Energy demand growth a dubious benefit for industry
ENERGY is a double- barrelled issue for the steel industry. The enormous foreshadowed growth in global energy demand offers steel mills a burgeoning market, while the expected increases in power prices flowing from carbon constraints is a considerable headache for them.
Steel is critical for energy supply. It is used in mines, offshore production platforms, pipelines, tankers, generation plant, pylons and cables for power networks and in electrical motors. It is also used in the construction of wind turbines and in solar photovoltaic panels — and it will be essential for hydrogen storage and delivery if decarbonisation of the global economy leads to a shift away from fossil fuels.
‘‘ Steel,’’ says the International Iron & Steel Institute, ‘‘ powers our world night and day.’’
The problem for the steelmakers is that energy, and electricity in particular, is also critical to their world in a market where demand for the metal is soaring and competition is getting tougher. They are significantly exposed to a shift to a carbon- constrained environment. They use carbon as a chemical reductant, and indirectly through their use of electricity and natural gas.
In Europe the industry is complaining loudly that its gas and electricity bills have increased ‘‘ dramatically’’ over the past three years, weakening EU steelmakers’ international competitiveness. The EU carbon dioxide trading system, it says, has added substantially to upward price pressures in the energy market. Because of energy price volatility in Europe, it adds, long- term contracts are now very difficult to obtain, a significant problem for a capital intensive business that needs to make 20- year investment decisions.
The industry’s prime greenhouse issue is that coal and coke are essential raw materials in making iron and steel. ‘‘ Emissions of carbon dioxide and other greenhouse gases are an unavoidable consequence of current iron and steel manufacturing technology and likely to remain so for the foreseeable future,’’ BlueScope Steel, Australia’s largest listed manufacturing company, has told the inquiry in to emissions trading held by the state governments.
A steep change in technology is being pursued, it says, through Australia’s participation in the Asia- Pacific Partnership on Clean Development and Climate ( AP6) with the aim of reducing carbon dioxide emissions in steelmaking through changes to iron ore processing. ‘‘ However,’’ it adds, ‘‘ the new technology is many years, and perhaps decades, away from commercialisation.’’
BlueScope points out that it is unavoidably an energy- intensive business, consuming 117 petajoules of energy in Australia each year.
The advantages of operating in Australia at present are three — some of the world’s highest quality iron ore is mined here; there are extensive metallurgical coal supplies; and world- competitive energy sources. For BlueScope Steel, there is also the advantage of access to Port Kembla’s deepwater port.
A big concern for BlueScope Steel and other energy- intensive manufacturers in Australia is that the constraints on greenhouse gas emissions now being proposed by the federal Government and the opposition are not likely to be applied in countries with whom they compete in the global marketplace.
This includes China, Indonesia and Brazil in the steel industry. The Chinese steel mills are churning out more than 350 million tonnes of products a year and are expected to reach 400 this year — compared with 7.5 million tonnes in Australia.
‘‘ Regulation of greenhouse gas emissions in developed countries alone could simply see more and more steel production moving to the developing world,’’ BlueScope told the premiers’ inquiry. ‘‘ This will not cut global greenhouse gas emissions, and may actually increase greenhouse intensity if less efficient technology is used.’’