The transition from steel production in coal-fired blast furnaces using basic oxygen (BF-BOF) to steel production in electric arc furnaces (EAF) in Europe could cost $400 billion, Bloomberg Intelligence analysts said in a note reviewed by Kallanish.
Steel companies are expected to incur about $90 billion in direct furnace conversion costs, while the rest of the costs will be for clean electricity, hydrogen electrolyzers, and related transportation and storage. It may take between 190 and 300 terawatt-hours (TWh) to fully switch to carbon-free electricity, up from 75 TWh today. Taking into account the capital costs of renewable energy sources in the amount of 691-2852 dollars per kilowatt, this could lead to potential costs of new generating capacity in the amount of 126 billion dollars. According to Bloomberg estimates, the steel industry's share in hydrogen infrastructure and the strengthening of the energy system could increase by another $200 billion.
Analysts stress that the sustainability of steel production in Europe depends on this "costly change." A significant part of the needs of EU steel mills in iron ore and coal, which are necessary for the production of more than 55% of steel in the EU using the BF–BOF technology, is met through imports. Switching to EDPS that melt scrap and/or direct reduction cast iron (DRI) using electricity may reduce the unit's dependence on imports.
"For Europe, eco-friendly steel is the way to increase supply chain sustainability and competitiveness, not just to reduce emissions," they add.
However, the industry's transition to a more sustainable model of environmentally friendly steel production depends on major policy changes. Europe needs to secure a raw material base by using scrap as a strategic raw material; reduce the cost of clean energy; protect investments from unfair imports; and create demand for low-carbon steel through environmentally friendly public procurement.
"The optimal European steel production model is round-section steel, deposited by direct reduction of iron, competitive in energy consumption and protected from trade," writes Bloomberg. However, the transition to EDP, although technically feasible, is hampered by electricity prices, network capacity, DRI availability, and low profitability. In the case of using hydrogen, despite the importance of deep decarbonization, "Europe should not expect to be completely self-sufficient in mining."
"A realistic end result is a hybrid: domestic
