Europe's steel sector is undergoing structural changes under pressure from high energy prices, global steel overcapacity, rising imports and carbon costs. According to an analysis by PwC in Germany, by 2040, coal-fired blast furnaces will no longer be the cheapest production method in any region. In order for Europe to remain competitive, it needs to rely on the production of secondary steel, low-carbon primary steel and high-value-added products.
The European steel industry is undergoing structural transformation under the pressure of global competition, as well as energy prices and carbon dioxide emissions. According to an analysis prepared by PwC in Germany, high energy costs and production costs in Europe are combined with a global excess of steel production capacity and strong import pressures, while the competitive advantages of regions outside Europe in low-carbon steel production are gradually increasing. At the same time, the European Union's Emissions Trading System (ETS) and the Carbon Boundary Regulation Mechanism (CBAM) make carbon costs a more significant factor in making production decisions, but these mechanisms are not expected to completely eliminate the gap in energy costs between Europe and regions with cheaper resources.
The cost-effectiveness of blast furnaces is coming to an end. One of the key conclusions of the analysis is that the traditional technology of blast furnaces using coking coal will lose its economic advantages in the long term. According to PwC calculations, rising CO2 prices could double the cost of traditional steel production by 2045. By 2040 at the latest, the blast furnace method will cease to be the cheapest method of steel production in any region of the world. This has important implications for Europe. Maintaining energy-intensive primary steel production on the continent is becoming increasingly difficult, not only because of the cost of carbon emissions, but also because of the continuing price gap between Europe and regions with access to affordable energy sources.
The countries of the Persian Gulf and India are reaching a new level. The center of gravity of competition in the production of low-carbon primary steel is shifting to regions outside Europe. The countries of the Persian Gulf and India occupy advantageous positions in the production of environmentally friendly steel due to access to inexpensive sources of energy and raw materials. In particular, the ability to produce electricity from solar energy at a low cost makes direct hydrogen-based recovery technology more competitive in these regions. According to the PwC analysis, in 2030
