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April 2015 – Vol.39 No.3 – www.steeltimesint.com

PLANT SAFETY CLIMATE POLICY SUSTAINABILITY ENVIRONMENT

STEEL AND THE CIRCULAR ECONOMY

COVER April.indd 1 4/10/15 2:58 PM

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ISSN1475-455X

4 Leader5 NewsThe latest steel industry news from around the world.13USA updateUncertainties abound15Latin America updateVenezuela’s downward motion 18 India updateWeak demand causes problems

Iron ore20 Challenges ahead for Guinea

CONTENTS APRIL 2015

Picture courtesy of Midrex.ESISCO DRI Plant in Sadat City Egypt. The 1.76Mt/yr plant supplied for Egyptian Sponge Iron and Steel Company (ESISCO) is designed for simultaneous dis charge of hot DRI and cold DRI. The plant is in the commissioning stage and is expected to begin operations in Q2 2015. ESISCO is an operating unit of Beshay Steel.

Sustainability23 What goes around,comes around29 Europe is “steel” running

Climate policy35 EU climate policy under scrutiny

Sustainability38 Sustainable stainless steel production

Furnaces41 Re-heat furnace sustainability

Electric steelmaking49 Organic Rankine Cycle waste heat recovery

Safety52 No room for complacency54 Keeping safety ‘top-of-mind’

Perspectives58 Turn – and face the strange

History60 UK ore resources during WW1.

58 58

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PLANT SAFETY CLIMATE POLICY SUSTAINABILITY ENVIRONMENT

STEEL AND THE CIRCULAR ECONOMY

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LEADER

Life cycle assessment and the circular economy

Matthew MoggridgeEditor

[email protected]

We need to face facts. The modern world cannot function properly without steel. It’s everywhere: In cars, buildings, bridges, ships, railways, even violin strings – they all rely upon steel. And because we don’t have enough scrap to make steel from recycled steel scrap, we still need to rely upon blast furnace steelmaking for 70% of world steel production, which means we need to mine iron ore to make pellets and sinter and we need coal to turn into coke. We also need electric arc furnaces – which account for 30% of world steel production – into which we can feed scrap, direct-reduced iron (DRI) and iron ore pellets to make steel.

And yes, steel production is a heavy industrial process, but, as worldsteel points out in its latest publication Steel in the Circular Economy – a life cycle perspective, the steel industry has dramatically reduced its energy consumption over the past half century. It is also working hard to reduce the impact of CO2 emissions through the use of carbon capture and storage technologies. In a nutshell, the global steel industry is doing more than its fair share of the work to ensure that it produces steel in the ‘greenest’ way possible.

In fact, when it comes to matters

environmental, steel scores highly because it is 100% recyclable and there’s a lot of it around in the aforementioned cars, buildings, bridges and ships waiting to be recycled. Did you know, for example, that the Sydney Harbour Bridge in Australia contains 53,000 tonnes of steel that, at some stage in the distant, faraway future, will be recycled and transformed into something else – possibly another bridge? Are you aware that 75% of all the steel products ever made are still in use today and that buildings and other structures made from steel can last for more than100 years if properly maintained?

Facts like these and others are overlooked when governments sit down and discuss the effects of global steel production on the environment. Very often an obsession with the use-phase of products made from steel wins through when a broader life cycle assessment should be considered to establish steel’s true ‘green credentials’.

The World Steel Association argues that the circular economy reflects the true value of steel to society in terms of its real environmental impact on the planet, and that ‘life cycle thinking’ is the only way to assess steel’s true sustainability.

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Leader april.indd 1 4/13/15 9:23 AM


5INDUSTRY NEWS NEWS IN BRIEF

Climate consciousness will slash outputA nationwide environmental campaign in China is expected to slash output. Prices are expected to rise and smaller mills not complying with new laws are likely to close down.

Panzhihua Steel in China’s south western region confirmed recently that it would be closing 1.8Mt of steel capacity in Chengdu, the capital of Sichuan province.

More lay-offs for US Steel workersA report by Associated Press claims that US Steel is to lay off another 83 workers at its Gary works in Indiana, USA. A total of 780 jobs have been lost in North West Indiana this year, it is claimed.

US Steel called the lay-offs part of an ‘ongoing operational adjustment’.

JSW weighs up mine closures JSW Steel is weighing up whether or not to shut its iron ore mines in Chile, according to a report by the Economic Times of India.

The reason is simple: falling iron ore prices on the international market, which have fallen substantially over the past 12 months. As a result, Santa Fe Mining (SFM) has been considering a temporary shutdown in May.

Chinese mills fall foul of lawSeventy per cent of steel mills in China fall short of the country’s new environmental laws, which came into force at the beginning of 2015.

Billed as the ‘strictest environmental law in Chinese history’ the new legislation, which came into force in January, will require China’s steel mills to invest around 200 yuan (US$32) into environmental protection per tonne of steel produced.

Major expansion for Vizag SteelSteel Authority of India Ltd (SAIL) and Rashtriya Ispat Nigam Ltd (RINL) – otherwise known as Vizag Steel – have both announced modernisation and expansion plans designed to increase their respective hot metal capacities by 23.1Mt and 7.3Mt by the fiscal 2016/17.

For more steel industry news and features, visit


Steel plant halves costs

SMS Mevac has supplied a Duplex VOD unit to Fujian Fuxin Special Steel in Zhangzhou, China, follow-ing on from the start-up (by SMS Mevac) of the Chinese steelmak-er’s stainless steel melt shop last year.

The VOD facility is equipped with two tanks and two vacuum covers, a joint four-stage vacuum pump system with automatic vac-uum pressure control (VOD-SC) and a common alloy storage and addition system.

In terms of the environment, an integrated bag filter system with gas cooler separates process dust under vacuum.

A new power plant at Hille & Müller, part of Tata Steel’s plat-ing business based in Dusseldorf, Germany, has halved energy costs, claims the company.

The new combined and heat power (CHP) plant will reduce an-nual energy costs by about €1 mil-lion (£750,000) and cut CO2 emis-sions of by almost 50%.

Hille & Müller employs 275 people and is a leading European producer of specialised steel used to case household and car batter-ies. It was also the first company in the world to produce electroplated steel strip.

In addition to producing electric-ity, Tata Steel’s €2.8 million (£2.1m) gas-fuelled CHP plant turns by-product heat into steam, which is used in manufacturing process-

es as well as to heat buildings for employees. It will also reduce CO2 from the site by the equivalent emissions of about 2,000 homes.

Hille & Müller’s managing di-rector in Düsseldorf, Friedmar Schhittko, said it was the compa-ny’s long-term aim to be self-suffi-cient in energy in order to improve competitiveness and become more resource-friendly.

“In future we will be able to produce about half of our own electricity in Düsseldorf – about 13 megaWatt hours per year. This is equivalent to supplying almost 3,000 households with electricity,” Schhitko said, adding that the com-pany was also looking into whether it can supply heat to neighbouring businesses.

The CHP plant is now fully op-

erational and consists of two high-temperature boilers and a power-heat co-generation facility. The 2,500bhp engine (equivalent to about 25 car engines) for the power-heat co-generation runs on natural gas and produces approxi-mately 2,000 kW of electricity. The plant also produces about 2,000 kW of by-product heat, which is turned into steam and used in manufacturing processes and to heat buildings for employees.

According to Tata Steel, the CHP plant is just one component of the company’s energy management strategy.

Hille & Müller has also imple-mented an energy management system according to ISO 50001 standard, certified by the technical control board (TÜV).

China’s largest automotive steel producer has taken on international engineering group Fives to design and supply two Stein Digiflex vertical annealing furnaces for the steelmaker’s new 1,550mm cold rolling mill in Zhanjiang, Southeastern Guangdong.

One of the furnaces will be supplied to Baosteel’s 700kt/yr continuous annealing line and the second will service the company’s 270kt/yr continuous galvanising line.

According to Fives, the Digiflex annealing furnaces sport a new compact design and offer ‘the

most advanced combustion and cooling technologies’ including an AdvantTek WRT 2.0 combustion system.

“Such combustion technology benefits from high recuperative energy efficiency, low NOx emissions and usage of the site-generated fuels,” claims Fives, adding that it will allow Baosteel to ‘significantly reduce operational expenses, minimise environmental footprint and achieve its target of a ‘double excellent project’ and a highly efficient plant.

The 1,550mm cold rolling mill is

part of phase ll of a 10Mt/yr steel project in the port of Zhanjiang, which involves a pickling line, a pickling line-tandem mill, a continuous annealing line and a continuous hot-dip galvanising line. The mill will be ‘progressively put into action’ during 2016 and 2017 and, on completion, will have a 2.55Mt/yr capacity of coil for appliance and automotive sheet.

According to Fives, Baosteel has entrusted the engineering company with a total of five full processing lines since 2005 for its Baoshan and Zhanjiang plants.

Fives supplies Baosteel furnaces

SMS Mevac supplies Chinese steelmaker

Industry News april.indd 1 4/13/15 11:44 AM


INDUSTRY NEWS

SAIL rolling mill ready to roll Lost production after blockadePlatts reports that ArcelorMittal, the world’s biggest steelmaker, has lost 90kt of finished steel production at its Lazaro Cardenas plant in Mexico due to a series of blockades by transport workers over the past five months.

The loss has cost the company an estimated US$20 million as shipments of iron ore from the company’s Las Truchas mine have been disrupted.

Award for Tata SteelThe 2014 Continuous Improvement Award from NACCO Materials Handling Group goes to Tata Steel.

According to NACCO, the steelmaker has been committed to improving the quality of mast profiles delivered to NACCO plants over the past three years, reducing the number of rejected parts by 97%.

NACCO claims to be the third largest forklift truck manufacturer in the world, while Tata Steel is a leading global supplier of special profiles for the forklift truck industry.

MTAG wins ArcelorMittal contractMTAG of Switzerland, a leading company in the field of vacuum degassing plants with dry mechanical pumps, has signed a contract with ArcelorMittal Hunedoara of Romania for the supply and installation of a vacuum degassing and dry mechanical pumping system.

The vacuum degassing installation will include the latest technology available and will be developed and commissioned in ‘record time’.

Shipbuilding success for MMKShipments of steel to shipbuilders have grown 37.2% year-on-year for Russian steelmaker OJSC Magnitogorsk Iron & Steel Works (MMK).

The company claims to have enjoyed a long-standing track record of success with the shipbuilding industry and supplying up to half of all metal products sold to Russian shipbuilders.

Tata Steel wins Crossrail contractA contract to supply highly wear-resistant rail for the London, UK-based Crossrail project has been awarded to Tata Steel.

The line runs beneath London and will travel 100km from Reading and Heathrow, through central London to Shenfield and Abbey Wood.

7NEWS IN BRIEF

Steel in the Circular Economy – A Life Cycle Perspective is the title of a new publication published by the World Steel Association.

The publication demonstrates how steel enables a sustainable society, through a circular econo-my, when the full life cycle of steel products is taken into account.

According to worldsteel, the new publication ‘highlights the need for legislators and industry

decision makers to take a full life cycle approach before making leg-islative or manufacturing material decisions.’

Edwin Basson, worldsteel’s di-rector-general, said that the ‘take, make, consume and dispose’ mentality was outdated and that a move toward a circular economy model for ‘optimal resource effi-ciency’ was more in keeping with a world of finite resources.

“To achieve this, we need a life cycle approach that measures the social, economic and environmen-tal impact of a product at each stage in its lifecycle,” he said, add-ing that life cycle thinking must become a key requirement for all manufacturing decisions going forward.

Turn to page 23 of this issue for an in-depth article on worldsteel’s latest publication.

Steel and the circular economy

NLMK Kaluga has produced its mil-lionth tonne of rolled steel. The EAF plant opened in July 2013 and is de-scribed as the ‘next generation EAF minimill by its Russian owner. Alexander Burayev, NLMK’s long prod-ucts general director, said that efficient organisation of the plant’s production processes and ongoing process im-provements were behind the compa-ny’s success.

NLMK Kaluga produces 1Mt of steel

More warnings have been issued by UK Steel concerning the safety implications of using Chinese steel.

“Some imported steel plates and sections from China are being supplied into the UK market which are not fully compliant with the re-quirements of the relevant stand-ard,” said Ian Rodgers, director of UK Steel.

According to Rodgers, it is im-perative that structural steel plates and sections with elevated alloy

levels are treated with great care and, where possible, avoided to-tally.

Rodgers advised customers to check the alloy content of any structural steel from China before processing it as the EU specifi-cation for structural steel clear-ly states that it applies only to non-alloy steels.

UK Steel argues that a ‘non-al-loy’ must comply with strict limits on the quantity of other metallic

elements it contains to ensure that the steel is readily weldable with-out any special welding parame-ters being applied.

Chinese steel with elevated lev-els of boron and chromium have been arriving on UK soil because, up until recently, Chinese produc-ers have been offered tax rebates by the Chinese government if they add these elements to their steel so qualifying it as an ‘alloy’. The rebate has since been withdrawn.

UK Steel issue safety warning

The Steel Complex Ltd (SCL), a joint venture between Steel Authority of India Ltd (SAIL) and the Govern-ment of Kerala, is ready to launch a new rolling mill in Kozhikoe on the Malabar Coast of the Southern Indian state of Kerala.

The new mill will open slightly later than scheduled and cost 65 crore (US$139 million) most of which was paid for by a loan from the Canara Bank, SAIL stumping up 10 crore (US$2.1 million) and the Keralan government paying

9.72 crore (US$1.7 million).SAIL-SCL Kerala Ltd is the only

minimill operation in the State of Kerala. The Kerala State Industrial Development Corporation and a private entrepreneur originally set up the company in 1969. A mini steel plant opened on site in 1972 followed a decade later by an ex-pansion scheme that included a third electric arc furnace, raising capacity to 55kt/yr of steel billet.

A financial crisis in the early nineties led to SCL being referred

to the Board for Industrial and Fi-nancial Reconstruction (BIFR) and in 2008 an MoU with SAIL led to a 50% acquisition by the Indian steel giant and an eventual takeover of operations early in 2011.

The new rolling mill forms the cornerstone of the joint venture between leading Indian steelmak-er SAIL and the regional Govern-ment of Kerala.

Once up and running the new rolling mill will have a capacity of 65kt/yr of TMT steel.



8 INDUSTRY NEWS

Cut production, urges report Major infrastructure projects em-bracing rail, water, roads and housing, are set to boost steel de-mand in China, it is claimed.

Government-led projects worth billions are on the cards as details emerge of China investing in the construction of 13 highways and eight railways under its Silk Road economic belt initiative, according to a report in the Yangtse Evening newspaper.

An estimated 30Mt of steel will be used on railway construction during 2015, up almost 43% over 2014 according to analysts SC199.com

China used 21Mt of steel on rail-way construction in 2014.

Source: China Metals

Infrastructure worth billions

Steel traders in China are claimed to be more optimistic than steel-makers, but prices are destined to shrink further in early 2015, according to a report by China Metals.

The China Steel Price Index (CSPI), compiled by the China Iron and Steel Association (CISA) fell to 75.06 by end February, down 2.68% when compared with end January 2015. The index was 21.92% lower than a year earlier.

The price index of long steel dipped 2.72% month-on-month in February and steel sheet de-clined by 1.55%.

In fact, the price of eight major steel products continued to fall during February, but they were smaller declines than those report-ed in January.

According to the CISA, hot-rolled coil, galvanised sheet, cold-rolled sheet and medium plate fell by 107 yuan/tonne (US$17), 98 yuan/tonne (US$16), 91 yuan/tonne US$15) and 73 yuan/tonne (US$12) respectively.

During the first two weeks of March the CSPI slid marginally to 74.91 by 6 March and by 74.14 by 13 March.

Source: China Metals

China’s traders are optimistic

Near to 17% of forecast US coal production in 2015 is at risk of idling or closure, according to a report from Wood Mackenzie.

The company’s Coal Market Outlook shows that the majority of the coal at risk is produced in the Central Appalachia region of the USA where, it is claimed, 72% of total output is unprofitable due to years of declining productivity, thinning seams and increasing strip ratios. More stringent gov-ernment regulations and a highly paid workforce have also taken their toll, claims Wood Mackenzie.

But Central Appalachia – the highest cost region in the USA – is not alone. Other regions also have substantial amounts of coal at risk, ranging from 47% of production in Southern Appalachia to 8% in

the Western Bituminous and Pow-der River Basin. “In aggregate, this equates to approximately 14% of US thermal coal production and 58% of metallurgical coal produc-tion being at risk,” claims Wood Mackenzie.

The company’s senior research analyst, Dale Hazelton, claims that there are a significant number of mines unable to cover their oper-ating costs plus sustaining capital. Despite this, he said that mine closures, while not rare, are not a frequent occurrence.

“Part of the reason for this is the amount of thermal coal sold on the open market is very small compared to that under contract,” he said, explaining how contracts can cover multiple years and prices may have been agreed well before

the current market’s lows.“A producer may also be able

to beat the market prices as they have a valuable niche-quality coal, such as stoker coal, or the location of the mine is near an end-user providing transportation advan-tage over competitors,” Hazelton said.

For prices to rise, Wood Mac-kenzie argues that global demand for steel and power must increase or coal supply must decrease.

For Hazelton, growth pros-pects for steel remain tenuous at best due to the fragility of global economies. The only way for the market to get back into balance is for producers to cut production ‘sooner rather than later’ and ei-ther voluntarily or involuntarily through bankruptcy.

Pulverised coal injection (PCI) at NLMK Group’s Novolipetsk site in Lipetsk has saved the company 425 million rubles, it is claimed.

PCI lowers natural gas and coke consumption by replacing it with steam coal, which reduces the cost of pig iron production and subse-quently that of steel production while maintaining high quality and efficiency, claims NLMK.

The PCI process is employed on two of the Novolipetsk blast fur-naces and was first introduced at Lipetsk in 2013. After tests the Russian steelmaker has introduced commercial operation of the pro-cess in its blast furnaces 4 and 5 where it produces 3Mt and 2Mt per year respectively.

During the testing period, these two furnaces decreased coke con-sumption by 10% and natural gas by 40%, NLMK claims.

According to the Novolipetsk managing director Sergey Filatov, more than a third of the plant’s blast furnaces have been fitted with PCI systems. “We continue to work on enhancing the efficiency and cutting the cost of pig iron production,” he said, adding that the plan is to equip almost all No-volipetsk blast furnaces with PCI systems.

Furnaces 6 and 7 – the plant’s largest blast furnaces with respec-tive capacities of 3.2Mt and 4.2Mt – are being prepared for PCI and the aim is to reduce coke con-sumption by 20% and natural gas by 60%.

Improved pig iron smelting technology has increased pro-ductivity at all of the plant’s blast furnaces, NLMK claims. Daily pig iron output has increased by 2.3% year-on-year to 36kt on average.

PCI saves money

OJSC Magnitogorsk Iron & Steel Works (MMK) has adopted a ‘broad IT development strategy.’ The plan is to implement an inte-grated in-house corporate com-munications system, mobile ac-cess to core business applications, modelling and forecasting and continuous planning on custom-

ised production and operational management.

A pivotal element of the IT pro-gramme is a mobility project in-volving the creation of new mobile applications that allow the com-pany’s customers to monitor de-livery status online and offer com-plete transparency from ordering

through to final delivery.A mobile maintenance and re-

pairs application ‘makes it possible to ensure the timely execution of both scheduled and unscheduled repairs’ and detects equipment defects early on. The company ex-pects a reduction in breakdowns and unscheduled downtime.

MMK’s advanced IT solutions



Russia’s steel success story

NLMK, a leading Russian steel produc-er, has produced its millionth tonne of rolled steel at its Kaluga plant. The EAF facility opened in July 2013 and is described as the ‘next generation EAF minimill’ by its Russian owner. Alex-ander Burayev, NLMK’s long products general director, attributed the compa-ny’s success to efficient organisation of the plant’s production processes and ongoing process improvements.



Crude production up by 0.6%

10 INDUSTRY NEWSDIARY OF EVENTS

May

04-07 AISTechCleveland Convention Center, Cleveland, Ohio, USA.A major global steel event em-bracing both a conference and exhibition and strongly focused on the US steel industry.

For further information, log on to www.aist.org

June

01-02 Steel Markets EuropeHotel Rey Juan Carlos, Barcelona, Spain.A conference showcasing the re-gion’s leading steelmakers and their innovation strategies.

For further information, log on to www.platts.com

08-10 Steel Success StrategiesSheraton New York Times Square, USA.A leading steel industry confer-ence focused on the global mar-ket.

For further information, log on to www.metalbulletin.com

08-11 Metallurgy LitmashExpo Centre, Moscow. Organised by Messe Dusseldorf.International trade fair for metal-lurgy, machinery, plant technolo-gy and products.

For further information, log on to www.metallurgy-tube-russia.com

16-20 METEC Trade Fair & 2nd ESTAD 2015Congress Centre, Düsseldorf, Ger-many.A major exhibition and confer-ence highlighting the latest and most sophisticated technological advances in the global metals in-dustry.

For further information, log on to www.metec-tradefair.com

23-24 African Iron & Steel Hotel Avenida, Maputo, Mozam-bique.Previously known as the African Iron Ore Conference and now re-named by organiser Metal Bulletin Events to reflect exciting changes in the region.For further information, log on to www.metalbulletin.com



For a full country by country listing visit:www.worldsteel.org/statistics/crude-steel-production.html

World crude steel production for February 2015 stood at 128Mt, an increase of 0.6% when compared to the same period last year, ac-cording to the latest figures from worldsteel.

In China, crude steel produc-tion was estimated at 65Mt. Total production for January and Febru-ary was 130Mt. Japan produced 8.4Mt of crude steel in February 2015, down 0.2% compared with

last year and in South Korea the figure was 5.1Mt, down 4.4%.

Germany produced 3.5Mt of crude steel, down 9.7%. France’s crude steel production was 1.3Mt, down 1.6% and the figure in Spain was 1.1Mt, down 4.4%.

Turkey’s crude steel produc-tion for February 2015 was down 12.2% at 2.4Mt and in Russia 5.7Mt was produced, up 5.6%. In Ukraine the figure was down

33.2% to 1.6Mt and the USA pro-duced 6.3Mt, a decrease of 7.9%.

Brazil’s crude steel produc-tion for February was up 2.3% at 2.7Mt.

The crude steel capacity utili-sation figure for the 65 countries that report to worldsteel was 73.4% – 1.7 percentage points lower than in February 2014. Compared to January 2015, it was 3.8 percentage points higher.

Declining commodity prices have deepened the trade deficit be-tween Latin America and China, according to Alacero, the Latin American Steel Association.

As the price of steelmaking raw materials (iron ore, coal and scrap) took a nosedive in 2014, China benefited from the situation and acquired 7% more raw materials from foreign markets at a value 13% lower in dollar terms.

Latin American shipments to China grew by 5% but decreased by 16% in value terms. The region shipped 199Mt of iron ore to Chi-na in 2014, up 5% on the previous year and 86% originated in Brazil.

Conversely, shipments of coking coal from China to Latin America grew by 23% in volume terms and

5% in dollar terms when com-pared with 2013. Coke was the main steelmaking input shipped by China to the LATAM region in 2014 (907Mt up 25% from 2013).

Where finished steel was con-cerned, China shipped 8.3Mt in 2014 – 56% more than in 2013 – while the LATAM region exported only 41.5kt to China, 3% lower than in the previous year.

Brazil was on the receiving end for most of China’s LATAM exports (2Mt) followed by Chile (1.25Mt) and Central America (1.17Mt). Mexico was the fourth most im-portant destination (790kt).

Flat products accounted for 67% of finished steel arriving in Latin America from China (5.5Mt) while long products totalled 2.2Mt, a

growth of 79% compared with 2013. Other products included other alloyed steel sheets and coils (2.16Mt), wire rod (1.18Mt) and hot dip galvanised (1.11Mt).

Latin America increased ship-ments of seamless pipes to China by 106% despite the small volume of 18kt. However, it received 499kt of the same product from China.

Where indirect imports were concerned, the Chinese shipped 6.1Mt to Latin America but im-ported just 106kt from Latin America.

The most popular indirect steel import into Latin America was the automobile which accounted for 14% of total inflow. Other metal items amounted to 808kt while manual machines totalled 783kt.

LATAM trade deficit deepens

A report on predictive mainte-nance by a leading lubricant man-ufacturer argues that the practice has the potential to increase over-all productivity and profitability in the manufacturing sector.

Predictive maintenance: Is the timing right for predictive main-tenance in the manufacturing sector? relies upon examples of results achieved in other indus-tries.

According to the report, energy companies have eliminated 75% of breakdowns through the imple-mentation of predictive mainte-nance programmes, which equate to almost eight in 10 breakdowns. “Maintenance is increasingly seen as a strategic business function

by manufacturers looking for new opportunities to drive efficiency and lower costs,” said Bryan Ra-benau of Castrol innoVentures. He said that advanced predictive

maintenance technologies present a powerful tool to aid manufac-turers in easing their maintenance burden and increasing overall pro-ductivity and profitability.

Maintenance highlighted


13


** USA correspondent

USA UPDATE

Uncertainties abound

Industry pundits speak of the uncertainties that characterise the US steel industry’s future outlook, although the economy is improving and rebounding. Nevertheless, rising imports also remain a source of concern for many steel producers. By Manik Mehta*

THE year began on an uneasy note, with weak demand for tubular products hanging like the proverbial sword of Damocles’ over the industry; weak demand is attributed to a sharp decline in oil prices which, in turn, forced the oil and gas industry to drastically reduce capital spending for 2015. But that is not all: the US steel industry faces some more challenges in the shape of the appreciating dollar and an economic slowdown in China.

But why would a rising dollar affect the US steel industry and force it to cut prices? The dollar’s value appreciated by nearly 17% in the second half of the previous year against major world currencies. A strong dollar is tempting for importers to buy more steel from low-cost foreign suppliers, notably China and South Korea which have, traditionally, benefi ted from such a development. To remain competitive, US steel producers have had to slash prices, a development that might lead to lower profi t margins.

Rising importsNevertheless, data compiled by the American Iron and Steel Institute (AISI) suggests that steel imports into the US rose by 24% and 36% in January and February 2015 to 8.02Mnt (million net tons) and 6.39Mnt respectively, over the corresponding months of 2014. Indeed, imports of all kinds of steel, such as bar, rod, cold-rolled sheet and tin plate, have been rising. Imports have risen from all supply sources. In the fi rst two months

of 2015, fi nished steel imports from South Korea, for example, jumped 59% to 1.31Mnt while it achieved an impressive 104% rise to 610knt from Turkey. China’s steel exports to the US rose 23% to 453knt.

Industry sources say these rising imports have prompted the industry to call for government action against overseas competitors, including a possible anti-dumping complaint. The AISI has been describing Chinese steel supplies to the US in 2014 and 2015 as a source of “great concern” to the industry. The economic slowdown in China is forcing that country’s suppliers to “dump” their steel on the US market, one New York-based steel trader preferring to remain anonymous, told Steel Times International. China’s global exports touched a record 93.78Mmt in 2014, posting a 51% increase over the previous year. US steel producers fear that the downturn in China, coupled with the dollar’s strength, would unleash a wave of cheap imports from China, which emerged as the second largest source of steel exports to the US.

Anti-dumping complaintAccording to US-based analysts, a hearing in Washington could well lead to the launching of an anti-dumping complaint with the International Trade Commission, but Chinese steel suppliers have already been calling attempts to curb steel imports as “protectionist measures”.

Notwithstanding the growing strength of the dollar, US total steel exports in

January 2015 barely changed over the December 2014 level, declining by a mere 0.4% to 925.4knt. US exports to Canada rose 2.3% to 480.8knt but declined by 0.8% to 337.5knt to Mexico in January. Both Canada and Mexico are partners of the US in the North America Free Trade Agreement (NAFTA).

Nevertheless, the present situation is a far cry from the doom-and-gloom mood in the steel industry when the Great Recession descended on the USA. The industry is lot more confi dent today, with steel producers better prepared for a downturn after cutting costs, thinning layers of fat implicit in excess staff and suspending or even completely shelving projects that were considered, in hindsight, “superfl uous”. In short, the mantra to future success will rest on boosting effi ciency, profi tability and competitiveness. US steel companies realise that one way to keep fi t and agile is to invest in technology, develop high-strength grades for use in cars so as to reduce their weight and conform to the new emission standards requiring twice the fuel effi ciency as now.

Cut costs and boost effi ciencyBoth ArcelorMittal and US Steel are resorting to other measures that will generate “new ideas” for cutting costs and boosting effi ciency levels. ArcelorMittal USA recently replaced president and CEO Michael Rippey with Andy Harshaw who will now be responsible for the management of the company’s US facilities.

USA.indd 1 4/14/15 10:23 AM

USA UPDATE14


US steel circles assume that ArcelorMittal will shut down the electric arc furnace at Indiana Harbor Long Carbon, and possibly idle the number 1 aluminising line at the former LTV steel mill and shift production to the new AM/NS Calvert plant in Alabama, a joint venture between ArcelorMittal and Nippon Steel & Sumitomo Metal Corp.

The plant, which produces 5.3Mt/yr of rolled steel, is located close to new automobile plants being set up in the south of the country.

New product developmentArcelorMittal’s global R&D Centre in East Chicago has been developing some of the most advanced grades of steel, which are stronger and hence used less in auto frames and other car parts. The company representatives assert that ArcelorMittal can take the lead in developing steel that complies with the official CAFÉ standards set by US authorities for automakers for compliance by 2025. The company has increased product development activities to offer innovative steel solutions, recently re-doubling R&D efforts in anticipation of a 35% rise in orders for advanced high-strength steel in the next five years.

ArcelorMittal is getting the message across to the automobile industry, policymakers and regulators that steel remains the “dominant material used in vehicles because of its ability to provide superior cost and performance”.

US Steel is investing in technology aimed at replacing the blast furnace at Fairfield Works in Alabama with an electric arc furnace that would require a smaller workforce, fewer raw materials and less electricity, since it could be run according to the imperatives of demand.

More electric arc furnacesUS Steel’s CEO Mario Longhi hinted in recent media interviews that the company would operate more electric arc furnaces, which can turn scrap metal into rebar and other construction materials. Analysts feel that mini-mill furnaces could replace conventional blast furnaces at Gary Works, given their age and the cost to replace them.

Last year US Steel drastically cut costs, which included retrenching non-union managers at Northwest Indiana operations in Gary and Portage. The company closed a mill in Ontario, Canada, and idled tubular facilities in Ohio and Texas when oil plunged to less than $50 a barrel for the first time in years and reduced demand for tubular products.

The steelmaker closed two more coke ovens at its Granite City plant in Illinois and temporarily idled East Chicago Tin, laying off 369 workers for the foreseeable future. The drive is aimed at achieving profitability.

Tata car plant for the USA?Indian industry magnate Ratan Tata, chairman emeritus of Tata Sons, was recently in the US where he attended the 4th SC Automotive Summit. He said that Jaguar Land Rover was looking for a plant site. Tata headed the family-owned Tata Group, which includes India’s largest car manufacturer Tata Motors, which acquired Jaguar and Land Rover in 2008.

“The company is indeed looking at North America as a location for another plant,” Tata said during the summit at the Hyatt Regency in Greenville, South Carolina. He said the choice of the next location for a Jaguar Land Rover plant, whether in the US or elsewhere, would be decided by the company.

Jaguar Land Rover reported that sales increased 9% in 2014, to 462,678 vehicles.

The prospect of Jaguar establishing a plant has created a lot of excitement in US steel circles, which envisage steel sales getting a strong boost in the future, even though Tata did not comment on the plant’s location. t

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LATIN AMERICA UPDATE 15


Venezuela’s downward motion

Venezuela used to be a prominent Latin American producer of steel inputs and products and was the world’s largest producer of DRI-HBI, achieving a 31.2% market share in 1983. However, since the decision to nationalise the country’s two largest steelmakers and all HBI producers in 2008-2009, the sector has rapidly declined. By Germano Mendes de Paula*

* Professor in economics, Federal University of Uberlândia, Brazil. E-mail: [email protected]

WHEN President Hugo Chávez took over in 1999, crude oil prices were only $12 per barrel. By 2008 it reached a record of $145 per barrel. Swimming in oil money, the government embarked upon a series of ambitious social-spending reforms (aimed at improving the lives of the country’s most marginalised citizens) and on nationalisation of strategic industries (including the steel industry).

President Nicolás Maduro took over office in 2013. He inherited an economy in a critical situation, because of years of massive social spending and bad management (comprising considerable corruption) of government and state-owned enterprises (SOEs). The intention to go ahead of Chávez’s socialist revolution resulted in a very unfriendly market economy. Despite efforts to diversify the economic structure, Venezuela remained fairly dependent upon the oil industry. The collapse of global oil prices since June 2014 was a pivotal moment for the country’s macroeconomic chaos.

Fig. 1 shows the evolution of GDP growth during the period 2007-2015. During the bonanza time of 2007, the economy enlarged by 8.8%. After the involution of 2009-2010, it recovered fairly well to 5.6% in 2012. However,

GDP expanded only 1.3% in 2013 and moved to a negative variation of 3.0% in 2014. Morgan Stanley forecasts that an additional drop of 2.5% will occur in 2015.

Skyrocketing inflationVenezuela established a three-tier currency system, in which the domestic currency is worth a different amount of dollars: a) rate of 6.3 bolivars for imports of food and medicine; b) a complementary rate of roughly 12 bolivars for other goods; c) a “free-floating” currency exchange mechanism, known as Simadi, which sold dollars for 178 bolivars in the first week of March 2015. Meanwhile, in the parallel market, the exchange rate was already 250 bolivars on the same date.

In a context of shortages of food and other essential goods, the inflation rate skyrocketed to over 60% per annum in 2014. Morgan Stanley expects a consumer price inflation of 66% in 2015 and 72% in 2016. Another key determinant of such a high rate is the unsustainable fiscal budget deficit of 24% of GDP.

DRI-HBI and steel performanceConsidering the domestic economic crisis and unsatisfactory global steel market

sentiment, it is wise to expect a poor performance from the Venezuelan steel business. However, the effective outcome seems worse than might be expected.

Fig. 2 demonstrates that DRI-HBI output diminished from 7.8Mt in 2007 to 2.6Mt in 2013 and to 1.4Mt in 2014. Consequently, Venezuela’s global share retracted from 11.6% to 3.5% and 2.0% (preliminary estimation), respectively. As explained in the 2013 World Direct Reduction Statistics Report, edited by Midrex: “The immediate reason [for HBI output diminution] is a shortage of iron oxide pellets to feed the DR plants, but the underlying reason is lack of funds for maintenance throughout the supply chain; mining, transportation, materials handling, pelletising, ironmaking and infrastructure”. Not surprisingly, DRI-HBI exports plummeted from 2.7Mt in 2007 to 800kt in 2013, the latest available data.

The evolution of the nation’s crude steel production is examined in Fig. 3. It diminished from 5Mt in 2007 to only 1.5Mt in 2014. Therefore, the country’s participation in Latin America dropped from 7.4% to 2.4%. The trajectory was the opposite of what was planned by the Venezuelan National Steel Plan (NSP), unveiled in January 2009. The goal was

6

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Fig 1: Venezuela’s GDP growth 2007-2015 (%).

9876543210

2007 2008 2009 2010 2011 2012 2013 2014

Fig 2: Venezuela’s DRI-HBI production 2007-2014 (Mt) Fig 3: Venezuela’s crude steel production 2007-2014 (Mt)

LA.indd 1 4/13/15 2:24 PM

LATIN AMERICA UPDATE16


to boost the country’s output to 9Mt in 2013 and even to reach 15Mt by 2019 (STI, May-June 2009, p.12).

Sidor, Venezuela’s largest steelworks, fabricates both flat and long steel products and experienced a noteworthy output retraction, as can be observed in Fig. 4. Its crude steel production decreased from 4.3Mt in 2007 to 3.6Mt in 2008, bearing in mind that the company was renationalised in July 2008. After that, it declined further to reach 1Mt in 2014. Sidor faced various problems, related to bad management, shortage of raw materials and strikes. Many times, the government approved investments to

Fig 4: Sidor’s crude steel production 2007-2014 (Mt) Fig 5: Venezuela finished steel apparent consumption (Mt)

Sidor, but there has been a long distance between the rhetoric and the reality.

Complejo Siderurgico Nacional (CSN, formerly Sidetur), a nationalised long products producer, interrupted five of its six plants from the end of 2014 onwards, due to a lack of equipment, inputs and maintenance. The only meltshop and rolling mill operating was located in Barquisimeto. The second meltshop (Casima) was stopped in November, while the rolling mills Antimano, Guarenas, Lara and Valencia have been idled at least since January 2015.

Big hurdles to climbArcelorMittal subsidiary Unicon is focused on welded tubes. It has an installed capacity of nearly 1Mt/yr, but produced 190kt in 2014 because of significant constraints derived from a lack of substrate in the country.

Finished steel apparent consumption diminished from 3.6Mt in 2007 to 1.8Mt in 2014 in Venezuela, implying that its share in Latin American demand decreased from 6.2% to 2.6%, respectively. It should be highlighted that consumption experienced a lesser decline than production and it can

be concluded that the Venezuelan steel industry’s hurdles are even bigger than those related to the country’s depressed macroeconomic performance.

It is hard to predict if Venezuela’s steel sector has or hasn’t hit rock bottom. For optimists, the fact that state-owned iron ore producer CVG Ferrominera Orinoco (FMO) resumed production at its 3.3 Mt/yr pellet plant in January 2015, after a two-year stoppage, can be viewed as a good indication that the worst is over. The plant supplies domestic HBI producers.

For pessimists, there is little evidence that the Venezuelan steel industry is recovering even partially. t

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LA.indd 2 4/13/15 2:24 PM

INDIA UPDATE18


THE steel industry in India is currently passing through a rough phase due to weak domestic demand caused by poor infrastructure spending. While domestic steel mills are operating at just 70-80% of their installed capacity, a steep surge in cheap imports from countries like China and South Korea have worsened the fi nancial health of Indian steelmakers, most of which have cut their selling prices to match the landed cost of imported steel. But, they fear that if the trend continues, imports will grow at the expense of domestic producers. The sector’s growth rate has shrunk to a mere 3.4% over the last two years as the government’s fund allocation towards infrastructure has dried up.

Production down, imports upData compiled by the Joint Plant Committee (JPC) under the Ministry of Steel showed total steel output at 65.19Mt between April and December 2014, a marginal increase from 64.19Mt reported in the same period the previous year. Amid expectations of a revival in demand following a positive Union Budget in February (2014?), steel mills continued production until the December quarter (Q3 2014/15?). The World Steel Association (worldsteel) estimated India’s steel production at 14.56Mt between January and February 2015. According to worldsteel, a lot of installed capacity in India is to be commissioned during 2015 from its present manufacturing capacity of a little over 100Mt.

While steel mills have accelerated production, actual demand is yet to be seen on the ground. The new government has taken several initiatives to propel steel demand and experts believe it will take at least one year to take effect.

Meanwhile, steel imports have risen sharply as traders build massive inventory amid fears of government moves to raise import duty. Between April and December 2014, India’s imports of fi nished steel

shot up to 6.49Mt, a staggering 57% increase from 4.12Mt during the same period in 2013?. Steel imports have already surpassed the last full year’s level of 5.45Mt (is this the fi gure for 2014 or 2013?). India has imported nearly 2Mt between January and February 2015 to take the overall import fi gure to 8.39Mt between April 2014 and February 2015 – an impressive 67% increase over the same period last year.”At 8.39Mt now, India’s steel imports will hit a record high in the current year,” said A S Firoz, chief economist, joint plant committee, part of the Ministry of Steel.

“By March, India’s steel imports may surpass the record 10Mt mark,” said Jayant Acharya, director (commercial), JSW Steel, one of India’s largest private sector steel producers.

Trade imbalanceMeanwhile, India’s exports of fi nished steel declined 6% to 4.07Mt between April and December 2014 from 4.36Mt the previous year. Acharya believes that last year’s export fi gure would be unachievable this year. Last year, JPC reported India’s total steel exports at 5.98Mt.

Falling exports and rising imports have created a massive trade imbalance in India’s steel sector. Until recently the country was self suffi cient in steel and used to import only specialised steel for unique applications.

However, oversupply and lower production costs in China have resulted in the dumping of steel into India. Indian steel producers have urged the government to raise import duty from 10% to 15% in addition to some non-tariff barriers to safeguard domestic players against the abnormal surge in imports.

Indian steel mills are facing a host of other problems, such as higher production costs, due to the rising cost of raw materials and infl ated interest rates. With a ban on mining, iron ore has become more expensive.

Demand driversA Working Group on Steel report says that many factors exist which carry the potential of raising per capita steel consumption in India. These include, among others, an estimated infrastructure investment of nearly a trillion dollars, a projected growth of manufacturing from current 8% to 11-12%, an increase in urban population to 600 million by 2030 from the current level of 400 million, the emergence of the rural market for steel currently consuming around 10kg per annum buoyed by projects like Bharat Nirman (Development of India), Pradhan Mantri Gram Sadak Yojana (Prime Minister’s Village Road Connectivity Programme) and Rajiv Gandhi Awaas Yojana (Rajiv Gandhi Housing Programme) among others.

The National Steel Policy 2005 had envisaged steel production reaching 110Mt by 2019-20. However, based on an assessment of current ongoing projects, both greenfi eld and brownfi eld, the Ministry of Steel has projected India’s crude steel capacity to rise to 140Mt by 2016-17 and has the potential to reach 149Mt if all requirements are adequately met. The policy, however, is currently being reviewed keeping in mind rapid developments in the domestic steel industry (in supply and demand) as well as the stable growth of the Indian economy.

Falling pricesSteel prices in India have been under severe pressure of late. Long product (TMT) prices fell 3.1%. Trading currently at INR 31,400/t, TMT prices have declined by 11% from INR 35,200/t in April last year. Prices of hot rolled coil have nose-dived by a massive 23% to trade currently at INR 27,500/t. Steel making raw materials have slumped in tandem with iron ore plunging by a massive 49% to $58/t. Coking coal and shredded scrap fell by 10% and 31% to trade at $101/t and $247/t respectively between 1 April 2014 and 28 February 2015. �

Weak demand causes problemsIndia’s steel industry is having a rough time at present thanks to the usual suspects of weak domestic demand, reduced infrastructure spending and, of course, a surge in imports from China and South Korea. By Dilip Kumar Jha*

* India correspondent

INDIA UPDATE.indd 1 4/13/15 2:27 PM

IRON ORE20


Challenges ahead for Guinea

* Mining correspondent

DISCUSSION has usually centred on the Simandou resource in Guinea which, according to Rio Tinto’s website, hosts reserves of high-grade iron ore (65.5% Fe). Simandou offers 40 years of mining, supported by major rail and port infrastructure improvements. The latter would include the Trans-Guinean Railway, which would literally cross through the middle of the country as would two other lines, along with three new ports.

So far, so good. Enter Sam Walsh, Rio Tinto’s CEO. Quoted in Bloomberg Business on February 10, Mr Walsh declared that if Rio Tinto substantially reduced its iron ore output after prices had also declined, then other companies would make up the deficit but at higher prices. Or, using Walsh’s own words, “Guess what happens when you take 100 million tons off? The price goes up, and all those people that went out of the market come back into the market. And guess what? The price gets back to where it was and, whacko, we would be down 100 million tons.”

This comment is having its effect on, among others, the Guinea iron ore market.

For example, there will be elections in Guinea this year, when President Alpha Condé will be up for re-election. In turn, observers have been asking whether Condé should promote Rio Tinto as beneficial for his country and, furthermore, whether he should be proclaiming the benefits of the rail and port projects when there is a possibility they might not even be built.

Needless to say, the opposition in Guinea is making the most of this. Jeune Afrique, a widely read publication, has described Sam Walsh as speaking from both sides of his mouth: to Guinea he says that Simandou will be built, but to the rest of the world he asks why other projects should be allowed to come to market.

Even more bluntly, the opposition-owned and run Guinea News has recently commented to the people of Guinea that, “Walsh has thrown Guinea, Alpha Condé and especially [mining minister] Kerfalla Yansane and his group under the bus.” Nothing if not explicit.

And the implications for other producers? Well, it may seem bad, but one source (another producer) has briefed this writer that it is good for his particular

enterprise. This is based on the idea that if Rio Tinto reduces the amount of iron ore it ships, then the benchmark price for sales to China will rise, and a higher price will induce other producers to fill in the supply gap created by Rio Tinto.

In other words, the price of iron ore, depressed at the moment (which is how the majors like it to be) will rise and iron ore projects that have been shelved could well be reinstated.

Rio Tinto’s comments have imparted an element of instability into the pricing, not to say the extraction of one of the world’s key minerals. A major depletion of high-grade iron ore has already set in and is likely to last until 2070, if the statistics compiled from US Geological Survey figures by the Earth Policy Institute are not acted on. At present, lower-quality iron ore is being extracted worldwide, precisely to attempt to make up for shortages of good-quality ore.

But then Rio Tinto is not the only iron ore producer in Guinea – step forward other companies to invest, extract and bridge the global quality gap with Guinea’s high-quality ore. t

One of the world’s largest iron ore deposits lies in Guinea – it is an upcoming source of the steel industry’s chief raw material, says Michael Schwartz*

iron ore.indd 1 4/10/15 11:02 AM

SUSTAINABILITY 23


When determining the ‘green’ credentials of steel should we be concentrating purely on the use-phase, such as car tailpipe emissions, or make a wider ‘life cycle assessment’? By Matthew Moggridge*

*Matthew Moggridge, editor, Steel Times International

THE World Steel Association (worldsteel) has recently published Steel in the Circular Economy – a life cycle perspective in which it argues the case for moving away from a linear business model embracing design, raw materials, production, manufacturing, use and disposal and focusing instead on a circular economy.

The circular economy is defi ned by four key words: Reduce; Re-use; Re-manufacture; and Recycle.

ReduceReducing the amount of raw materials and energy required to make steel is something the global steel industry has been working on for the past 50 years. It has developed a wide variety of advanced high strength steels that contribute to the ‘light-weighting’ of applications as diverse as wind turbines, construction panels and cars. By reducing the weight of the steel it produces, the steel industry uses less raw materials.

Re-useSteel’s durability means that it can be re-used or ‘re-purposed’ without re-manufacturing. Train rails, automotive components and construction materials are good examples of where this is commonplace. Re-use is possible without reducing safety, mechanical properties and/or warranties, claims worldsteel.

According to worldsteel, ‘the amount of energy and resources required for re-use applications can be signifi cantly lower than producing a new application from raw materials.’

Re-manufacturingThere is a big difference between re-manufacturing and repair. The latter is a process limited to making the product operational whereas the former is described as ‘thorough disassembly and restoration with the possible inclusion of new parts’. The durability of steel components makes re-manufacturing

common practice for automotive engines and wind turbines, claims worldsteel.

Typical products that are re-manufactured include machines tools, electrical motors, automatic transmissions, offi ce furniture, domestic appliances, car engines and wind turbines.

RecycleSteel is 100% recyclable and always has been. It can be infi nitely recycled to create new steel products in a closed material loop. In fact, over 650Mt of steel is recycled annually – and that includes pre- and post-industrial scrap. The high value of steel scrap guarantees the economic viability of recycling and magnets make the recycling process very straightforward

What goes around, comes around

• Over 1,400kg of iron ore, 740kg of coal and 120kg of limestone are saved for every tonne of steel scrap made into new steel.

• More than 23 billion tonnes of scrap have been recycled since steel production began.

• More than 85% of vehicles are recovered globally, but nearly 100% of the steel in recovered automobiles is recycled.

Recycling Facts

WORLDSTEEL.indd 1 4/10/15 11:07 AM

by enabling steel that enters the waste stream to be easily separated from other materials.

Life cycle thinkingworldsteel believes that adopting a life cycle approach is crucial if we are to solve society’s problems sustainably. The term refers to the consideration of the raw materials used, energy consumption, waste and emissions of a product throughout its life time. ‘This starts with design and ends at the point where the product reaches the end of its natural life.’

To define the true environmental impact of a product from ‘cradle to grave’ life cycle thinking determines that we must calculate the resources and energy used and the waste and emissions produced at every stage of a product’s lifetime.

Knowing the impact on the environment of each stage of a product’s lifetime also determines what materials are used. For example, while aluminium, carbon fibre and plastic are often used to ‘lightweight’ a product, consideration must be given to the manufacturing of such materials and whether or not they are recyclable.

“The whole life cycle, from raw material extraction through to end-of-life recycling or disposal has to be considered,” says worldsteel.

Life Cycle AssessmentIn order to understand the environmental impact of a product throughout its lifetime, a Life Cycle Assessment (LCA) needs to be undertaken.

According to worldsteel, LCA is ‘a tool that enables us to measure the holistic environmental impact or performance of a product at each stage in its life cycle. It provides a measurement which can be used to compare the environmental sustainability of similar products and services which have the same function.’

The Life Cycle Assessment process can be described as a ‘cradle to grave’ approach as it considers the potential impacts from all stages of the material’s life cycle including manufacture, product usage and the end-of-life stages.

Life Cycle Assessment comprises four stages. First the purpose of the study and its boundaries must be identified; second, the data collection process (Life Cycle Inventory or LCI) takes place, the

objective being to compile a list of inputs and outputs of the materials, energy and emissions related to the product under scrutiny. Third, a Life Cycle Impact Assessment (LCIA) takes place to quantify the environmental impacts. Fourth, ‘significant environmental issues’ along with conclusions and recommendations need to be identified.

Standards of measurementThe International Organisation for Standardisation (ISO) has set down specific standards governing the methodologies employed when undertaking a Life Cycle Assessment. Worldsteel relies upon ISO 14040: 2006 and ISO 14044: 2006 which relate respectively to the principles and framework and the requirements and guidelines for Environmental management – Life cycle assessment.

Since 1995, worldsteel has been busy compiling life cycle inventory (LCI) data from its global membership. The information gathered was updated in 2001 and 2010 and will be updated again this year (2015). The full database is maintained by worldsteel and is available to members and third parties.

What’s the point?LCA data, which is collected from different regions of the world from worldsteel members, is used to encourage best practice among its global membership.

Academics, architects, government bodies and steel customers can use the data if they want to undertake their own

LCA study of steel-containing products. Data currently exists on 15 steel products

and is available to anyone who wants to conduct an LCA study. It can be used across a number of market sectors including automotive, building, packaging, energy and electronic appliances.

The available LCI data from worldsteel covers the raw material and production phases of the steel life cycle and includes environmental inputs and outputs, such as resource use and emissions to land, air and water. The processes involved include coke making, steel production, final processing (of steel products) and any other processes such as wastewater treatment.

Worldsteel argues that by using its LCI data either globally or regionally, the environmental impact – or LCA – can be calculated for a final product from cradle to grave.

Sustainability Nobody can criticise the global steel industry for ignoring big issues such as climate change, the environment and saving the planet. In many ways, the steel industry flies in the face of the stereotype that equates ‘big business’ with environmental catastrophe.

In 2012 66 members of worldsteel signed up to the Sustainable Development Charter, which basically committed them to operating their businesses in a financially sustainable way as well as supplying steel products that met the needs of their customers, offered value

SUSTAINABILITY24


Material production greenhouse gas (GHG) emissions:

GHG from production (in kg CO2e/kg of material)

Steel 2.0 - 2.5

11.2 - 12.6

21 - 23

18 - 45

Current average GHG emissions primary production

Aluminium

Magnesium

Carbon FRP

Footnotes:

- All steel and aluminium grades included in ranges

- Difference between AHSS and conventional steels is less than 5%

- Aluminium data: global for ingots; European only for process from ingot to final products

Packaging FactIn 1998 Chinese steel maker Baosteel developed drawn wall ironing (DI) tinplate, which is used to manufacture two-piece steel food and beverage cans. The company reduced the thickness of the steel from 0.228mm to 0225mm but in doing so increased the energy consumption of the reheating furnace and rollers.

The thickness reduction, however, meant less steel was needed, the production rate of finished cans was greatly improved, transportation impacts were reduced and, therefore, emissions and energy consumption decreased.


and optimised ‘the eco-efficiency of steels throughout their life cycle’.

The charter committed the 66 steel makers to pay close attention to environmental, social and economic sustainability and this meant improving resource and energy efficiency, being respectful to humanity and making ethical profits ‘to ensure the long-term viability of their enterprises’.

Life Cycle Assessment fits into the spirit of the Sustainable Development Charter inasmuch as it addresses economic, social and environmental sustainability. Where the latter is concerned, there has been a 60% drop in energy consumption per tonne of steel produced as a result of changes made to the production process over the last 50 years.

Where social sustainability is concerned, the steel industry has focused strongly on worker safety (see page 51 of this issue) and economically it is worth pointing out that the steel industry currently employs two million people and a further two million as on-site contractors, not forgetting those who work for upstream suppliers and related downstream industries.

The by-products of steel productionAccording to Clare Broadbent, head of product sustainability at worldsteel, one of the key aims of the steel industry is to have zero waste and with this in mind she highlights the way in which slag, a by-product of the steel production process, is used successfully in other industries.

“When we make steel we also want to make a good quality slag so we add extra things into the process to improve quality and make it good enough to sell on for other uses. By doing this we achieve a 96% utilisation rate,” she said.

Slag is widely used in the cement industry and, according to the Slag Cement Association, by replacing Portland cement with slag cement a saving can be made of up to 59% of the embodied CO2 emissions and 42% of the embodied energy required in cement manufacturing. Slag can also be used as a crop fertiliser and as an aggregate in road building.

Short-sighted legislation?Worldsteel argues that there is plenty of legislation in place around the world to ensure that the environmental impact of products, manufacturing and waste are minimised. The problem is that most of the laws in place tend to focus on the use-phase of the product and don’t take into account so called ‘life cycle thinking’.

Most legislation focuses on emissions and in this respect the steel industry is on a back foot as, with 1.6 billion tonnes produced annually, it is the biggest emitter of CO2.

Product Environmental FootprintThere are, however, a number of regional and global initiatives in place that do follow life cycle assessment thinking and these include the European Union’s Product

SUSTAINABILITY26


The durability of steel

• New York’s Brooklyn Bridge, built in 1883, was the first bridge built to carry traffic. 130 years later it carries 120,000 vehicles per day.

• The Basilica of San Sebastien in Manila, the Philippines, was built in 1891 and is the only pre-fabricated steel church in Asia.

• The Sydney Harbour Bridge in Australia opened to traffic in 1932 and contains over 53kt of steel waiting to be recycled.

• Steel makes up nearly 60% by mass of North American vehicles and 50% in the rest of the world.• The fact that wind tower turbines are 50% lighter today than 10 years ago translates into a 200-tonne reduction in CO2

emissions for a 70-metre tower.

Manufacturing facts

Environmental Footprint (PEF) standard, which measures the environmental performance of a product throughout its life time.

The PEF is currently a pilot project, but there are steel companies assessing the PEF’s suitability for the industry.

Life Cycle InitiativeCurrently in phase lll of its development is the Life Cycle Initiative, a joint venture programme between the United Nations Environment Programme and the Society for Environmental Toxicology and Chemistry (SETAC).

According to worldsteel, this initiative ‘aims to enable the global use of credible life cycle knowledge in order to create more sustainable societies’.

Chinese Eco-design initiativeWhile the media paints a picture of China as uncaring when it comes to environmental matters, some would argue the complete opposite. The Eco-Design Initiative, says worldsteel, ‘aims to draft the eco-design manual for several key products including cars’. Many car manufacturers and raw material suppliers have been involved in the pilot project and an authentification system for eco-designed products is in the pipeline.

Professional LCA societyThe American Center for Life Cycle Assessment (ACLCA) aims to build knowledge of the practice among industry, government and NGOs. The ACLCA is a professional body for LCA and organises conferences on the subject.

The Australasian solutionLife Cycle Assessment bodies in Australia and New Zealand joined forces in September 2014 to form the Australasian Environmental Product Declaration (EPD) Programme. It is hoped that EPDs will become commonplace in the region.

Steel in the Circular Economy – A lifecycle perspective is published by worldsteel. t

For further information, log on to worldsteel.org


SUSTAINABILITY 29


Europe is “steel” runningHow the European Commission intends to help the steel industry to remain competitive in the globalised world. By Carlo Pettinelli*

* Director – Sustainable Growth and EU2020, European Commission

SINCE taking offi ce in November 2014, the new European Commission has been fully aware that, in order to rebuild the confi dence and regain the trust of EU citizens, it is time to make a difference on the big economic and social challenges of Europe. High unemployment, slow growth, high levels of public debt, investment gap and lack of competitiveness in the global marketplace: these are the main challenges that the Commission has identifi ed in its Work Programme 2015. Jobs and growth will be at the heart of the EU’s political agenda, in line with the 10 priorities of President Juncker’s Political Guidelines.

The way we need to follow is clear: Europe has to base its prosperity on the real economy. The fi nancial and economic crisis has made it clear that we cannot rely solely on the services sector, including fi nancial services, for our prosperity. Europe’s economic recovery will not happen without industry, which accounts for over 80% of Europe’s exports and 80% of private research and innovation, returning a €365 billion surplus in the trade of manufactured products, that is €1 billion a day.

For all the above reasons, the European Commission has set the objective of raising the profi le and importance of industry in the European economy, from less than 16% today towards 20% of the EU’s GDP by 2020. Moreover, the President of the Commission, Mr. Jean-Claude Juncker, reaffi rmed that a high-performing industrial base is needed for growth in Europe, as much as a strong services sector, and the synergies between these two should be fully exploited. This should ensure that Europe maintains its global leadership in strategic sectors with

high-value jobs such as those found in the automotive, aeronautics, and engineering industries.

In this context, the steel industry plays a key role, contributing 335,000 direct jobs, around 1.5 million supply chain jobs and a turnover of €170 billion (a 1.4% share of the EU’s GDP). Additionally, a strong and competitive steel sector is important for Europe’s industrial base as steel is at the beginning of a number of industrial value chains and is closely linked to many downstream industrial sectors such as automotive, construction, electronics, mechanical and electrical engineering.

Major challengesNowadays, the European steel sector fi nds itself in a diffi cult situation, with up to 40,000 jobs lost in recent years plus the simultaneous effects of low demand and overcapacity in a global steel market dogged with high energy costs, volatile raw materials prices, a regulatory burden that implies certain costs, the need to invest in the transformation towards a clean, low-carbon economy and the development of innovative products.

All these challenges have been taken into account in the comprehensive Steel Action Plan of 2013, which recognised the strategic importance of steel in the EU.

Where steel demand is concerned, the Commission is confi dent that downstream sectors will be re-launched and thus steel demand will increase. The recently announced EU Investment Plan, which is expected to mobilise at least €315 billion of additional investment over the next three years will defi nitely help achieve this vision. Some projects in the Investment Plan, which are proposed by

Member States, directly concern the steel sector; for example: (i) the Italian project Energy Effi ciency for Steel Production of ILVA, aiming at the improvement of energy effi ciency and the implementation of the best available technology and (ii) the HISARNA project in the Netherlands, presented by PPP HULCOS (Ultra Low CO

2 Steelmaking). The steelmaking process that has been developed uses 20% less energy and results in a reduction of 20% of CO2 emissions and could, therefore, help the European steel sector to improve its competitiveness. Thus, the Investment Plan can provide good opportunities for the steel sector not only on the demand side, but it could also potentially support the fi nancial investments necessary to develop breakthrough technologies to reduce GHGs. In addition, other opportunities can come from the EU’s research and innovation funding programme, Horizon 2020 (around €600 million to be spent over a seven-year period on the topic of raw materials within Societal Challenge 5), as well as from the Research Fund for Coal and Steel (RFCS) which supports research projects in the coal and steel sectors with an annual budget of €44 million.

At an international trade level, the EU addresses trade barriers and unfair practices by rigorously implementing its market access strategy in order to enforce international commitments and secure a level playing fi eld for EU operators on the global steel market. One major challenge the European steel industry has to face stems from the global industry’s overcapacity problem and the fact that third countries [such as China] are exporting excess production through commercial behaviours that sometimes

Pettinelli.indd 1 4/10/15 11:12 AM

can be considered predatory. These unfair trade practices are addressed through the application of the EU’s trade defence instruments: there are currently 10 on-going anti-dumping investigations and 37 measures in force, related to imports of steel products into the EU and some measures have already been implemented.

Electricity and coking coal are the steel industry’s most important energy sources and the EU is under pressure for both. On average, EU industrial retail electricity prices are higher than in the US and China. However, there are significant differences between member states and there are quite different causes for elevated prices. One is that there is too little, if any, competition on the retail market (while the wholesale market appears to work much better) and another is the, sometimes, significant burden from national energy taxes and levies. In the steel sector, depending on the type of production and the existence of exemptions or state aid, energy costs may have a significant impact on the final steel producers’ profitability, especially in years when margins are low. In order to address the problem of high energy prices, on 25 February 2015, the European Commission adopted the Energy Union Strategic Framework that, among other provisions, introduced measures for further integration of the internal energy market where companies freely compete to provide the best energy prices.

The price of the other input, coking coal, has also significantly increased over recent years. The Commission, therefore, proposed the inclusion of coking coal in the list of critical raw materials in addition to other key essential elements for steel production. As of May 2014, the new list of raw materials that are deemed “critical” for Europe includes borates, chromium and coking coal, which are particularly relevant for the sector as they are needed for the production of steel alloys. We are confident that this inclusion will have positive effects for the sector, especially in trade negotiations with third countries

and/or in research projects. Where regulatory burden is concerned,

the steel sector has undergone a cumulative cost assessment to evaluate the impact that the most relevant EU legislative acts and initiatives have on the performance of the sector. Findings show that the cumulative regulatory costs are low compared to the overall cost of steel production. However, because the steel industry is a pro-cyclical industry, in times of crisis, regulatory costs may be even higher than EBITDA, for example, in the exceptional case of 2009. More often, they represent 20% to 30% of EBITDA and, therefore, may endanger the viability of the industry, as EBITDA need to cover financial expenditures, depreciation and amortization, that is the cost of capital.

More investment neededEU industry is not investing enough in the transformation towards a clean, low-carbon economy and in the development of innovative products. Investments are still 20% below pre-crisis level and this means an estimated €500 billion investment gap for the EU. Meanwhile our competitors in the USA and Asia are investing heavily in smart and clean technologies. If Europe does not act, it may lose its global leadership and risk being confined to the low-tech/low-profit segment of value chain. On the other hand, Europe’s industrial strategy for the 21st century aims to find the right balance for securing a high level of prosperity

and employment, while reducing its environmental footprint.

Against this background, in October 2014 EU leaders have set long awaited head-line targets and the architecture of the 2030 framework for climate and energy policies, putting forward ambitious objectives for GHG emissions reduction, renewable energy and energy efficiency. We are, of course, aware that complex work is still ahead of us and that we need to define the most appropriate technical solutions. The details of further EU proposals will need to be based on a thorough assessment of impacts, with valuable inputs from all stakeholders. Simple, predictable and effective provisions, for example, will have to be found to address the competitiveness of industry sectors covered by the EU emissions trading system (EU ETS) which are deemed to be exposed to a significant risk of ‘carbon leakage’. These provisions will need to take into account (i) the technological feasibility of reducing emissions; (ii) direct and indirect sources of cost increase and (iii) the need for an adequate level of free allocation of allowances. All these elements will need to be accompanied by increased efforts that trigger investment in research and innovation for low carbon technologies and energy efficiency.

Equally, we have to examine the opportunities offered by the green economy: the global market for ‘low carbon’ and ‘environmental’ goods and services (a subset of the total market of green products) is estimated at €4.2 trillion with an EU share of 21% . This market has been growing at an annual average rate of 4%, even during the recession, making the green economy one of the sectors with the strongest job growth potential.

Europe needs real economy which certainly involves manufacturing and – as a consequence – the steel industry. At the same time, there are several challenges that the sector must face: some come from outside (energy and raw material prices, unfair competition) others are set by us (regulatory burden, EU climate goals). The EU has to tackle these issues in order to maintain and reinforce its position as the second largest producer of steel in the world.

As the title says, the EU is “steel” running, and I think we cannot stop if we want our steel sector to remain competitive on the global stage and grow in a sustainable way. I am confident that the European Commission is ready to play its part by acting at a global level and by proposing the right framework conditions with its industrial policy to stimulate new investments and speed up the adoption of new technologies. t

SUSTAINABILITY30


Jobs and growth will be at

the heart of the

EU’s political agenda,

in line with the 10

priorities of President

Juncker’s political

guidelines.

Pettinelli.indd 2 4/10/15 11:12 AM

CLIMATE POLICY 35


EU climate policy under scrutinyIt is 10 years since the European steel sector first begun grappling with the complexities of the EU’s emissions trading system (ETS). The intervening years have not made the bloc’s climate and energy policy framework any simpler or more predictable for steelmakers. By Gareth Stace*

* Head of climate & environment policy, Engineering Employers Federation (EEF).

EU leaders might have agreed outline targets for 2030 last October, but the detailed rules are still to be decided and policymakers reminded yet again of the value, and vulnerability, of some energy-intensive industries.

In the meantime, a political deal is likely to be reached on the market stability reserve (MSR), which is designed to push up the price of ETS allowances and adds more complexity and uncertainty to the market. This year will also see major UN climate talks in Paris, which could shift the landscape in which the EU’s targets sit.

Taken together – and in the context, of course, of the wider economic uncertainties facing European steelmakers – the picture is a concerning one for the industry. It is difficult to say at this stage, what the eventual impacts will be.

A market-based approachThe debate over the 2030 targets occupied most of last year, with the final deal struck between EU governments and the Commission in October centred on a 40% cut in total greenhouse gas emissions below 1990 levels. The parts of the EU economy covered by the ETS have to reduce their emissions to 43% below 2005 levels. There will also be a binding EU-wide renewable energy target of 27% and a similar, but voluntary, energy efficiency goal, and the final text included a promise to review the package in light of any deal reached at the Paris talks.

That might not sound particularly welcome to some in the industry, but there were elements to be pleased about.

First, the UK government helped resist the imposition of further national-level renewables and energy efficiency

targets, on the grounds that it would be more cost-effective to have an approach focused on the ETS. This is the view of UK Steel too: we have long argued that the EU’s complex regulatory landscape with multiple overlapping targets prevents the ETS functioning efficiently.

In addition, a fund used in the existing phase of the ETS to support carbon capture and storage schemes and innovative renewables technologies will be expanded in the next 2020-30 phase to include industrial emissions reduction projects. Industry has long been frustrated at how little support it receives for decarbonisation compared to the energy sector and, with the right rules, this could start levelling the scales.

Steelmakers also managed to secure some encouraging, if slightly vague, commitments to retain and reform the current system of support for sectors considered to be at risk of ‘carbon leakage’ because they compete globally and cannot pass on ETS costs to their customers.

This support is meant to stop vulnerable industries moving overseas and potentially increasing net global emissions in the process.

The current system is based on free allocation of allowances for direct ETS costs and, in some countries, state aid to cover ETS costs passed through by energy suppliers. It does not deliver the degree of protection originally promised because of overly ambitious benchmarks for the steel sector and an arbitrary cross-industry cap on free allowances, as a result there will be an increasing shortfall through this decade. Even in those countries offering state aid for indirect ETS costs, this is still capped at around 80%.

Commission projections show the MSR could push up carbon prices from around €7/t of carbon dioxide to around €30/t in the next phase of the ETS. Other market analysts have suggested €40/t or higher. Adequate carbon leakage provisions will become even more important under these kinds of scenarios and the steel industry continues to be frustrated that these two ETS reforms are being agreed separately. MEPs and some member states are now looking to increase the mismatch further by bringing forward the start of the MSR to 2019 or even 2017.

The European Steel Association (Eurofer) has calculated that carbon prices of €30-€40/t, when combined with the existing carbon leakage rules, would cost the European industry €43bn-€58bn during the 2020s. This equates to around €20-€30 per tonne of steel –

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