Posted on 29 Aug 2022
He added that the fleet of BF/BOF systems in China is still young and decarbonisation could mean making BF/BOFs more emissions friendly than to see a complete shift to EAFs.
Dr. Bekir added that China is looking at growing its current pool of scrap from 200-240 million tonnes today to 300 million tonnes by 2030 and to 400-450 million tonnes by 2050, for its internal consumption.
He does not expect any immediate change to the steelmaking structure in China in their decarbonisation efforts. However, it is not yet clear if BF/BOF systems will be integrated with carbon capture technologies or whether hydrogen steelmaking will dominate (though there are such facilities to be commissioned in the next few years).
When the shift towards low carbon economy happens, there will be a change in China’s economic structure model, as reflected on steel demand and production structure. This shift is already happening and will accelerate some point in the future.
Ms Seguineaud pointed out while Europe has had a head start in reducing carbon, most low carbon projects are about transforming and adapting BF/BOF systems rather than building new EAF facilities.
However of late, she has also observed some shift from BF/BOF to Direct Reduced Iron (DRI), Hydrogen EAF projects. Large steel producers are also exploring these cleaner technologies, starting at the pilot and demonstration stages. Taking these towards full commercialisation level is a challenge.
However, European Union has announced a plan to move to cleaner energy systems, requiring primary hydrogen based steel production targets to be achieved by 2030. She also observed more and more of this type of projects in partnership with energy companies, which are the first signs of a major transformation.
Dr. Bekir further added that recent developments have also impacted EAF steelmakers as they have a much higher exposure to energy prices. COVID shutdowns also limited the collection of scrap. These could be why EAFs have smaller market shares, even though BF/BOF, capacities are not growing in Europe.
However, trends towards electrification are consistent based on company announcements in Europe, to the tune of 25 million tonnes of DRI making capacity to commission by 2030; all these are announcements to replace BF/BOF capacities.
He also believes the share of EAFs would increase gradually based on the strong growth of EAF capacity in China.
Are Steel Capacities Going to Reduce in China?
Mr. Widnell explained that China is also in the process of offshoring capacity and investing in high quality steel capacity, which is more trade friendly than having onshore capacity and exporting steel. However, China’s economic performance last year has been bad and they more focused on stimulating the economy more than decarbonisation.
What are the ASEAN Producers’ Views about Overcapacity in ASEAN?
Dato’ Lim Hong Thye of Malaysia acknowledged this is a major issue facing the Malaysia Steel Industry since 2016-2017. With a demand of 10 million tonnes of steel at the peak, the looming capacity is about 46 million tonnes, which includes WenAn Steel with a 10 million tonne capacity and Alliance Steel targeting to grow from 3.5 to 10 million tonnes. It is obvious that these new investments have the objective of exporting steel back to China. The recent leadership changes in the country have made it difficult to approach the right people on this issue.
He also noted that China has a number of BF/BOF projects. India intends to increase capacities from 120 to 300 million tonnes with half of these coming from EAFs. From the previous presentation, it shows ASEAN investments will see a possible 90 million tonne increase in capacity in ASEAN. With the engine of growth expected to come from China, India and ASEAN for at least the next 10 years, ongoing investments appears to be on predominantly BF/BOF systems. He questioned how do these systems actually align with the decarbonization goals of ASEAN countries and the world.
According to Mr. Ngheim Xuan Da from Vietnam, the Vietnam situation appears to be less serious compared to Malaysia.
On the upstream side, as Vietnam’s crude steel capacity was 25 million tonnes in 2021 vs their production of 23 million tonnes. While utilisation levels are high, Vietnam is also very concerned about the upcoming new capacities. Hoa Phat, for example, is embarking on a 5-6 million tonne second phase expansion project. Another
private company in the north is carrying out a feasibility study to invest in a 10 million tonne project in less than five years. All these are expected to lead towards a potential overcapacity situation in Vietnam.
On the downstream side, the overcapacity is more serious. He highlighted that the capacity in construction steel, wire rod and bar are about 24 million, but 2021 production was about 10.5 million (only 50% capacity utilisation). Cold-rolled coil capacity was about 9 million tonnes with 5 million of production (60% utilisation). For tubes and pipes, the capacity was about 4.5 million tonnes and last year’s production was about 3 million (65% utilisation). For galvanizing and color coating capacity was 10 million tonnes with 2021 production of 6 million tonnes. As far as finished products are concerned, Vietnam is facing an overcapacity, right now.
For the ASEAN region, Vietnam is also concerned about the huge mega projects in Malaysia and Indonesia. They have made a proposal to their government on how to control the expansion of capacities in Vietnam.
How do ASEAN Producers Manage Their Raw Materials & Scrap Situation amid Price Volatility, Availability?
Dato’ Lim shared that his company decided to invest in a mini blast furnace in 2008 because South East Asia is short of scrap and that it is tough to move towards high grade steel using scrap. A positive development in ASEAN is also the presence of Vale’s distribution hub in Lumut, Malaysia, which helps solve a lot of the raw materials issue.
He also pointed out that they could use DRI/Hot Briquetted Iron (HBI). Unless hydrogen based technology really come onstream and the carbon tax is introduced, then it may make economic sense to invest in clean technology, which is a challenge for private companies like theirs.
The Chinese are familiar with BF/BOF technology and it is not surprising that they are investing in BF/BOF systems in ASEAN. Vale’s big distribution centre will continue to be a source of iron ore supply in this region.
Mr Da pointed out that the raw material situation in Vietnam is the same as for ASEAN countries. Steel production in Vietnam has increased rapidly in the last 5 years. Last year, Vietnam produced 23 million tonnes of steel, three times of production 5 years ago. Raw material demand also tripled in 2021, with the demand for iron ore currently at 23 million tonnes noting that BF/BOF system accounts for 65% of production.
In 2021, scrap demand was about 11 million tonnes and coking coal around 10 million tonnes. To meet that demand, Vietnam imported nearly 18-19 million tonnes of iron ore, 6.5 million tonnes of scrap and 90% of its coking coal requirement.
He estimated ASEAN can only supply about 10- 15% for scrap, 40% for coking coal and 10% of its iron ore requirements. The upcoming mega steel investment projects will increase the competition for raw materials in ASEAN.
The Vietnam Steel Association has proposed to the government to invest into the exploration for iron ore, as their iron ore capacity is probably sufficient up to 50 years only.
On the other hand, steel producers should establish strategic alliance with suppliers in Australia, Brazil, China or Chile to ensure stable and long-term iron ore supply.
He quoted examples of Hoa Phat buying an Australian mine with reserves of 320 million tonnes of iron ore and Formosa Ha Tinh had similarly developed an iron ore base overseas.
They are also considering new technology and diversifying their raw material for billet as well as pig iron.
In view of low self-sufficiency in raw materials, steel producers need to strategise to ensure stable supply of and reasonable & competitive price for the raw material to keep competitiveness in ASEAN countries.
Are the Technologies Being Explored Commercially Available Now, Whether They Are by Japanese Companies or Others?
Note: The Course 50 project aims to reduce CO2 emissions from steelworks by 30% by developing technology to reduce CO2 emitted from blast furnaces and technology for highly efficient separation and recovery of CO2 from blast furnace exhaust gas.
According to Dr. Watakabe, the COURSE50 project, which has been under development for over 10 years, and the Japanese companies are hoping to implement this process by 2030 in Japan. Some parts of the technology of COURSE50 is already commercialized and the blast furnace reduction technology using hydrogen gas is now expected to be implemented in 2030.
As for the Super-COURSE50, this technology utilizes hydrogen from outside of the site, so that usage of
hydrogen gas is very huge so, this is more difficult than the COURSE50 project. JFE is planning to evaluate the effects of the Super-COURSE50 process by running test in a small blast furnace operation. Again, this will be done by 2030.
On whether the hydrogen DRI process could be implemented using an existing system or not, Dr. Watakabe highlighted that the challenge is there is no natural source of hydrogen. Some ideas for the process using hydrogen gas is already commercialized in other countries by Midrex. This development process, also subsidized by Japanese government, started last year, and now they are in the stage of what is the best process using hydrogen. One idea is to utilize the conventional process, and other one will be the new process.
Ms. Seguineaud also agreed that most of these technologies will take time to reach commercialisation. By 2025, most low carbon steel projects will be about adapting and retrofitting existing facilities. DRI based hydrogen projects are targeted to come onstream by about 2030. She pointed out that the first project was the HYBRIT project in Sweden. Recently ArcelorMittal Canada also realised the first tests of hydrogen with DRI. These projects are paving way for the scaling and commercialisation of such technologies by 2030.
Dr. Bekir added that the SSAB HYBRIT project seems to be the most advanced at this point in time. He also added that the technology is unlikely to be commercially available off the shelf in the near term. After all, this technology is dependent on the availability of green electricity and green hydrogen. Most projects in Europe aim to reach the green hydrogen phase only by going through gray hydrogen and increasing the availability of green hydrogen to 100% in about 10 to 15 years. It is not easy for every company or producer to have such favourable conditions like SSAB. While it will take time, the value chain will continue to transform gradually.
That’s for the CEO Panel Discussion and I would like to thank our panel of Experts and Directors of SEAISI for sharing their views on overcapacity, raw material situation in China and ASEAN and on the availability of technologies towards a low carbon future.
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