24 June 2022 – The EU alloy surcharges have just been made absurd with a small paragraph in a recent press release. What does a possible new food scandal about MSM in German sausages have to do with this? We asked ourselves the same question. And largest US aluminium smelter has to stop production for nine to twelve months, up to 250,000 tonnes of primary aluminium affected.
US: Largest aluminium smelter has to stop production
The largest US aluminium smelter, Century Aluminium, has announced that it will have to shut down its main smelters in Hawesville, Kentucky, for probably nine to twelve months. The reason for this is the sharp rise in electricity costs, which currently make it impossible to operate the plant economically.
Producer of high-purity primary aluminium
According to the company, the aluminium smelter in Hawesville produces high-purity primary aluminium that is used in the defence and aerospace industries, among others. The smelter has an annual production volume of 250,000 MT of primary aluminium.
Opinion: Have the Europeans gone completely mad?
After the three big stainless steel producers have outdone each other in either mutual competition or collusion in undercutting alloy surcharges, a southern European re-roller is now taking a similar tack.
As one hears, completely desperate salesmen of this company are predicting prices that cannot even do justice to the mathematical competence of a primary school pupil in the first grade.
This alone would be reason enough to doubt the thinking capacity of various European actors, but someone always has to go one better.
EU alloy surcharges finally reduced to absurdity
Yesterday we already referred to the result of the vote on the revision of the European Emissions Trading Scheme (EU ETS) and the CO2 border surcharge CBAM, which did not necessarily turn out as the European steel producers had wished.
One sentence from the EUROFER press release on this needs a little more attention.
“In addition, the Parliament missed the opportunity to concretely address the upstream emissions of input materials used for the production of stainless steel. Those emissions are up to seven times higher in imported products compared to EU stainless steel production.”
Source: Eurofer, 22 June 2022
What does this have to do with EU alloy surcharges?
With this statement, all arguments for the alloy surcharges of the European stainless steel producers are gone. European stainless steel is up to seven times cleaner than imported stainless steel.
EAFs, stainless steel scrap and free ETS certificates
What is the reason for this? The raw material, stainless steel scrap. And, as Mr Eggert does not tell the reader, according to EU regulations stainless steel does not emit CO2 when melted in EAFs. If the steel producers use 90% stainless steel scrap, their EAFs officially emit no CO2 at all and – to everyone’s surprise – get their free ETS certificates for it.
How is the EU alloy surcharge calculated?
The problem? What is the alloy surcharge for a 304 calculated from? Precisely from nickel, ferrochrome and scrap or iron. Whereby in the official calculation simple steel scrap (NOT stainless steel scrap) is meant.
Where does it say stainless steel scrap?
The main raw material that the EU stainless steel producers put into their EAFs has officially no part in the calculation of the alloy surcharges although they advertise that they process up to 90% stainless steel scrap in their electric furnaces.
However, pure stainless steel scrap is still included. In different amounts, which explains the deviations in the alloy surcharges recalculated monthly.
Up to 90% stainless steel scrap in EAF
With a scrap rate of 90%, a manufacturer can only add 10% other ingredients (such as nickel, chrome, molybdenum) to get a halfway usable 304 or 316L. This poses a challenge for manufacturers, because above a certain amount of scrap, the quality of the stainless steel suffers and in the end only long products can be made from it. Flat products, on the other hand, cannot.
And again DRI/HBI
This is also one of the reasons why manufacturers are suddenly calling so urgently for green hydrogen after the vote in the EU Parliament. Direct Reduced Iron (DRI) or Hot Briquetted Iron (HBI) is the magic bullet to make EAFs green. At first, the plan was to produce the DRI/HBI with cheap natural gas for as long as possible. The times of cheap natural gas are over and it is no longer available in unlimited quantities.
Free ETS certificates tied to conditions
The special thing about the DRI/HBI is that the CO2 emissions generated in the production of DRI/HBI did not originally have to be added to the downstream product, i.e. the hot rolled coil, in order to get the free ETS certificates. It simply had to be a Scope 3 emission.
DRI known for decades
Because actually DRI/HBI is nothing new and is known to produce an awful lot of CO2 in its production. It is actually intended for use in EAFs, but can also be used in BF/BOF to increase efficiency. The production of CO2 is simply shifted from the BF/BOF to another polluter.
And that explains why blue gum steel with minimal CO2 emissions has suddenly appeared on the market. Nothing has really changed in terms of technical innovations.
Green hydrogen makes “green” DRI/HBI
DRI/HBI only becomes “green” when green hydrogen is used. Before that, it’s just another CO2 dirt chute, but it’s needed to produce hot-metal for quality flat stainless steel from EAF production.
Now these Scope 3 emissions will have to be included one way or another in the future. Ouch. The end of green steel from dirty raw materials.
We already talked about green washing yesterday. What we are actually trying to get at today is the fact that customers have to pay a premium for ingredients that are not contained in the product at all or only in significantly smaller quantities than indicated.
Short excursion to a comparable case?
Maybe there is a similar case in Germany right now. In the food industry. Once again, a manufacturer of German sausages seems to have thought that he had to mix animal waste products, so-called mechanically recovered meat, into his products. The German Federal Office of Consumer Protection and Food Safety has an exciting definition of this on its website and the European Union has a regulation about it.
We are just wondering if this also exists in other areas.
Clear statement against alloy surcharges
In any case, EUROFER has just clearly communicated that European stainless steel is up to seven times cleaner in production than imported stainless steel. And you, the reader, now know why this is so and why the European alloy surcharges have been reduced to absurdity with a simple press release.
“Lord throw brains from heaven (or coils, the main thing is that you hit the right ones)!”
Loosely translated from German slang
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