German steel companies can withstand international competition for environmentally friendly steel if the cost of crude steel is below 600 euros per ton ($685 per ton). But this strongly depends on policy measures to ensure the framework conditions, as Callanish found out from a new study.

A study commissioned by the Hans-Boeckler-Stiftung Foundation and the University of Mannheim has shown that the transition process will be successful only if the structure of industrial policy corresponds to the critical phase of transition.

This requires, among other things, long-term price restrictions on industrial electricity and hydrogen. At the European level, a "Buy European-style" rule would be required for public procurement and guarantees against the sale of steel at low prices "as a result of environmental and social dumping and subsidies".

The authors estimate that without a functional steel sector, the German economy will lose up to 50 billion euros in value-added revenue per year along the entire value chain.

"It's like with computer chips, antibiotics, and chemicals: we can't do without steel, and if we do, we're in for an unpleasant surprise," the study notes.

As for prices, they offer a guaranteed electricity price of 60 euros per megawatt hour (MWh), including network charges and all fees, and for environmentally friendly hydrogen, a guaranteed purchase price of 140 euros per MWh until 2035.

Under these conditions, according to their calculations, the cost of crude steel on the DRI route will be 590 euros per ton. According to the study, considering that the average market price for a hot-rolled roll over the past three years has been 640 euros per ton, this level of cost is economically reasonable. When produced in electric arc furnaces, scrap-based raw steel will cost 464 euros per ton, which is also an acceptable indicator, the authors note.

Author: Christian Kel

Kallanish.com