Steel Industry Energy & Value Chains · Steel Industry Energy & Value Chains The threat to Competitiveness Presentation to the Consultative Committee on Industrial Change of the EESC
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Steel Industry Energy & Value ChainsThe threat to CompetitivenessPresentation to the Consultative Committee on Industrial Change of the EESCBrussels 7 th May 2008By Ian Goldsmith, UK Public Affairs Manager, Corus
About Steel
• Ubiquitous– If not made of steel, it’s been made using steel
• Growing rapidly globally after a period of stagnation– But not in Europe
• Energy and CO2 intensive– Efficient processes
• Little further scope for significant improvement
– Need breakthrough technology to make a real difference
• Competitive market– Imports set the price floor
– But facing rapid cost escalation from raw materials and energy inputs
• Policy priorities discourage major investment in EU facilities
Steel is fundamental to modern society
• Recycling– steel is the most recycled material in
the world
• Transport– bicycles, trains, cars, lorries, ships
are all made of steel
• Energy– exploration and extraction,
transportation, refining, electricity production
• Water– extraction, transportation and
purification
• Housing and Construction– steel construction is time & energy
efficient
• Packaging– steel packaging is light, versatile and
recyclable
• Agribusiness– steel-based farm equipment essential
to modern farming
• Automotive– new steels reduce body weight with
compromising safety
• Communication– ballpoint pens to satellites
• By-product reuse– using slags reduces minerals
extraction and CO2 emissions
Steel is one of the solutions to a more climate frie ndly society
Steel SolutionsCarbon neutral housing
All new homes in the United Kingdom will have to be carbon neutral by 2016
Steel SolutionsNew generation vehicles
AHSS is predicted to be more than 50% of sheet stee l in cars in 2010 contributing a 5% reduction in total GHG emiss ions
Steel SolutionsWind turbines
Steel support for renewable electricity
Steel is in constant circulation, but a significant amount is ‘stored’ in society
Data: Hatch Beddows, IISI. Note: CAGR – compound annual growth rate
World steel productionstill growing fast by recent standards
0
250
500
750
1,000
1,25019
0019
0519
1019
1519
2019
2519
3019
3519
4019
4519
5019
5519
6019
6519
7019
7519
8019
8519
9019
9520
0020
05
Cru
de s
teel
, Kt
6.6%2000-061.4%1940-49
-0.4%1990-994.1%1930-39
0.9%1980-895.8%1920-29
2.6%1970-79-0.3%1910-19
5.8%1960-697.5%1900-09
5.3%1950-59CAGRs >4%pa?
1.8bn Tonnesby 2015?
Data YearValueIndicator
200020052006
29.6 Mt CO2
28.4 Mt CO2
29.4 Mt CO2
Direct CO2 emissions from Corus Group
20002005
330 Mt CO2
319 Mt CO2
CO2 emissions from EU (25) steel industry
20002005
1,442 Mt CO2
1,920 Mt CO2
Global CO2 emissions from steel industry
200026.3% 14.3% 13.6% 12.4%11.2%6.8% 6.2% 5.7% 3.5%
Global CO2 emissions (Ceq) by region: USA & CanadaWestern Europe
Communist East AsiaEastern Europe & Former Soviet States
India & Southeast AsiaAustralia, Japan, Pacific Ocean States
Central & South AmericaMiddle East
Africa
20008.8 Bt CeqGlobal CO2 emissions (anthropogenic) in C equivalent
200032.2 Bt CO2Global CO2 emissions (anthropogenic) 100 %
4 %
0.9 %
0.09 %
Year 2000
Business EnvironmentClimate change
Source: IPCC Report and IISI. 2000 data has been used to provide greater accuracy of information.
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 20000
200
400
600
800
hot blast temperature >1200 °°°°C
burden distribution
coal injection
improved sinter quality
oxygen enrichment
top pressure
oil injection and burden preparation
Red
uctio
n ag
ent c
onsu
mpt
ion
(kg/
t hot
met
al)
oil
theoretical minimum level of carbon demand
414 kg /t hot metal
coke
coal
Carbon as a reducing agent = non reduceable process emissions of blast furnaces
EU steelmaking has become more energy efficient
• -20% through dramatic improvement of material efficiency
1975: 71.5% 2005: 92%
Continuous casting; quality control; process management
• -14% through increase in scrap availability
1975: 55Mt/y 2005: 80MT/y
• -18% through improved BF management and concentration
Measurements; models; charging; high grade ores
• -6% through shift away from local C-bearing iron ores 40
50
60
70
80
90
100
1975 1980 1985 1990 1995 2000
CO2 emission per ton of finished productIndex 100 for 1975
Source: Eurostat/Eurofer
Incremental improvements limited: Technology change needed
>45% reduction in 15 years
<10% reduction in 10 years
Breakthrough technologyULCOS – Ultra-Low CO 2 Steelmaking
• Objective: to reduce CO2 emissions by 50% by 2050 compared to today’s best routes– 5 year project– €59m budget
• Equivalent of 60 man-years• Involving well over 100 people
– 48 companies and organisations from 15 European countries
– Funded by industry (56%) and the EU (44%)
– 80 options examined
– 4 process concepts selected for further development
– Next stage• to move to large-scale pilot• Potentially costing some €300m per technology
– Implementation?• Unlikely before 2020
ULCOS II:Top Gas Recycling Blast Furnace
Reduction of25 %
carbon input(= 15% for the whole plant: 270 kg CO 2/t)
Sinter, pellets
lump ore & coke
Dust
catcher
Export gas
Hot metal
and slag
25 - 1200°°°°CGas heater
CO2
removal
Coal &
cold oxygen
900 - 1000°°°°C
Tail gas
Product g
as
Ready for CCS
(800 kg CO 2/t)
Modification of blast furnace with gas recycling, CO2 removal & injection of oxygen
Depth > 800m to have CO2 behaving like a fluid. ( temperature < 31 °C and pressure > 73,83 bar) Capacity depends on: area, thickness and slope of the reservoir, appropriate cap rock, absence of faults, average porosity, permeability, Conflicts of use to be checked (ex: aquifer used for drinking water)
ULCOS II: Geological storage
Product prices are set globally
USA
Europe
Asia
0
100
200
300
400
500
600
700
1980
1983
1986
1989
1992
1995
1998
2001
2004
Data: Hatch Beddows, SBB. Note: USA: Midwest prices, fob mill. Europe: North European prices, ex-works. Asia: East Asian imports, c&f port.
All prices are annual averages in nominal terms
Yearly average HRC prices by region ($/t)
Indexed on 2001 pricesSource: CRU including 2008 forecasts for iron ore and coking coal, Thomson Datastream showing 2008 year to 29/01/2008 data for scrap, tin & zinc
50
100
150
200
250
300
350
400
450
500
'01 '02 '03 '04 '05 '06 '07 '08YTD
Raw material prices indexed to 2001
Scrap
Zinc
Iron ore
Coal
Tin
Steep increases in raw material prices
Shown prior to:>200% increase in coking coal prices>60% increase in iron ore prices
2222€€
1616€€
2626€€
4949€€
6060€€
8484€€
4646€€ 2424€€
5757€€
7070€€(1)
(1)
(1)
(2)
(3)
(3)
(3)
(3)
(3)
World Map of electricity prices (€/MWh)
Sources: (1) Presentation European
Aluminium Association HLG-Ad hoc 1 (Long Term Contracts) -2005
(2) TVO EPR R.Tarjanne and K. Luostaninen, LappeenrantaUniversity of technology (Long term contract) – 2003
(3) Platts Base load year 2007 (Platts 4 April 2006)�
(4) CEFIC
(3)
6060€€(3) 6767€€
(3)
< 20< 20€€(4)(4)
2525€€(4)
88€€(4)
UK Electricity costs Competitiveness gap with Europe
UK wholesale electricity pricesElectricity: €/MWh baseload, year forward
20
30
40
50
60
70
80
90
100
Feb-05 May-05 Aug-05 Nov-05 Feb-06 May-06 Aug-06 Nov-06 Feb -07 May-07 Aug-07 Nov-07
DE
FR
UK
Source: Reuters
UK power prices currently 20%
more expensive
Policy confusion?• Burden sharing under Kyoto Protocol
– 8% reduction in GHG emissions– But no targets beyond 2012
• EU Climate Change Policy– Target of 20% reduction in CO2 emissions by 2020 (30% if others take action)– Target for automotive CO2 of 130g/km
• EU Emissions Trading Scheme– Cap & trade system, implemented by Member States in different ways in Phase I– Move from free allocation towards auctioning post 2012
• Energy market/supply issues– Lack of a level playing field across Europe– The current liberalisation proposals may not be enough to fix the problem
• High Level Group on Competitiveness, Energy & Envir onment– Recognition that energy intensive industries in Europe are at risk.
Political Situation/Business EnvironmentEuropean position
EU ETSImpact on competitiveness of auctioning
Pot
entia
l max
imum
gro
ss v
alue
add
ed a
t sta
ke (
MV
AS
)an
d ne
t gro
ss v
alue
add
ed a
t sta
ke (
NV
AS
)
Cem
ent
Bas
ic ir
on &
ste
el
Lime
Fertilisers & Nitrogen
Alu
min
ium
Other inorganicbasic chemicals
Pulp &Paper
Malt
Coke oven
Industrial gasesNon-wovens
Refined petroleum
Household paper
Hollow glass
Finishing of textiles
Rubber tiers & tubes
CopperCasting of iron
UK GDP
Allocation dependent (direct) CO2 costs / GVA
Electricity (indirect) CO2 costs / GVA
Price increase assumption: CO2 = €20/t CO2; Electricity = €10/MWh
Flat glassVeneer sheets
0%
10%
20%
30%
40%
0.0% 0.2% 0.4% 0.6% 0.8% 1.0%
4%2%Pot
entia
l max
imum
gro
ss v
alue
add
ed a
t sta
ke (
MV
AS
)an
d ne
t gro
ss v
alue
add
ed a
t sta
ke (
NV
AS
)
Cem
ent
Bas
ic ir
on &
ste
el
Lime
Fertilisers & Nitrogen
Alu
min
ium
Other inorganicbasic chemicals
Pulp &Paper
Malt
Coke oven
Industrial gasesNon-wovens
Refined petroleum
Household paper
Hollow glass
Finishing of textiles
Rubber tiers & tubes
CopperCasting of iron
UK GDP
Allocation dependent (direct) CO2 costs / GVA
Electricity (indirect) CO2 costs / GVA
Price increase assumption: CO2 = €20/t CO2; Electricity = €10/MWh
Flat glassVeneer sheets
0%
10%
20%
30%
40%
0.0% 0.2% 0.4% 0.6% 0.8% 1.0%
4%2%
CO2 cost screen: Sectors potentially exposed under unilateral CO2 pricing
Hourcade et.al. Differentiation and dynamics of EU ETS industrial competitiveness impacts. Source: Carbon Trust
Global problems need global solutions
• Being “first mover” is not always an advantage
– If policy drives up costs locally, globally competing companies will lose out
– Customers decide to buy elsewhere• Manufacturers follow them• The more mobile the product, the quicker it will shift
– Competitors are becoming more sophisticated• Competition is no longer for basic products offered in bulk
• China is a large supplier of galvanised steel to the European market
» Now offering organic coated steels
Industry response to policy
• As long as it can remain competitive, industry will continue to:
– Drive down energy use
– Reduce CO2 emissions where possible
– Research new process technologies
– Develop new energy efficient product applications
– Invest in existing facilities
• Industry therefore needs policy solutions that will:
– Maintain competitiveness of EU-based companies
– Maintain industrial base in Europe
– Avoid encouraging CO2 migration (leakage)
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