Posted on 24 Sep 2024
Steel is leading the energy transition metals when it comes to consumer willingness to pay a green premium by 2030, according to a report by McKinsey & Company, seen by Kallanish.
The Global Materials Perspective 2024 reports that 42% of steel customers were ready to pay some extra premium to secure supply if green materials are in deficit by 2030, above that of aluminium (37%) and copper (20%) customers.
While 44% of steel customers were not ready to pay extra and would switch to a grey alternative, this remained a lower percentage than those in the aluminium (59%) and copper (60%) sectors.
Across all materials, less than 15% of customers indicate a willingness to pay premiums of around 10% for low-carbon materials. However, the research notes regulatory measures could change the outlook, such as the EU Emissions Trading System (EU ETS) and Carbon Border Adjustment Mechanism (CBAM), amid higher costs for carbon emissions.
It adds that the energy transition is changing the materials landscape by accelerating demand growth for materials that are utilised in low-carbon technology such as electric vehicles. A long-term shift is taking place in terms of the materials needed, increasing the importance of the metals and mining portfolio, while at the same time driving a reduction in the use of thermal coal in energy.
In response, companies might seek to either switch to sourcing low-carbon footprint materials or invest in innovative solutions to reduce process emissions.
Elsewhere, the report notes that in metals and mining, around 80% of revenues stem from just five materials, steel, thermal coal, copper, gold, and aluminium, accounting for $4 trillion.
Of this, thermal coal and steel account for approximately 60-70% of revenues, with production volumes more than 30 times higher than all other materials combined. Gold, copper, and aluminium make up another 15-20%.
However, despite the long-term shift in material choice, steel was one of the few materials that has a somewhat weaker growth expectation, with demand projections remaining strong until 2035. With the exception of steel and thermal coal, demand is expected to outpace absolute historical growth in the coming decade compared with the previous decade for all the other energy transition materials in the report, including lithium and nickel.
In 2023, total production emissions from the metals and mining industry accounted for approximately 15% of global emissions. Assuming no external shifts, the share is estimated to decrease to approximately 13% by 2035.
This decrease in emissions is driven by the net effect of several factors, according to the report. This includes changes in production of thermal coal, a 50% decarbonisation of the global power grid, as the share of renewable energy increases, improved circularity as more recycled material is collected and utilised, efficiency improvements, and assets transitioning to net zero production.
Steel was also looking at a more “modest” decrease in emissions from in a “business as usual” perspective over the coming years than other materials. However, the research notes for the sector, approximately 40 million tonnes capacity of such transitions have already been announced by 2035, which would lower global emissions by as much as 60mt of CO2.
Elsewhere, the report notes that despite a turbulent environment, finances were healthy until 2023 – yet 2024 has a gloomier outlook. The past two to three years have posed some challenges for the materials industry, with high price volatility driven by increased supply chain disruptions and volatility in energy prices, among other factors. While the industry has experienced previous cycles of boom and bust, these recent fluctuations are unprecedente…
[11:48 am, 24/09/2024] Nirmalya Mukherjee: Germany plans to decarbonize one-third of domestic steel capacity by 2030
19 September 2024
During Germany’s National Steel Summit held in Duisburg, politicians and industrial associations have spoken in favor of the preservation and green transition of the domestic steel industry and have listed the needs of the sector, according to media reports.
Robert Habeck, German federal minister for economic affairs and climate action, stated that Germany and the EU are spearheading the decarbonization of the steel industry. “In Germany, we will convert around one-third of German crude steel capacity by 2030 and, in doing so, produce around 12 million mt of carbon-free steel,” Mr. Habeck added.
As stated in local German media reports on the summit, steel production is the foundation of many sectors such as automotive and mechanical engineering and their transformation, though it is very energy-intensive and accounts for seven percent of Germany’s total greenhouse gas emissions. New technologies and the use of renewable or green energies such as hydrogen are needed.
The German government has been allocating billions of euros for large-scale renewable energy plants, but the domestic steel industry is facing the risk of a weak economy and high energy prices, and cheap imports mainly from Asia. Therefore, IG Metall, one of the largest metalworkers’ unions in Germany, has urged politicians to create a reliable investment environment and to ensure competitive prices for electricity.
Gunnar Groebler, president of the German Steel Federation, stated that Germany needs to establish green markets, to keep energy prices in check and to create effective protection against unfair competition in order to support the industry, which is under pressure.
Additionally, other unions pointed out that a competitive domestic steel industry is essential for industrial value chains, prosperity, employment and a green transformation in Germany and Europe.
Source:Kallanish
