Steel decarbonisation gathers speed
The announcement within the last week of over 6mn t/yr of new direct-reduced iron (DRI) capacity and five new electric arc furnace (EAF) sites by the early 2030s suggests that conditions are becoming increasingly favourable for low-carbon steelmaking.
German steelmaker Salzgitter will fully move to hydrogen and renewable energy-based DRI-EAF steelmaking by 2033. It will award construction projects for industrial facilities by the end of this year.
ArcelorMittal announced further DRI and EAF capacity in France, including 2.5mn t/yr of DRI-EAF capacity at Dunkirk and an EAF unit at Fos-sur-mer to be fed by scrap, requiring a total investment of €1.7bn ($1.94bn). This brings the steelmaker's total DRI capacity plans for 2030 to roughly 10.8mn t/yr, including projects in Spain, Belgium, Germany and France.
Swedish steelmaker SSAB announced last week that it would do the same, bringing forward plans for almost 3mn t/y of EAF capacity at Lulea, Sweden, and Raahe, Finland, to 2030 from 2030-45.
ETS phase-out incentivises decarbonisation
The timing of steelmakers' decarbonisation plans suggests that EU policy on carbon costs is having the desired push effect towards greener steelmaking. While so far only pilot-scale hydrogen-based steel projects are operational, several industrial-scale projects are planned to come on line around 2026, when the ETS-CBAM transition begins, and over 30mn t is planned by 2033, after the phase-out is to be completed in 2030.
The phase-out of free allowances under the EU emissions trading system (ETS) and the introduction of a carbon border adjustment mechanism (CBAM) over 2026-30 in theory provides protection for low-carbon steelmaking in the EU, while removing the incentive for steelmakers to cut costs by continuing to use coal or gas as an energy source. And the threat of paying over €80/t in carbon costs is an important incentive for EU steelmakers to decarbonise. But European steel association Eurofer argues that the EU should continue to grant free emissions throughout the whole ETS-CBAM transition phase to mitigate the carbon costs that steelmakers will bear, alongside the considerable investment costs of reducing emissions by 30pc by 2030, estimated by Eurofer to be around €25bn. "The combined effect of the huge investment needed to decarbonise — and also [of] simply cutting emissions by cutting production, which is inevitable given the existing technology, plus skyrocketing energy prices and rising production costs will put enormous and unsustainable pressure on our members," Eurofer director of market analysis Alessandro Sciamarelli said. Eurofer estimates the cost to the industry in 2030 will be €14bn at today's emissions levels or €8.4bn presuming a 30pc emissions reduction.
Cross-sectoral relationships pivotal
The EU plans to have 6GW of renewable hydrogen electrolyser capacity by 2024, and 40GW by 2030, as well as 40GW of production available for import from outside the EU by 2030. But partnership with companies in upstream and downstream sectors have been determining factors for steelmakers assessing the viability of hydrogen-based DRI-EAF steelmaking.
Salzgitter and Danish energy provider Orsted aim to establish a circular supply chain, within which Salzgitter will supply renewably-produced steel, largely for use in the construction of wind farms, and Orsted will supply renewable (wind-generated) energy, as well as returning windmill parts to Salzgitter as low-CO2 scrap at the end of their life span. The company aims to increase the amount of scrap it uses by 50pc to 3mn t/yr by 2033. Salzgitter will also supply low-CO2 steel to all of carmaker BMW's European plants from 2026 onwards.
ArcelorMittal recently added to its investments in the renewable energy sector, committing $100mn to sustainable energy-focused investment fund Breakthrough Energy, and $5mn to Israel's H2Pro, a company that has developed E-TAC (Electrochemical — Thermally Activated Chemical) technology that splits water into hydrogen and oxygen in a process similar to electrolysis.
For SSAB, the abundance of hydroelectric and wind power in northern Sweden has played an important part in allowing the steelmaker to fully commit renewable-powered EAF production within the next eight years, as has its partnership with iron ore mining firm LKAB and energy provider Vattenfall.
Further progress by steelmakers in forming supply or offtake partnerships might encourage further decarbonisation commitments in the near future. German steelmaker Dillinger-SHS has an initial agreementwith engineering company Paul Wurth and steelmaker Liberty to develop a 2mn t/yr DRI plant including 1GW of hydrogen electrolysis capacity at Dunkirk. The steelmaker is also working with seven energy and engineering companies to develop a "hydrogen economy" in the German Saar region, the French Lorraine region, and the state of Luxembourg by producing 61,000 t/yr of hydrogen and investing €600mn in production facilities and transport infrastructure.
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EU HRC market gears up for mill consolidation
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US Fed cuts rate by half point, signals more: Update
US Fed cuts rate by half point, signals more: Update
Adds chairman Powell comments, economic projections. Houston, 18 September (Argus) — The US Federal Reserve cut its target interest rate by 50 basis points today, the first rate cut since 2020, with policymakers signaling they expect to make another half-point worth of cuts by the end of 2024. The Fed's Federal Open Market Committee (FOMC) lowered the federal funds rate to 4.75-5pc from the prior range of 5.25-5.5pc, which was a 23-year high. The Fed had kept the target rate unchanged since July 2023 after hiking it for more than a year in the most intense rate-tightening campaign in four decades to quash inflation, which peaked at 9.1pc in mid-2022. "The committee has gained greater confidence that inflation is moving sustainably toward 2pc, and judges that the risks to achieving its employment and inflation goals are roughly in balance," the FOMC said in its statement after the two-day meeting. "Job gains have slowed, and the unemployment rate has moved up but remains low." In their latest economic projections, the Fed board and policymakers expect the target rate range will end 2024 near a midpoint of 4.4pc compared with an end of year midpoint of 5.1pc projected in June, which implies further cuts amounting to 50 basis points by the end of 2024. Policymakers also penciled in another 100 basis points of cuts over the course of 2025. "We're recalibrating policy down over time to a more neutral level and we're moving at the pace that we think is appropriate given developments in the economy," Fed chair Jerome Powell told a press conference after the meeting. "The economy can develop in a way that will cause us to go faster or slower. The US economy is in a good place and our decision today is designed to keep it there." The Fed's economic projections see core Personal Consumption Expenditures inflation — the Fed's favorite measure of inflation — ending 2024 at a median rate of 2.6pc, down from a prior forecast of 2.8pc. Policymakers see core PCE inflation falling to a median of 2.2pc by the end of next year. The outlook for the unemployment rate for the end of 2024 climbed to 4.4pc from 4pc penciled in at the June meeting. Policymakers expect gross domestic product (GDP) growth to end 2024 at an annual 2pc, slightly down from a prior 2.1pc projection. The latest policy meeting comes as the Consumer Price Index (CPI) eased to an annual 2.5pc in August , down from 2.9pc in July, the Labor Department reported on 11 September. Inflation had ticked up to 3.5pc in March from 3.1pc in January, prompting the Fed to turn more cautious about beginning its rate cuts. US job growth has recently slowed sharply, falling to an average 116,000 in the three months through August from 211,000 for the prior three months. The jobless rate rose to 4.3pc in July, the highest in three years, before edging down to 4.2pc in August. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US Fed cuts rate by half point, signals more to come
US Fed cuts rate by half point, signals more to come
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Hoekstra to face 'tough' EU parliamentary hearings
Hoekstra to face 'tough' EU parliamentary hearings
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