What’s this world coming to when an integrated steelmaker – a leader in an industry notorious for taking a huge toll on the environment – spends much of his earnings call talking about cutting carbon emissions? Said Lourenco Goncalves, Cleveland-Cliffs’ chief executive, last week: “Cliffs sees decarbonization as part of our license to continue to exist…. We are well on our way to achieving our [emissions] targets through the combination of natural gas usage, HBI production and internal usage, and carbon capture.”
Cliffs’ goal is a 25% reduction in its carbon emissions by 2030. “Every company that claims it will be carbon neutral by 2050 is just saying what people want to hear. No one knows what will happen that far out. Our 2030 number, that is real,” he said.
Globally, production of steel is blamed for about 8% of all the carbon dioxide (CO2) emissions that are changing the world’s climate, with disastrous long-term consequences, though the percentage emitted by the U.S. is much less.
The integrated steelmaking process, which uses iron ore and coking coal in blast/basic oxygen furnaces, emits far more CO2 than minimills, which melt recycled scrap in electric arc furnaces. Cliffs operates both blast furnaces and EAFs at its various facilities. Goncalves is not ready to cede all the environmental high ground to the lower-emitting minimills, though, and argues that the market needs both.
“Replacing blast furnaces with EAFs is not the solution. No major steelmaking nation runs entirely on EAFs,” said Goncalves. “When producing flat-rolled steels, EAFs need a significant amount of virgin material like pig iron, prime scrap, DRI and HBI…. Even here in the United States, soon to achieve 75% participation of EAFs, we may be near a peak, particularly if further investments in direct reduction are not made.”
Cleveland-Cliffs Inc. reported the best quarterly results in the company’s history with net income of $795 million on revenues of $5.0 billion in the second quarter. Cliffs is planning to spend its windfall profits on reducing its debt load to zero over the next few years, not on investing in new EAF production, he said. “Don’t count on Cleveland-Cliffs for that. That ship sailed when we acquired ArcelorMittal USA and AK Steel.” No comment on possible future acquisitions.
Cliffs began producing hot-briquetted iron at its new direct reduction plant in Toledo, Ohio, earlier this year and expects to soon consume the plant’s entire 2.1 million tons of annual capacity internally – and not just as an alternative to expensive prime scrap in its EAFs. In fact, the majority (54%) of the HBI that Cliffs uses goes into its blast furnaces. Using the pre-reduced iron allows for a lower carbon load in the BOF and thus reduces CO2.
“Our timing [with the Toledo HBI plant] could not be better. Prime scrap is scarce. And every day that the price of scrap goes up, our cost savings from HBI becomes more significant,” Goncalves said. “On top of that we have actually used the vast majority of our internally consumed HBI in our blast furnaces, enhancing hot metal output and allowing us to capture additional margin on incremental steel tonnage produced and sold to clients. Along with the productivity benefits, this action alone reduced our implied carbon emissions by 163,000 tons during the quarter.”
Goncalves sees an upward trend for global metallics prices. Russia, the largest exporter of pig iron, is restricting exports of ferrous materials. China plans to use more scrap to cut its emissions. “As new EAF capacity continues to be brought into operation in the United States and abroad, the notion that prime scrap is a precious metal will be better understood,” he said.
Goncalves was critical of foreign governments including those in Europe, Japan and even Canada for subsidizing their steel industries with environmental research grants and other funding. The industry in Europe is placing a big bet on hydrogen-based steelmaking, largely because the region does not have the natural gas reserves that are abundant in other parts of the world. “That’s another compelling reason why imports need to be held in check as other countries take advantage of a totally uneven playing field with their much worse environmental performance and major government subsidies that we don’t get here in the United States. China is not our only problem; our so-called friends are, too,” he said.
He acknowledged that hydrogen holds promise. Cliff’s direct reduction plant was designed and built to be able to use up to 70% hydrogen. But in order to make hydrogen a viable reductant, serious cost improvements and breakthrough technical developments are still needed, he added. “So natural gas is the only technologically proven way to decarbonize the steel industry at this point. Everything else is just technologically speculating,” he said.
What’s this world coming to when an integrated steelmaker talks about the importance of cutting emissions? Perhaps it’s coming to its senses.
Companies continue to sign up for the 2021 SMU Steel Summit Conference set for Aug. 23-25 event in Atlanta. The following companies registered over the past couple of days (the * means more than one executive is registered): Aceroteca*; B. Riley Financial; B.F. Steel de Mexico, S.A. de C.V.; Clopay Building Products Co.; CMC – Impact Metals; JP Morgan; Mainline Metals*; Matandy Steel & Metal Products, LLC*; Montrose Advisors, LLC; Odyssey Specialized Logistics, LLC; Target Steel; Watco; and Wick Buildings. The following companies added more executives to their registrations: AcelorMittal*; California Steel Industries*; Lafayette Steel*; Mitsui & Co. USA*; OWC*; PGT Trucking, Inc.*; Reibus International, Inc.*; Steel Warehouse* and Wastequip, LLC*. You can join the almost 900 individuals who are already registered (on our way to 1,000) by clicking here.
SMU’s Community Chat webinar beginning at 11 a.m. ET on Wednesday, Aug. 11, will be a tutorial on the protocols for this year’s conference and how to use the conference platform. Spending a little time to get familiar with the online platform in advance will enhance the experience for both those who plan to attend in person and those who plan to attend virtually.
It’s not too late to sign up for this week’s free Community Chat with auto market expert Bernard Swiecki from the Center for Automotive Research (CAR). The webinar begins at 11 a.m. ET on Wednesday, July 28. You can register by clicking here.
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Tim Triplett, Executive Editor, Tim@SteelMarketUpdate.com
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I’ve had discussions with some of you lately about where and when sheet prices might bottom. Some of you say that hot-rolled (HR) coil prices won’t fall below $800 per short ton (st). Others tell me that bigger buyers aren’t interested unless they can get something that starts with a six. Obviously a lot depends on whether we're talking 50 tons or 50,000 tons. I've even gotten some guff about how the drop in US prices is happening only because we’re talking about it happening.
We’ve all heard a lot about mill “discipline” following a wave of consolidation over the last few years. That discipline is often evident when prices are rising, less so when they are falling. I remember hearing earlier this year that mills weren’t going to let hot-rolled (HR) coil prices fall below $1,000 per short ton (st). Then not below $900/st. Now, some of you tell me that HR prices in the mid/high-$800s are the “1-800 price” – widely available to regular spot buyers. So what comes next, and will mills “hold the line” in the $800s?
Everyone knows the old saying that “a picture is worth a thousand words.” Just because it’s a cliché doesn’t mean that it’s wrong. A lot of inked has been spilled trying to figure out why prices are falling now. I thought it might be as simple as this: Market dynamics in the fourth quarter (UAW strike, companies buying ahead of an anticipated post-strike price spike, etc.) pulled forward restocking activity that typically happens in the first quarter.
What a difference a month makes. There are a few full bulls left in the room, but their numbers are dwindling. We’ll release results of our full steel market survey tomorrow afternoon. I took a sneak peak at the data on Thursday. And more people than I expected think that US hot-rolled (HR) coil prices will be in the $700s per short ton (st) two months from now. Vanishingly few think prices will be above $1,000/st in mid-April.
Sheet prices have fallen again this week on shorter lead times, higher imports, and potentially higher inventories. (We’ll see for sure when we release our service center shipment and inventory data next week.) I remember reporting almost exactly the same thing about a month ago and getting a fair amount of pushback. Not so much these days.