Tata Steel is one of Europe’s leading steel producers, with steelmaking in Port Talbot, Wales, and IJmuiden, Netherlands, as well as processing plants across Europe. In a recent announcement, Tata Steel said that it will shut down Port Talbot's two blast furnaces (BFs) with a combined capacity of 3.6Mtpy and replace them with an electrical arc furnace (EAF). The EAF production capacity would be about 3Mtpy, with a 2.5Mtpy finished steel production.

The main argument put forward is environmental. A blast furnace generates on average 1.8-2t of CO2 per tonne of steel compared to 1.4-1.6t for an EAF cum Direct Reduced Iron (DRI). Shutting down the blast furnaces would reduce the UK’s carbon emissions by about 1.5%.

However, economics is also key. Tata Steel UK lost almost £1.5M a day in its most recent quarter. As well as generating lower emissions, EAFs are less labour-intensive, more flexible, and cheaper to run. Plus, the British government will contribute £500m of the £1.25bn investment. The main drawback is that an EAF – even adding DRI/HBI – cannot produce the same steel quality as a BF, which uses virgin iron ore. Therefore, it is likely that some higher-quality steel would need to be imported. Port Talbot is not the only UK steel mill at risk. China’s Jingye Group said in November that it would close its two blast furnaces at Scunthorpe (2.8Mtpy capacity) and replace them with electric arc furnaces.

What is happening in the UK is just the beginning of a trend spreading across Europe. Europe wants to be at the forefront of the steel industry’s decarbonisation. Less efficient blast furnaces will be replaced by EAFs with DRI facilities, ideally using hydrogen as a reducing agent, although some blast furnace operations will have to remain when higher steel quality is needed.

As a result of this, more imports will be necessary, and the EU’s Carbon Border Adjustment Mechanism (CBAM), which will charge a carbon levy on steel imports based on the embedded emissions generated during the production process, would increase the price for end-users. The restructuring of the steel industry is accelerating.

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