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Figure 4: Hot-Rolled Coil Steel prices 5 Year until 19th March 2024 Source: tradingeconomics.com
Market information
European high energy consuming indus- tries are confronted with.
The long-term strategy to shift towards green hydrogen to replace fossil energy sources such as natural gas, are also ques- tioned by some specialists. Hydrogen pro- duction via electrolysis in an industrial scale requires not only masses of clean water, but also a lot of electrical energy. About 55 MW/ton of Hydrogen must be considered. Furthermore, the chemical process, the electrolysis, requires permanent electri-
cal energy 24 hours over 7 days per week with limited power network variations. The lifetime of the electrolyse stacks is signif- icantly reduced in case of larger power supply volatility. Therefore, green hydrogen production seems to be feasible in regions with steady sun and wind. In most parts
of Europe such constant power supply at reasonable cost is still hardly to be realized by the green energy sources wind and sun. Some European countries therefore con- sider nuclear power as the green solution hereto.
Europe has established the ETS (Emission Trading System), to reduce CO2 emis-
sion by introducing levies on each tonne
of emitted CO2. In addition, the CBAM (Carbon Border Adjustment Mechanism), was introduced as compensating levies on CO2 intensive goods imported from third countries outside of Europe. This system, characterised by punitive tariffs, ensures a certain equalisation of costs within Europe,
local European producer however do not get any further protection. However, as it raises the overall cost level for goods in Europe, it is leading to cost disadvantages for products which are exported outside of Europe.
In contrast, USA has introduced an instru- ment with the introduction of the IRA (Inflation Reduction Act), which provides financial incentives for low-carbon invest- ments. A climate protection package of 369 billion US dollars is providing tax credits for climate saving investments. The US IRA has created a boost of investments, whereas the European levies system did create irritations amongst investors and economic recession.
Therefore, the European energy intensive industry is confronted by a significant cost disadvantage. If no cheaper energy supply sources become available, this disadvan- tage remain as a major thread for the Euro- pean energy intensive steel and tubular industry.
It is to be seen, to what extend measures to increase energy effectiveness and produc- tivity can help European producers to com- pensate such cost disadvantages and the flood of additional administrative measures required by regulations such as ETS and CBAM. Lean and competitive production is somehow in danger to come out of sight.
Tube and Pipe manufacturers buy hot- rolled coils, round billets, or plates as input material for their production lines. More than 70 % of the total world pipe produc- tion, i.e. about 110 million tonnes/year,
are welded tubes and pipes. Welded tube producers are highly dependent on attrac- tive hot rolled coil prices and large OD
pipe (pipeline) producers, on plate prices. Average prices for hot-rolled coils came down from September 2021 (ab. 2000 USD/ ton) to September 2023 (ab. 700 USD/ton). Since then, the HRC prices strengthened again to prices of about 1120 USD/ton. Mid of March 2024 the price is at 880 USD/Ton (Figure 4). Furthermore, tube producers suffer from shortages in the availability of special tube material specifications. Special alloyed HRC as applied e.g. OCTG tubes and pipes, are traded at significant higher prices.
ITAtube Journal April 2024