Posts Tagged ‘European Union’

Salzgitter strip unit is 92% self-sufficient in electricity

Steelmakers may still be concerned about the cpotential costs of Europe’s Emissions Trading System. Although costs will likely be less than estimated by many (see below) the additional cost of power is still a worry. However, this does not change the fact that captive power supply should still cut costs. Power generators expect to be able to pass on thier costs from the ETS to customers in full. As such the additional cost to captive production should be equal to the additional cost of buying in power. Meanwhile, steelmakers with captive power will be able to choose how to allocate their allocated carbon credits, potentially making their additional costts lower.

 Platts SBB News – 1 June 2012 German steelmaker Salzgitter is around 60% self-sufficient in electricity across its strip steel plant in Salzgitter and its Peiner beams mill. The electricity generated at the strip mill site – by two in-house power plants – has an annual market value of around €150m, the company told Platts Steel Business Briefing.

The two 110 megawatt units were finished a few years ago and have since been optimised. Strip production in Salzgitter is now 92% self-sufficient, whereas the Peiner meltshop still relies 100% on external power suppliers.

Together, the Salzgitter stations produce roughly one terawatt of power per year, all of which is consumed on site, the company said. Self-supply creates an annual saving for the company of up to €25m, according to the firm’s spokesman.

However, changes to the European Union’s emissions trading scheme for carbon-dioxide from 2013 onwards could mean that Germany’s steel industry incurs extra costs totalling up to €485m/year, according to Salzgitter’s comments to the German press.

This action would add additional costs of between €17 and €37 per tonne of steel produced, according to Salzgitter’s ceo, Heinz Jörg Fuhrmann.

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.

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.

Eurofer expects EC to ‘stick to the rules’ on climate change

With international climate change negotiations still making slow progress, regions are taking their own steps to tackle the issue. Steelmakers’ associations, concerned by the added cost to their members, have fought a rearguard action against stricter emissions regulations. Both European Commission’s DG Climate Action and Eurofer have argued firmly about what measures are and are not legitimate. But what is clear is that the steel industry will have to adapt to a more regulated and greener economy. To learn how the industry can adapt to, and even profit from, increased regulation, come to SBB’s third annual Green Steel Strategies conference in berlin on 19-20 April.

SBB 26 December Some EU member states are in favour of moving to a 30% carbon emission reduction target and the European Commission will present a member state-led study of the investment benefits of a 30% target in the first half of 2012, the commission tells Steel Business Briefing.

However, Eurofer says it “does not see how [the] Durban [conference] could have given grounds for any stricter targets in the period before 2020”. In particular, any increase in EU targets is to be linked to binding reductions in other regions. “None of the conditions set by the EU Emissions Trading System (and set in the ETS) have been fulfilled in Durban,” Eurofer notes.

One source states that following the relative success of international climate change negotiations in Durban, proponents of faster reductions have “more energy”.

The European Court decided to include non-EU airlines in the ETS; The commission released guidelines on state compensation for higher energy prices resulting from the ETS; and the European Parliament’s environment and industry committees have approved the removal of 1.4bn carbon phase 3 carbon credits from the ETS, in order to strengthen prices.

Before the set-aside takes effect it must be first voted in by the parliament’s industry committee, the EU member states and the plenary session of the parliament, explains Carine Hemery of carbon market analysts, Orbeo. This is unlikely to be complete before June.

EU carbon compensation may meet 60% of steelmakers’ need

EAF steelmaking produces significant;y less carbon dioxide directly than integrated steelmaking. however, EAFs are far more vulnerable to increasing energy prices. EU compensation is necessary to maintain the competetiveness of the industry. For more information on how steelmakers, rollers and distributors can ensure their businesses are economically, as well as environmentally, sustainable, come to Steel Business Briefing’s third annual Green Steel Strategies conference in Berlin on 19-20 April.

SBB 22 December The European Commission (EC) released, on 21 December, its guidelines on state aid for industry to compensate industry, including EAF steelmakers, for higher electricity prices as a result of the Emissions Trading System (ETS). However, the provision could mean only 60% of steelmakers’ additional costs are met, Eurofer tells Steel Business Briefing

Elements of the document are unjustified, agrees Ian Rodgers, policy director of UK Steel. One key issue is that the document calls for a maximum of 85% of the theoretical additional costs to be compensated, falling to 80% in 2016-2018 and 75% in 2019-2020.

The EC argues that this is to incentivise less efficient facilities to invest in energy efficiency. However, UK Steel argues that this is unnecessary as the calculation of theoretical costs already includes a benchmark. This means that only the most efficient plants could possibly receive full compensation.

The theoretical costs are also calculated using production levels from 2005-2011. For much of this period Europe was in recession and production levels were abnormally low. This would mean lower levels of compensation for EAF plants, the associations complain. Furthermore, the EC can only give a maximum figure for compensation, meaning EU member states could actually give less than this in reality.

Eurofer hopes that EU member states will support its views and force a revision of the document by the end of the consultation period in January. Germany is likely to support amendments, SBB understands and UK Steel confirms it will ask the UK government to act.

Emissions trading should cost steelmakers less than expected

The changing state of the European carbon markets has led analysts to regularly alter their price forecasts for phase two of the Emissions trading System (2012-2020). New forecasts suggest the cost of carbon trading to Europe’s steel industry could be some €8bn less than Eurofer’s first estimates. To see how environmental regulations will affect your business and how you can make your company competetive in a greener economy, come to Steel Business Briefing‘s third annual Green Steel Strategies Conference in Berlin on 19-20 April. For more information, click here.

SBB 2 December The cost to steelmakers of the European Emissions Trading System (ETS) is likely to be far below initial Eurofer estimates because of a collapse in carbon credit prices, Steel Business Briefing estimates. According to the latest price forecast by Barclays Capital, the true cost of the ETS in 2013-2020 could be around two thirds of its earlier estimate.

However, the effect on producer margins could still be disastrous, Eurofer says. Any additional cost is expected to reduce profits, not increase prices, it notes.

According to a Barclays Capital’s forecast of €22 per EUA on average over 20113-2020, the total cost to the steel industry in that period would be around €15.9bn, compared with Eurofer’s first estimate of €24bn. €8.2bn of the costs would be faced by integrated producers, €400m as direct costs for EAF producers and €7.3bn as indirect costs because of higher energy prices for EAF producers, Eurofer calculates.

Eurofer confirms SBB’s calculation that an average price of €22/t would mean an increase of approximately €5/t on average in 2013-2020 in theoretical production costs for EU integrated steelmakers with the lowest emission, more for those which are more polluting. Meanwhile, EAF steelmakers could see added costs of €7.6/t.

This does not account for any offsetting with even cheaper UN carbon credits or using up credits saved during 2008-2012. During this period, steelmakers received far more free carbon credits than they needed. The true cost is therefore likely to be less than €5/t for the low-emission steelmakers.