According to a PricewaterhouseCoopers (PwC) study conducted in Germany, the situation on the European steel market will change significantly by 2040, as the production of oxygen equipment will become uncompetitive, and steel smelting will mainly be carried out outside Europe.
The study examines three scenarios for the development of the economy as a whole, which may affect the future of the steel industry. The first of them notes that if imports increase in the long term and European countries fail to reduce their energy costs, the production of pig iron based on ore in Europe will cease. The second one assumes that the production of primary environmentally friendly steel will flourish in Scandinavia. While in the third scenario, improved political and regulatory conditions, along with lower energy costs, will help maintain ferrous metallurgy production.
However, all three scenarios exclude the survival of blast furnaces, which will be decommissioned by political will in the interests of environmental protection, Kallanish understands.
At the same time, India and the Gulf states are making progress in increasing the capacity of DRI-based plants, supported by affordable local energy sources. By 2030, steel produced by DRI using gas in these countries will already be 30% cheaper than steel produced by oxygen in Europe.
In this regard, the study calls into question the efforts and costs of German steelmakers to modernize their plants. It says that the cost of their low-emission steels is significantly higher than that of suppliers from India and the Gulf states. Only Scandinavia will have the chance to continue to play an important role in primary steel production thanks to new low-emission steel production facilities.
A competitive niche for other European manufacturing countries will be the production of EDP based on scrap, which is relatively abundant in Europe.
The study provides three strategic recommendations. First, companies should actively promote the transfer of energy-intensive production stages to other regions. Secondly, Germany should especially rely on its extensive technical expertise to support the value-added processes that will persist in the country. Manufacturers should also prepare for international changes in their relations with suppliers.
Thirdly, complex production and processing requires specialized sites in the form of regional clusters with diverse participants. For Germany, the author suggests the Rhine-Ruhr region with its existing steel industry,
