19/06/25
Nationalisation may prop up surplus steel: Worldsteel
New York, 19 June (Argus) — Redundant steelmaking capacity is unlikely to be
reduced by decarbonisation and market forces, given global fragmentation and the
focus on resilient supply chains, Edwin Basson, director general of
international industry organisation Worldsteel, told Argus this week. "If you
asked me five years ago, I would have said I suspect decarbonisation and market
forces would have led to reductions in redundant capacities, but the few recent
examples we've seen of nationalisation or re-nationalisation,
quasi-nationalisation, will most likely see countries try to retain steelmaking
capacity," Basson said on the sidelines of the Global Steel Dynamics Forum in
New York. There are several instances of governments becoming involved in the
operation of troubled mills in Europe and the UK. Basson said the industry's
future direction depends on three main forces — environmental, employment and
economic efficiency. In previous decades, economic efficiency was the main
driver, allowing inefficient capacity to close or be modified. But the zeitgeist
of reshoring, re-regionalisation and focus on employment has challenged this
force, also contributing to the continued operation of surplus capacity that is
not necessarily required by the market. "The strength of this efficiency force
has reduced the labour and the environmental force is receiving more prominence
at the moment. The moment you put a national interest filter on top of all of
this, then the efficiency force becomes of minimal importance," he said. And
there is limited room to consolidate producers in developed markets, such as the
US and EU, given competition concerns, which also dampens cross-border
consolidation to some extent. There is scope for consolidation in China, which
is still behind the targets set by the government in the previous five-year plan
— of 60pc of capacity being consolidated — and in smaller developing economies,
shrinking the long tail of smaller producers. Worldsteel forecasts that half of
all steel will still be made in blast furnaces in about 20 years from now,
despite the current focus on decarbonisation. There is insufficient scrap in the
world for the whole industry to move away from blast furnaces and insufficient
high-quality direct-reduced iron feed, Basson said. In the EU, where
decarbonisation is perhaps the most pressing issue as mills face mounting carbon
taxes, the energy challenge is of particular significance. "There is a reason
that Scandinavia is, at least in the EU, the home of very progressive
decarbonisation producers," he said. "They have access to high-quality
materials, direct-reduced iron and so forth, and access to high-quality
sustainable energy that is not carbon-based. It's a very different story in
other parts of northern Europe, where energy is a key question, and a different
question again in the south, where it's energy and access to raw materials."
"There will be multiple pathways to decarbonise, depending on location, and
Europe may soften its policies to enable existing production routes to remain a
force for a number of years longer," he said. Exponential breakthrough
technologies related to the blast furnace could see emissions fall to a similar
level as the gas-fed direct-reduced iron/electric arc furnace of 1.3-1.4t of
carbon per tonne of steel. By Colin Richardson Send comments and request more
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