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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US southbound barge demand falls off earlier than usual
US southbound barge demand falls off earlier than usual
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US Fed signals rates likely to stay high for longer
US Fed signals rates likely to stay high for longer
Houston, 1 May (Argus) — Federal Reserve policymakers signaled they are likely to hold rates higher for longer until they are confident inflation is slowing "sustainably" towards the 2pc target. The Federal Open Market Committee (FOMC) held the federal funds target rate unchanged at a 23-year high of 5.25-5.5pc, for the sixth consecutive meeting. This followed 11 rate increases from March 2022 through July 2023 that amounted to the most aggressive hiking campaign in four decades. "We don't think it would be appropriate to dial back our restrictive policy stance until we've gained greater confidence that inflation is moving down sustainably," Fed chair Jerome Powell told a press conference after the meeting. "It appears it'll take longer to reach the point of confidence that rate cuts will be in scope." In a statement the FOMC cited a lack of further progress towards the committee's 2pc inflation objective in recent months as part of the decision to hold the rate steady. Despite this, the FOMC said the risks to achieving its employment and inflation goals "have moved toward better balance over the past year," shifting prior language that said the goals "are moving into better balance." The decision to keep rates steady was widely expected. CME's FedWatch tool, which tracks fed funds futures trading, had assigned a 99pc probability to the Fed holding rates steady today while giving 58pc odds of rate declines beginning at the 7 November meeting. In March, Fed policymakers had signaled they believed three quarter points cuts were likely this year. Inflation has ticked up lately after falling from four-decade highs in mid-2022. The consumer price index inched back up to an annual 3.5pc in March after reaching a recent low of 3pc in June 2023. The employment cost index edged up in the first quarter to the highest in a year. At the same time, job growth, wages and demand have remained resilient. The Fed also said it would begin slowing the pace of reducing its balance sheet of Treasuries and other notes in June, partly to avoid stress in money markets. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Larger EU H2 bank auction could still clear below €1/kg
Larger EU H2 bank auction could still clear below €1/kg
Hamburg, 1 May (Argus) — The EU will launch a second European hydrogen bank auction later this year, ramping up the budget from a pilot for which results were published on 30 April. A bigger budget will allow more projects to win subsidies, but developers might still have to bid at or below €1/kg to stand a chance of being successful. As a result of the pilot, the EU will subsidise seven renewable hydrogen projects in Spain, Portugal, Norway and Finland with a total €720mn ($768mn), to be disbursed as a fixed premium per kg produced over a 10-year period. The European Commission picked the projects that requested the least support and the auction cleared at €0.48/kg, far below the bid ceiling of €4.50/kg . A second auction later this year is slated to have a much larger budget of around €2.2bn. This could open the door for projects with less competitive bids, but developers may still have to bid for less than €1/kg, data released by the commission suggest. 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While this would lift subsidised output across both auctions to nearly 460,000 t/yr, it would still be less than 5pc of the 10mn t/yr target. Assuming developers that missed out in the first round shoot lower in the second and the volume-weighted average of successful bids is in line with the pilot's €0.45/kg, 480,000 t/yr could be subsidised. Together with the pilot, this would yield 640,000 t/yr, or just over 6pc of the EU's target, although extra funds from Germany, Austria and potentially others could lift this further. The EU hopes this initial operating support, combined with subsidies for capital expenses, infrastructure developments and demand-side initiatives, will be enough to kickstart the sector and other projects will follow even without hydrogen bank support. By Stefan Krumpelmann Renewable H2 projects selected in hydrogen bank pilot auction Project Coordinator Project location H2 output t/yr Electrolyser capacity MW Bid price €/kg Requested funding mn € eNRG Lahti Nordic Ren-Gas Finland 12,200 90 0.37 45.2 El Alamillo H2 Benbros Energy Spain 6,500 60 0.38 24.6 Grey2Green-II Petrogal Portugal 21,600 200 0.39 84.2 Hysencia Angus Spain 1,700 35 0.48 8.1 Skiga Skiga Norway 16,900 117 0.48 81.3 Catalina Renato PtX Spain 48,000 500 0.48 230.5 MP2X Madoqua Power2X Portugal 51,100 500 0.48 245.2 - European Commission Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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