HLG AdHoc Group 3

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HLG Ad-Hoc Group 3

• Energy environment factors affecting the
  competitiveness of energy-intensive industries
• Ian Goldsmith

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Steelmaking made simple
Steel scrap
Iron Ore Coal/Coke Natural gas Oil Electricity
Blast Furnace
Oxygen Steelmaking
Secondary Steelmaking
Steel scrap Coal/Coke Electricity Natural Gas
Electric Arc Steelmaking
Continuous Casting
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Key Steel Industry Statistics
Steel Production by Region (millions of
tonnes) 2005 (/- 2004) Global 1106 (50) EU
25 186 ( -7) USA 94 ( -5) China
348 (72)

• In 2004, over 90 of global steel was
  continuously cast
• EU 25, China, NAFTA, Japan, Korea gt95
• But, Poland lt80

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Regional steel slab production costs
(/t, ex works, 2005, weighted average of
regional plants covered)
Tata, SAIL and Jindal only Sources WSD
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Raw materials (global effect) and energy (local
effect)
Raw materials (indexed)
Energy prices
Year 2000 100
p/therm
/MWh
UK Electricity (RHS)
60
70
500
UK Natural gas (LHS)
50
400
50
40
Coal
300
30
30
Scrap
200
Coke
20
Iron Ore
Germany Electricity (RHS)
10
10
100
06
00
01
02
03
04
05
06
01
02
03
04
05
YTD
YTD
Note UK Wholesale electricity and natural gas
forward prices Source Heren Energy report
Exchange rate /1.50
Note Market prices FOB Source Corus
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Global electricity prices
(2004 Electricity prices for industrial
customers, /MWh)
Current Price 70
Very large industrial customers 35
Estimated 2003 Sources IEA Energy Prices
and Taxes Q4 2005, Datastream, Corus
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Steel is a global industry
Global steel export volumes 1975-2004
Exports as of global production volumes (right
hand scale, )
Export volumes (left hand scale, mt)
Source IISI
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Competition drives cost reduction
oil injection and burden preparation
hot blast temperature gt1200 C
oxygen enrichment
800
top pressure
burden distribution
improved sinter quality
600
coal injection
oil
Reducing agent consumption (kg/t hot metal)
coal
400
coke
200
0
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
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Competition drives energy efficiency
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Legislation overload

• EU
• IPPC Directive
• EU Emissions Trading Scheme
• Packaging Packaging Waste Directive
• Landfill Directive
• Trans-frontier Shipment of Waste Regulations
• Waste Framework Directive
• EU Polluting Emissions Register
• Air Quality Directives
• National Emissions Ceilings Directive
• Large Combustion Plant Directive
• Water Framework Directive
• REACH
• ELV Directive
• WEE Equipment/RoHS Directives
• Energy Using Products Directive

• UK
• Environmental Protection Act 1990 (Contaminated
  Land Regulations)
• Landfill Tax
• Hazardous Waste Regulations
• Producer Responsibility (Packaging)
• Climate Change Levy
• Renewables Obligation
• Air Quality Objectives

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Impact of Environmental Policy
Electricity prices and EUETS allowance prices are
related
Estimated effect of EU ETS on UK electricity
prices is over 25 of the increase since 2004 UK
electricity companies have increased profits by
800m/year (Source IPA report for UK Government
Nov 2005) Examples of effect on Corus UK
Renewables Obligation 9m in 2006 (by 2010 this
will be over 13m) UK Climate Change Levy 6m
(index linked from 2007) EU ETS gt20m (Including
energy cost increases plus administration,
verification etc)
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