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Does AEP Want To Shut The UK Steel Industry Down?

September 9, 2021
tags: ,

By Paul Homewood

 

h/t Ian Magness

 

AEP is away with the fairies again:

 

 

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Britain has sold its climate credibility for a mess of brown pottage. The proposed Whitehaven coal mine in Cumbria has no commercial rationale and will be obsolescent before it ever opens.

One can only sympathise with Alok Sharma. The president of Glasgow’s Cop26 “summit to save the world” is entering the last critical phase of talks with China, India and Russia, only to be undercut at home by well-meaning Tory colleagues living in an economic time-warp, and deaf to the higher notes of global statecraft.

Over coming weeks, Mr Sharma will strive to conjure some sort of G20 consensus on the hardest of the hard issues: a timetable for the total phase-out of “unabated coal power”, the bedrock requirement for a 1.5-degree world.

While he does so, his own country will be debating a brand new mine at Whitehaven Colliery, intended to produce coking coal until the middle of the 21st century. The public inquiry began this week and will run for four weeks, a ghastly torment for Mr Sharma’s negotiating team.

The G20 resisters might note wryly that if an affluent post-industrial UK cannot muster the political courage to forgo a pork-barrel scheme for jobs in Cumbria – where pre-pandemic unemployment was just 2.8pc – why should they give ground on a coal-based infrastructure of systemic economic importance.

Presumably the Australian private equity group backing the mine – EMR Capital – is aware of the near unstoppable political moves in Brussels to extend the EU’s carbon trading scheme to steel producers, which account for 6pc of the EU’s total CO2 emissions.

Carbon futures prices in Europe have tripled in a year to €63 (£54) a ton. They will hit €100 a ton by the mid-to-late 2020s almost automatically because the European Commission is dialling down the permits. By that point coking coal will be caught in a hostile scissor-action of moving variables, ever less able to compete with exempted “green” steel made from hydrogen via electrolysis.

Chris Goodall, from Carbon Commentary, has crunched the figures: a ton of coal-based steel typically is responsible for 1.9 tons of CO2. Ergo, a carbon fee of €100 will add nearly €200 a ton to the final cost. That would raise the price of European steel by a third.

https://www.telegraph.co.uk/business/2021/09/09/cumbrian-coal-mine-careless-diplomacy-economic-idiocy/ 

 

For a start, if AEP thinks anything Alok Sharma can say that will make the slightest difference to what China, India and the rest of Asia do, then he is a bigger idiot than I thought.

And I would rather put faith in the business acumen of EMR Capital, who are putting their money where their mouth is, than AEP, who is rapidly losing the plot.

AEP believes that the future of steel production in Europe lies in a process called direct reduction, using heat to convert iron ore to iron, instead of the traditional blast furnace. To make direct reduction carbon free, however, the heat must come from renewable energy, in our case hydrogen produced from electrolysis using offshore wind. AEP has not worked it out yet, but this is an extraordinarily expensive way of making steel.

That is why the EU will have to jack up carbon prices to crippling levels, in order to make hydrogen steel viable.

The problem then, of course, is that EU steel becomes totally uncompetitive against imported steel. Yes, the EU may decide to impose tariffs, but this simply passes the uncompetitiveness onto products made from steel, such as cars.

The UK currently produces about 7 million tonnes of steel a year. About a quarter is from electric arc furnaces, but these are limited by the availability of scrap. The rest comes via the blast furnace route. To switch all of this to direct reduction, as AEP proposes, would mean spending billions to scrap existing plant and build new processes, money that the steel industry does not have. The inevitable consequence of AEP’s strategy will be the shut down of the British steel industry.

The EU produces just 8% of world steel, so are an irrelevance in global terms. Whatever they do, the rest of the world will carry on as they are now, making 70% via blast furnaces, and virtually all of the rest from electric arcs (all of which of course need fossil fuel generated electricity).

As for AEP, he seems determined to wreck this country’s economy in the mad pursuit of Net Zero.

23 Comments
  1. john cheshire permalink
    September 9, 2021 3:18 pm

    What on earth is a Green Job?

    • September 9, 2021 3:33 pm

      A Green Job is a lifetime on the dole and living in the poverty and squalor of the pre industrial revolution.
      The poor idiots don’t realise that steel is an alloy of iron and carbon and without coking coal they will lose all their modern conveniences, including clothing and the delivery of all services. They probably don’t realise either that steel is not only needed directly for these uses but also to make the tools and machinery needed in manufacturing.

    • Tfg permalink
      September 10, 2021 8:07 am

      In my part of the country, green jobbies are a sign of ill health ….

  2. Penda100 permalink
    September 9, 2021 3:23 pm

    Also from today’s DT: “UK electricity prices have surged to fresh highs and Ireland warned of possible blackouts as Europe’s power crisis shows no signs of fading. Prices hit a peak of £2,300 this afternoon – 10 times higher than the value recorded at 8am – as the supply crunch continues to take its toll.”
    Always interesting when reality intrudes on the Green Wonderland. Would AEP like to explain how much electricity his 40GW of windmills will produce when the wind doesn’t blow?

    • It doesn't add up... permalink
      September 9, 2021 3:39 pm

      The peak was £3,403.70/MWh, much helped by the stupidity of National Grid, who insisted on running export tests on the new interconnector to Norway.

    • Phoenix44 permalink
      September 9, 2021 5:00 pm

      Yet renewables are cheaper….

      Weird how all these “cheaper” things always end up costing us more. And no doubt plenty of journalists and others will continue to insist renewable actually cheaper despite higher bills.

  3. Ben Vorlich permalink
    September 9, 2021 3:24 pm

    I’ve never understood how tariffs do anything for consumers apart from empty their wallets. If our steel is more expensive than steel from elsewhere then putting a tariff on imported steel only makes the cost of everything made from steel more expensive.

    It doesn’t encourage home based producers to become more efficient, the reverse in fact. It encourages steel producing countries to impose tit-for-tat tariffs. If there’s dumping or subsidising going on then that’s different.

    Historically low cost manufacturing moves as wealth is created and shared.

    • Phoenix44 permalink
      September 9, 2021 4:55 pm

      As pretty much every economist agrees. And pretty much every politician pretends isn’t true.

      Asin seen in that after decades in the wonderful EU our farmers can’t compete with Us or Australian farmers – which tells us that we have all been paying far too much for our food for years because EU farmers are protected from competition.

      Tariffs simply make stuff more expensive for consumers and allow businesses to make higher profits than they ought.

      • Adam Gallon permalink
        September 10, 2021 6:50 am

        So, you think that relying on the US & Australia, to produce meat for us, is a good idea?
        You think that a British hill farmer, is rolling in money, enjoying the life of Riley & having a fortnight in the Seychelles over Christmas?

  4. September 9, 2021 3:36 pm

    As I recall one needs coal to convert iron ore to steel as it involves a chemical reaction. Hydrogen cannot be used in the conversion process notwithstanding the cost and availability. Electric Arc furnace’s are used to recycle scrap steel.

    The general public are so brain washed they actually believe in Green jobs, but not recognizing the majority of green jobs have already been exported to China and this will grow as the UK industries collapse due to governmental mendacious stupidity. Green jobs may be 10% of the industry jobs lost with Boris Bunters Green Build Back Better Feminist Equitable Nice (and other PC adjectives which increase in numbers by the day) Wet Dream.

    • Robert Christopher permalink
      September 9, 2021 4:16 pm

      “One can only sympathise with Alok Sharma.”
      No, ‘he’s only following orders’, doesn’t work anymore.

      “The general public are so brain washed they actually believe in Green jobs …”
      Most have no idea of the underlying Physics or Chemistry and, yes, do what they are told, without thinking. And the Cabinet aren’t even up to that.

    • September 10, 2021 7:38 am

      John,

      iron ore is used to make iron with steel being a refinement of iron.
      There is a big use for (Cast) iron in it’s own right and the process of smelting the ore with coke gives iron a high carbon content which is beneficial for it’s applications. This carbon is reduced in making steel from iron which gives steel it’s strength.
      The media, unsurprisingly, do not seem to understand the difference between iron and steel.

  5. bookymatelot permalink
    September 9, 2021 4:55 pm

    None of these idiots in the Telegraph appear to know anything! Not once is the Nations security, the ability to make steel to make ships, armaments etc. The chip manufacturer sale to the Chinese..chips used in our subs, no problem at all! I do feel this weeks prize should go to the “Environment Correspondent” who said that owners of electric cars could make up to £700 a year by allowing the grid to use the charge in their battery. No mention of who paid to charge the ruddy battery in the first place! Booker is sadly missed at the DT

    • Phoenix44 permalink
      September 9, 2021 4:58 pm

      Why does AEP care if other people waste their money? Why does he think he knows they will lose their money?

      As for “diplomacy”, sucking upto other Green fools is not diplomacy: standing up for the interests of your country is the entire point.

  6. September 9, 2021 5:12 pm

    The real problem is the electricity supply. Sweden produces and uses 134 Gwh of electricity. Steel production using electric arc furnaces uses 55 Gwh. Sweden also produces 24 Gwh of Nuclear power which it is slated to close in 2030. So between here and 2030 Sweden has to find another 79 Gwh, which Swedes will have to eat “go without”. Another small problem is when the electricity is shut off, scrap steel in the furnaces will solidify and be unable to restart. The same goes for Aluminium production.

  7. Mark Hodgson permalink
    September 9, 2021 6:50 pm

    Referring to pre-pandemic unemployment levels of 2.8% in Cumbria is a piece of legerdemain, IMO. Cumbria is a large county geographically, with many wealthy areas. However, west Cumbria, where the proposed mine would be, is a former industrial area fallen very much on hard times with high levels of unemployment, deprivation and poverty. The jobs from the coal mine would be very welcome indeed there. Still, what do comfortably-off middle-class “green” activists care about that?

  8. chriskshaw permalink
    September 9, 2021 9:10 pm

    OT,
    Another interesting document highlighting the overly optimistic thinking of alarmist solutions.
    http://info.gorozen.com/2021-q2-market-commentary-iea-ushers-in-coming-oil-crisis

  9. Gamecock permalink
    September 9, 2021 10:28 pm

    ‘The proposed Whitehaven coal mine in Cumbria has no commercial rationale and will be obsolescent before it ever opens.’

    Whah! Whah! Whah!

    So they’ll close it and lose their money.

    Like Phoenix44 says, AEP is faking concern. Openly and notoriously faking it. If he believes what he says, why is he writing about it?

  10. I don't believe it! permalink
    September 10, 2021 12:17 am

    Part of his article stated that the electricity generated was virtually free but then said it needed 1,500 workers per gw to build these turbines (no mention of on going costs though).

  11. Hivemind permalink
    September 10, 2021 12:35 am

    “Does AEP Want To Shut The UK Steel Industry Down?”

    Yes !!!

  12. CheshireRed permalink
    September 10, 2021 9:04 am

    Wouldn’t it be reasonable to assume that the UK government has secretly decided to shut down UK steel manufacturing?

    Here’s their rationale: global steel prices are on the floor. UK production prices are uncompetitive with China, with no prospect of ever being more competitive, either.

    UK can thus source globally at lowest cost with no supply issues.

    Steel is high emissions but relatively low numbers of employees. By offshoring energy-intensive steel UK makes large reductions in carbon emissions at a very low per-job cost.

    They know their green transition will come with job losses in some areas, offset by gains in others. Just as they’ve sacked off thousands of coal mining jobs as a result of ditching coal, so too they’ve chosen to wave goodbye to steel industry jobs.

    The Cumbria coal mine fiasco is another example. UK can’t miss 500 jobs we never had, so government have no problem blocking those jobs to prevent emissions from being allocated to UK total. Supply remains unaffected as can come from Australia, US or even Russia!

    They can’t publicly admit these policies and may even have entered into a political code of Omerta with the Opposition, who’re all onside for the green thing. Hence Labour et al seldom question these matters at PMQ’s and so on.

    This follows a similar pathway regarding high-emitting UK aluminum and cement manufacturing. That’s how I see it.

    • Gerry, England permalink
      September 10, 2021 12:13 pm

      No, because that would suggest that the government is capable of thought. Its actions in going for NetZero will shut down the steel industry first, followed by whatever is still left of heavy industry but they will struggle to comprehend why it has happened.

  13. John W Hollaway permalink
    September 10, 2021 10:24 am

    “AEP believes that the future of steel production in Europe lies in a process called direct reduction, using heat to convert iron ore to iron, instead of the traditional blast furnace.”
    To convert iron ore – an oxide – to metallic iron requires removing the oxygen. This can be either done with expensive hydrogen, generating water vapour, or carbon, generating carbon dioxide. Both are greenhouse gases.

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