER contract also consolidated to €12.97/t.

The carbon markets will have to adjust to a situation in which industrial sectors are buying rather than selling EUAs, says Barclays Capital carbon trader Ben Readman. Utility companies tend to hedge their EUA costs up to three years in advance. However, industrials do not want to sell this far forward, especially as in three years’ time they are also likely to have a shortfall of credits.

Financing available for CO2 technologies, EU execs say

One of the most important themes to emerge from SBB’s Green Steel Strategies conference was that the steel industry is not communicating its progress on environmental issues effectively. This could also be holding back investments as the industry is not properly communicating with providers of state funding, some suggest.

SBB 7 April While economics can make it difficult to implement the breakthrough technologies necessary to reduce steelmakers’ carbon emissions, a panel of financial executives said yesterday options are available to help fund them.

“I think the steel industry in Europe needs to raise its game in competing for funding, for political attention,” Christopher Beauman, senior adviser to the European Bank for Reconstruction and Development, told attendees at Steel Business Briefing’s Green Steel Strategies conference in Brussels. “Only through communication will you get access to bankers, and also to political support.”

Unproven but promising technologies such as the Ultra-low CO2 Steelmaking (ULCOS) programme, carbon sequestration and high-strength lightweight steel production are expensive. But Beauman and his fellow panelists said steelmakers don’t have to go it alone.

Alan Haigh of the Research Fund for Coal and Steel, an organization that helps finance technologically innovative pilot projects undertaken by companies based in European Union member states – as well as their operations abroad – said his organization has an annual budget of €55m (US$78m).

“This is a fund that provides research funding to support the competitiveness of European steel, and it’s available year-on-year,” Haigh said.

He pointed to ongoing European ULCOS pilot projects aimed at minimizing steelmaking’s environmental footprint. “It’s clearly one of our flagship projects,” he said.

Michael Van Hoey, a principal at McKinsey & Co, said, “Historically, the steel industry actually has not received its fair share of funding,” unlike the power and chemical industries. “Be a little bit more proactive,” he said.

Nucor exec says ‘let market drive’ GHG reduction

While integrated steelmakers are very concerned about the direct costs of cap and trade schemes, EAF producers are more worried about the effect on electricity prices.

SBB 7 April Competition and self-directed technological innovation should drive the global steel industry’s efforts to reduce its carbon footprint, not government initiatives, according to a high-ranking Nucor executive.

Speaking on 6 April during Steel Business Briefing’s Green Steel Strategies conference in Brussels, Nucor GM of environmental affairs Steve Rowlan said the US steel industry has already reduced CO2 emissions by some 28-30% since 1990.

“That was not because of any government edict. Competition drives it,” Rowlan said. “We’re looking at more technologies that would make us more efficient. Let the market drive it.”

Controversial climate change legislation that died in the US Congress likely would have resulted in a net temperature reduction of less than 0.1% Celsius. “In statistics, that’s in the chatter,” Rowlan said.

“We’re trading carbon. We’re buying carbon. We’ve got governments involved,” he said. “But in the meantime, nobody’s talking about whether it will make a difference.”

He said various GHG reduction schemes being pursued in the US and abroad could potentially triple electricity rates for steelmakers and other manufacturers.

“We need affordable, reliable and abundant energy. I don’t wish anything bad for the rest of the world, but if they want a cap-and-trade program, more power to them,” Rowlan said. “It takes what would be an otherwise green industry and turns it into a red industry, while we’re not really addressing the problem … if it really exists.”

“You can’t be sustainable if you’re not profitable,” he added. “You can’t be profitable if you’re paying exorbitant amounts for energy.”

‘Cleantech’ sector to double by 2020, says Rautaruukki

Although the move to a greener economy may impose significant costs on steelmakers, it is important to also note the opportunities. Steel companies who develop products for future markets may be more sustainable than those who fail to inovate.

SBB 7 April The global market for “cleantech” products will double between now and 2020 to over $1,000bn, to become the steel industry’s biggest single demand sector, Toni Hemminki, Rautaruukki’s vice president for energy and environment, said at Steel Business Briefing’s Green Steel Strategies summit in Brussels on 5 April.

Cleantech applications are those that reduce the environmental impact of economic activity. ”We expect cleantech [applications] to represent 8% of global GDP in 2020,” he said. In particular, he sees important new uses of steel in wind energy generation, hydro power production, bio-energy harvesting, combustion and light weighting.

“The wind market in particular is growing, and underscores how steel is an important means to cutting carbon emissions”, he added. High strength steels, for example in wind tower lattices, can be used to provide specific energy efficiency solutions for Ruukki’s customers.

More generally, Rautaruukki is studying green steel strategies tailored to providing different solutions to various clients and sectors. One focus is improving the strength of plate because using a light-weight, high-strength steel increases payload, saves energy and reduces CO2, Hemminki noted.