IEAGHG INDUSTRY CCS WORKSHOP

Christopher Beauman

European Bank for Reconstruction and Development

9th November 2011

Challenges and Opportunities of CO2 Capture and Storage in the Iron and Steel Industry:

Understanding the Overall Perspective

CARBON CAPTURE AND STORAGE IN INDUSTRIAL APPLICATIONS

The additional investment needs for CCS over the 2010 to 2050 period are about USD 882 billion; total additional

costs are over USD 3 trillion.

Abatement costs range most widely between and within sectors

Source: IEA/UNIDO “Technology Roadmap, Carbon Capture & Storage in Industrial Applications (September 2011)

22 SITES OVER 2.0mt CO2 2008

13.5

11.3

10.7

8.96

7.6

6.9

6.9

6.8

6.45

6.4

6.4

6.2

5.5

5.4

4.6

4.5

4.4

4.2

4.15

3.2

2.3

2

TKS Duisberg/HKM Duisenberg

AM Dunquerque

Riva Taranto

USSteel Kosice

AM Galati

Tata Port Talbot

Tata Scunthorpe

AM Poland (inc. coke ovens)

AM Fos

Tata Ijmuiden

AM Ostrava

Teeside (now SSI)

Dillinger

AM Espana

VoestAlpine Linz (inc. coke ovens)

AM Gent

Rauturuuki

Salzgitter Glocke

AM Sollac Lorraine

Lucchini Piombino

SSAB Oxelosund

AM Bremen

m t C O 2 (T O T A L: 1 3 8.3)

Derived from EU CITL

Total Group Mt CO2

ArcelorMittal 57.7

Tata 20.2 (ex-Teesside SSI)

9

15

2

6

7

18

19 12

10

5

1

22 21

13

8

20

3

4

14

17

16

11

EU Locations

1 BREMEN

2 OXELOSUND

3 PIOBINO LIVORNO

4 SOLLAC LORRAINE

5 SALZGITTER GLOCKE

6 RAUTURUUKI

7 AM GENT

8 VOESTALPINE LINZ

9 AM ESPANA

10 DILLNGER

11 TEESIDE

12 AM OSTRAVA

13 TATA IJMUIDEN

14 AM FOS

15 AM POLAND

16 TATA SCUNTHORPE

17 TATA PORT TALBOT

18 AM GALATI

19 US STEEL KOSICE

20 RIVA TARANTO

21 AM DUNQUERQUE

22 TKS DUISBERG/HKM DUISBERG

GLOBAL COST CURVE WORLD STEEL DYNAMICS - 2011

Source: World Steel Dynamics, October 2011

ARCELOR MITTAL COMPETITIVE POSITION - 2010

Source: World Steel Dynamics (WSD) Structural Cost Curve (2010)

THE STEEL SECTOR Share Price Performance

(year to 4th November 2011)

0

50

100

150

200

250

300

350

04/1

1/20

10

04/1

2/20

10

04/0

1/20

11

04/0

2/20

11

04/0

3/20

11

04/0

4/20

11

04/0

5/20

11

04/0

6/20

11

04/0

7/20

11

04/0

8/20

11

04/0

9/20

11

04/1

0/20

11

04/1

1/20

11

BWIRON Index PX_LAST

Source: BLOOMBERG

THE EUROPEAN MARGIN SQUEEZE ARCELORMITTAL 2011 (9 months)

16

42

66

71

70

85

106

111

0 20 40 60 80 100 120

EBITDA pt $ Operating Income pt $

Flat Carbon Americas (includes Brazil, NAFTA)

AACIS (includes Kazakhstan, Ukraine, South Africa)

Long Carbon Americas and Europe (includes Brazil, NAFTA) Flat Carbon Europe

before US$4 pt closure costs

ADDRESSING THE MARGIN CHALLENGE IN EU

Asset Optimisation (ArcelorMittal)

Full utilisation of lowest cost plants

Focus on automotive (30% of AM LCE)

Long-Term Relocation (Voestalpine)

“Commodity grade(s)…likely to move to regions such as Russia, Ukraine, Turkey”

“Europe has to refocus on top, top quality”

PIG IRON PRODUCTION (2010) (mt)

590

94.5 82.247.9 38.6 35 30 27.3 26.8

0

100

200

300

400

500

600

China EU Japan Russia India S.Korea Brazil Ukraine US

TOTAL WORLD PIG IRON PRODUCTION 1,025mt

Source: WSA

EU EXPORT OF GOODS - 2009

41

54

75

90

141

202

210

39

110

111

113

116

161

Textiles & Clothing

Iron & Steel

Power generating machinery

Electrical machinery

Office & telecom equipment

Agriculture (inc. food)

Pharmaceuticals

Other semi manufactures

Fuels & Mining

Other manufactures

Chemicals, other than Pharmaceuticals

Transport equipment (incl. automotives)

Non-electrical machinery

Steel Non-Steel

US$ billion

Source WTO Trade Statistics

TACKLING CARBON LEAKAGE (UK Carbon Trust report 2010)*

Choose approach based on characteristics of sectors

for Steel:

* Transitional Free allowances

* Monitor potential leakage

* Work with other countries:

on mutual recognition of carbon leakage sectors and

on options for border levelling for specific steel products

* Objective to reflect full costs by 2020 by one of

- import levelling

- export adjustment by producer countries, or

- carbon-cost reflecting global sectoral agreement Source: by Michael Grubb and Thomas Counsell, cited in IEA/UNIDO 2011 report

STRATEGIC ISSUES

Investment Costs: financeability and profitability

Operating Costs: need for climate-related trade policy?

Implications for Location:

- Within EU: Clusters? North Sea?

- Outside EU: Challenge of lower cost locations for lower cost blast-furnace-based steels?

Challenge from DRI-based processes? (potential implications of lower-cost gas?)