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CBAM Regulation: A Landmark Tool for Tackling Carbon Leakage

Strategic Research Institute
Published on :
23 May, 2023, 9:40 am

As the global community grapples with the daunting challenge of climate change, the European Union has taken a significant step forward in combating carbon leakage. On 10 May 2023, the co-legislators signed the Carbon Border Adjustment Mechanism Regulation, marking a crucial milestone in the EU's fight against carbon-intensive imports.

The CBAM Regulation officially entered into force on 16 May 2023, following its publication in the Official Journal of the EU. The CBAM itself will be implemented in a transitional phase starting from 1 October 2023, with importers required to report their emissions by 31 January 2024.

The precise rules and requirements for emissions reporting will be specified in an implementing act, formulated in consultation with the CBAM Committee comprising experts from EU Member States.

The core objective of the CBAM is to address the issue of carbon leakage, which occurs when EU-based companies relocate carbon-intensive production to countries with less stringent climate policies or when carbon-intensive imports replace EU products.

To tackle this problem head-on, the CBAM aims to assign a fair price to the carbon emissions associated with the production of carbon-intensive goods entering the EU. This will not only incentivize cleaner industrial production in non-EU countries but also align with the EU's ambitious climate goals.

The CBAM's scope initially encompasses imports of cement, iron and steel, aluminium, fertilizers, electricity, and hydrogen. These sectors, known for their carbon-intensive nature, face the highest risk of carbon leakage. However, as the CBAM gradually takes effect, it is projected to cover over 50% of emissions in sectors regulated by the EU Emissions Trading System. Importers falling within the CBAM's purview will initially report their greenhouse gas emissions, without any financial obligations, during the transitional phase.

Starting from 1 January 2026, importers will be required to declare their annual imports and the corresponding embedded greenhouse gas emissions. They will then surrender the appropriate number of CBAM certificates, the price of which will be determined based on the weekly average auction price of EU ETS allowances. This phased approach aligns with the gradual phase-out of free allowances under the EU ETS, ensuring a smooth transition for businesses and public authorities alike.

While the CBAM undergoes its transitional phase, a comprehensive review of its functionality will take place, along with an assessment of its product scope. The inclusion of additional goods produced in sectors covered by the EU ETS will be considered, allowing for the potential expansion of the CBAM mechanism. This review will be concluded before the definitive system comes into force, along with a roadmap for their inclusion by 2030.
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SSAB and BE Group Unite for Fossil-Free Steel
By Strategic Research Institute on May 24, 2023 01:42 pm

Leading steel service company BE Group and SSAB have forged a strategic partnership. This alliance aims to tap into the vast potential of fossil-free steel in key markets, with a particular focus on manufacturing and construction. By capitalizing on upcoming opportunities and embracing sustainability, this partnership sets the stage for meeting the evolving needs of BE Group customers.

By availing SSAB's fossil-free steel through their Finnish subsidiary, BE Group Oy Ab, they will empower customers to embrace sustainability and gain a competitive edge. The goal is to enable these forward-thinking customers to create a more sustainable future and stand out among their competitors.

"We are thrilled to welcome BE Group as our esteemed partner in the quest for fossil-free steel," declares Lotta Ruottinen, Sales Director of SSAB Europe.

With BE Group's unwavering commitment to expanding their fossil-free steel offerings across all markets, Peter Andersson, CEO of BE Group, expresses his enthusiasm for the collaboration. This long-term partnership between SSAB and BE Group extends beyond the mere supply of steel.
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Klöckner & Co & Salzgitter Group Unite for Green Steel
By Strategic Research Institute on May 24, 2023 01:39 pm

Klöckner & Co and the Salzgitter Group have joined forces to raise the bar for green steel availability in the market. This partnership marks a significant milestone in the journey towards a sustainable and environmentally friendly steel industry.

The Salzgitter Group will commence the delivery of CO2 reduced steel, produced through their innovative SALCOS® production route using hydrogen, to Becker Stahl-Service GmbH, a subsidiary of Klöckner & Co, starting from the end of 2025. This breakthrough will contribute to a substantial increase in the volume of green steel accessible to customers.

Guido Kerkhoff, the CEO of Klöckner & Co SE, expressed his excitement about the partnership, stating that it would greatly enhance the availability of green steel for their customers and further strengthen the renowned Nexigen® brand offerings.

The Nexigen® umbrella brand encompasses Klöckner & Co's range of CO2reduced steel and metal solutions, which are transparently combined to provide customers with reliable and sustainable value chains.
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Global Crude Steel Production Persists in Sluggishness
By Strategic Research Institute on May 24, 2023 01:38 pm

World crude steel production in April 2023 witnessed a slight decline of 2.4% compared to April 2022, amounting to 161.4 million metric tons.

Among the regions, Africa exhibited a positive growth of 4.8% in April 2023, reaching a production level of 1.3 million metric tons. Conversely, Asia and Oceania experienced a modest decrease of 1.5%, resulting in a production of 121.1 million metric tons. The European Union recorded a decline of 11.7%, manufacturing 11.1 million metric tons of crude steel. Europe, Other countries observed a significant reduction of 17.3%, producing 3.5 million metric tons. In contrast, the Middle East achieved a notable growth rate of 4.2%, generating a production volume of 4.2 million metric tons. North America encountered a decrease of 4.6%, manufacturing 9.2 million metric tons. Russia, other Commonwealth of Independent States countries, and Ukraine witnessed a 5.9% increase, reaching a production of 7.5 million metric tons. South America reported a decline of 2.2%, producing 3.6 million metric tons

China continues to lead the pack, despite experiencing a 1.5% decline in April 2023 compared to the same period last year, producing 92.6 million metric tons. On the other hand, India showcased an upward trajectory with a 3.2% increase, manufacturing 10.7 million metric tons. Japan, however, faced a setback with a 3.1% decrease, producing 7.2 million metric tons. The United States also experienced a decline of 5.3%, manufacturing 6.6 million metric tons. Meanwhile, Russia witnessed a positive growth rate of 1.9%, estimated to have produced 6.4 million metric tons. South Korea's steel production stood at 5.7 million metric tons, showcasing a growth of 3.0%. Germany encountered a decline of 3.8%, manufacturing 3.2 million metric tons. Similarly, Brazil faced a downturn of 5.9%, producing 2.8 million metric tons. Türkiye witnessed a substantial decline of 20.6%, manufacturing 2.7 million metric tons. Iran, on the other hand, demonstrated a positive growth rate of 5.9%, producing 3.1 million metric tons.
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ArcelorMittal Kryvyi Rih Upholds Eco Focus Amidst Turmoil
By Strategic Research Institute on May 24, 2023 01:36 pm

In the face of an ongoing war in Ukraine, ArcelorMittal Kryvyi Rih remains steadfast in its commitment to environmentally friendly green metallurgy, according to the company's General Director, Mauro Longobardo.

Despite the challenges posed by the wartime situation, ArcelorMittal Kryvyi Rih 's dedication to transitioning towards green metallurgy remains unwavering. Longobardo emphasized this point during a recent conference organized by Vox Ukraine and the National Endowment for Democracy. He highlighted that despite operating at only 20% of production capacity last year, the company retained its entire team in preparation for a swift resumption of production to support Ukraine's post-war recovery.

AMKR has announced plans to invest $130 million this year in modernization efforts, focusing on implementing the latest production technologies. Notably, the construction of a pelletizing plant, which was halted due to the war, will receive special attention.

In 2022, AMKR utilized only 20-25% of its production capacity, but now aims to reach 50% capacity utilization. To support its operations, the steel plant received financial assistance of over $600 million from the ArcelorMittal Group.
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European Steelmakers Contemplate Blast Furnace Stoppages
By Strategic Research Institute on May 24, 2023 01:34 pm

Reports have emerged suggesting that certain European steelmakers are considering idle periods for their blast furnaces due to a combination of lackluster demand and declining prices. Sources indicated to S&P Platts that Slovak steelmaker US Steel Kosice is contemplating idling its blast furnace number three. The company's press spokesperson declined to address the speculation.

US Steel Kosice currently operates three blast furnaces with a combined capacity of 3.5 million metric tons per year. Previously, in response to weak demand and soaring energy costs, the mill had temporarily taken blast furnaces two and one offline during the second half of last year. However, both were restarted in January amid a rise in coil prices.

Meanwhile, Liberty Galati in Romania has recently taken its sole blast furnace offline for technical maintenance. The unit is expected to resume operations within the next couple of days.

Despite efforts by European mills to sustain prices amidst sluggish demand and competitive import offers, their resolve appears to be faltering. Larger buyers in southern Europe have reported offers as low as €700 per metric ton delivered or ex-works. Although prices from north European mills remain slightly higher, above €750 per metric ton for now, there is limited interest at these levels.
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Industry Urges White House to Address Electrical Steel Shortages
By Strategic Research Institute on May 24, 2023 01:32 pm

Concerns about the limited availability of electrical steel, a critical material for power grid equipment and electric vehicle chargers, have prompted electric utilities, home builders, and an automotive trade group to call for a summit at the White House.

In a letter addressed to President Biden and various members of his administration, the trade groups emphasized that electrical steel plays a vital role in electric motors, transformers, EV chargers, and other grid equipment due to its properties that reduce power loss.

The shortage of domestically manufactured electrical steel has become a significant challenge for utilities and others seeking to promote the widespread adoption of electric vehicles. It has also contributed to an insufficient inventory of distribution grid transformers. The letter, signed by prominent industry groups including the Edison Electric Institute and the National Association of Home Builders, stressed the impact of these shortages on supply chain challenges across multiple industries.

The trade groups urged President Biden and key government departments to recognize the criticality of electrical steel for national and economic security and prioritize actions to ensure a sustainable supply. They proposed the organization of an electrical steel summit to bring together stakeholders such as electric utilities, manufacturers, labor unions, and home builders to address the current supply chain crisis and work towards the administration's goals of electrification and decarbonization.

The letter also highlighted concerns about proposed efficiency standards for transformers by the Department of Energy, which the utility groups believe could exacerbate the existing supply shortfall. To support domestic supply and manufacturing, the industry groups called for the expansion of domestic steel capacity and manufacturing, as well as financial resources to bolster the critical importance of electrical steel.

By convening a summit and prioritizing the importance of electrical steel, the industry groups aim to address supply chain challenges, promote domestic manufacturing, and support the nation's electrification and decarbonization efforts.
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Capital Coated Steel Charges Towards Sustainable Steel Supply
By Strategic Research Institute on May 24, 2023 01:30 pm

Capital Coated Steel, the UK's premier independent pre-finished metals processor and sole independent Tata distributor, has made environmental stewardship a central pillar of their business operations.

In their unwavering commitment to sustainability, Capital Coated Steel has undergone a profound transformation in how they conduct business, ensuring continuity while minimizing negative environmental and social impacts. Their aim is to secure abundant resources for future generations, encompassing not only their employees and customers but also the wider bio-diverse ecosystem.

One of their key initiatives involves conducting a comprehensive carbon footprint analysis, focusing on scope 1 and 2 emissions—those they have direct control over. Their ambitious goal is to achieve Net Carbon neutrality by 2030, though their effective strategies may expedite this timeline.

In partnership with ecologi.com, the company has already made a significant impact, with 948.18 tonnes of carbon reduction and the planting of over 12,828 new trees.

Capital Coated Steel has also embraced the transition to electric and hybrid vehicles, with 75% of their fleet now consisting of such environmentally friendly options. They have invested in supporting infrastructure, including the installation of new charging points, to facilitate this shift.

With over 50 years of industry experience, the company, originally founded by John Hunt and Nick Williams in 1972, remains a family-owned venture that has consistently strived for excellence in serving major domestic and international clients.
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JSW Steel to Acquire NSAIL
By Strategic Research Institute on May 24, 2023 01:28 pm

JSW Steel is set to shell out ?621 crore to acquire National Steel & Agro Industries. In addition, JSW Steel Coated Products, a wholly owned subsidiary, will infuse an additional ?8.52 crore through loans to settle outstanding insolvency resolution costs and payments to operational creditors. The completion of this acquisition is expected within the next month.

Last week, JSW Steel received approval for its resolution plan for NSAIL under the Corporate Insolvency Resolution Process. This achievement underscores the company's commitment to expanding its presence and influence in the coated steel manufacturing sector.

Since its inception in1985, NSAIL has continuously evolved and expanded its operations, embarking on a journey that witnessed remarkable milestones. Noteworthy achievements include the commencement of Production from Continuous Galvanized Line (CGL)-1 in 1987, the establishment of an in-house Cold Rolling Mill (CRM)-1 in 1994, the initiation of CGL-Line 2 in 1999, and the commissioning of a Color Coating Line in 2004. The story of progress continued with the addition of CRM-2 in 2004, the commencement of CGL Line 3 in 2012, and the advent of a Color Coating Line with a wider 1500 mm width in 2015.
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POSCO Emerges Triumphant with 3 Honors at the worldstainless
By Strategic Research Institute on May 24, 2023 01:26 pm

POSCO, the South Korean steel giant, has once again showcased its technical prowess by clinching three prestigious medals at the Stainless Steel Industry Awards hosted by Worldstainless. The international association, renowned for its discussions on industry trends and challenges, bestowed these accolades upon POSCO for its groundbreaking stainless steel technologies.

POSCO emerged as the sole recipient of all three medals - gold, silver, and bronze - in the highly coveted new stainless technology category. The gold medal was awarded for POSCO's high-strength 430 DP (Dual Phase) stainless steel, specially designed for large premium home appliances. This innovative material, developed in collaboration with Samsung Electronics, exhibits a remarkable 50% increase in strength while simultaneously reducing its thickness by 20%. Its durability against dents and scratches makes it an ideal choice for high-end appliance exteriors, such as premium refrigerator doors.

In addition to the gold medal, POSCO secured the silver medal for its non-magnetic and high-strength austenitic stainless steel, 316HN (High Nitrogen), developed for mobile devices. This advanced steel is engineered to shield electromagnetic waves emitted from attached sensors, ensuring optimal camera performance and preventing malfunctions. With the rising demand for smartphones and foldable devices with enhanced camera capabilities, the adoption of POSCO's 316HN steel is expected to witness a significant upsurge.

Furthermore, POSCO's bronze medal was awarded for its low-cost brazing filler metal, a game-changer in the realm of stainless steel used primarily in air-conditioning refrigerant piping. By utilizing more copper and significantly less silver compared to conventional welding materials, this development has resulted in a remarkable cost reduction of over 80%.
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LIBERTY Pipes Hartlepool Secures North Sea Contracts
By Strategic Research Institute on May 24, 2023 01:24 pm

In a significant triumph, LIBERTY Pipes Hartlepool has been awarded two contracts by Subsea7 for the Yggdrasil and Valhall PWP-Fenris offshore field development projects in the North Sea.

The company will produce a total of 16.6 kilometers of longitudinally submerged arc welded pipe for these contracts, supplying them to Subsea7's bundle fabrication facility in Scotland. Manufacturing of the pipes will commence soon and continue throughout 2023.

The LSAW pipes to be produced by LIBERTY will adhere to API 5L specifications, ensuring precise tolerances for a seamless fabrication and installation process. Prior to delivery, the pipes will be coated by LIBERTY Pipes Hartlepool.

Jeffrey Kabel, LIBERTY Steel's Chief Transformation Officer, expressed pride in winning this substantial North Sea contract. He emphasized how LIBERTY's pipes division has the potential to drive the development of crucial energy infrastructure in the UK and worldwide.

This accomplishment comes on the heels of LIBERTY becoming the first UK producer of hydrogen pipe material, showcasing their expertise and ability to contribute to energy transition and bolster UK energy security.
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East Pipes Secures Massive Pipe Suppl Contract with Aramco
By Strategic Research Institute on May 24, 2023 01:22 pm

East Pipes Integrated Company for Industry, a prominent pipe manufacturer based in Saudi Arabia, has announced a momentous contract agreement with the esteemed Saudi Arabian oil and gas giant, Aramco. The contract, valued at an astounding $480 million, inclusive of VAT, entails the production and supply of steel pipes by East Pipesto Aramco over a period of 12 months.

East Pipes Co, renowned for its exceptional production capacity of up to 500,000 metric tons per year, specializes in the manufacturing of pipes dedicated to the transportation of water, oil, and gas.
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Alleima Welcomes Carl von Schantz as President of Tube Division
By Strategic Research Institute on May 24, 2023 01:20 pm

Alleima, a renowned company, has announced the appointment of Carl von Schantz as the new President of the Tube division and a member of the Group Executive Management. With an effective start date of November 17, 2023, Carl von Schantz will succeed Michael Andersson, who is set to leave the company in June 2023, as previously announced.

Presently, Carl von Schantz holds the position of President for the General Industry Tools and Assembly Systems division at Atlas Copco.

Born in 1973, Carl von Schantz has spent the past five years as President for the General Industry Tools and Assembly Systems division at Atlas Copco. In this role, he led a world-leading provider of assembly tools and solutions for industries such as aerospace, electronics, energy, and general assembly. Prior to that, he served as the Senior Vice President and Head of Energy Sector at Lantmännen for seven years.

During the transitional period until Carl von Schantz assumes his new position, Nigel Haworth, who has been acting as President of the Tube division since February 13, 2023, will continue in his role.

The position of President for the Tube division is based in Sandviken, providing a strategic location for Alleima's operations in this sector.
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Tibnor Announces Fredrik Haglund as New President
By Strategic Research Institute on May 24, 2023 01:18 pm

Tibnor, a leading company in its field, has revealed that Fredrik Haglund, the current head of Tibnor Denmark, will assume the role of Tibnor President starting from July 1, 2023. This appointment comes as Kimmo Väkiparta, the current President, has made the decision to depart the company upon his own request.

Having joined Tibnor in 2008 and being a member of the management team since 2016, Fredrik Haglund brings a wealth of experience to his new position. He has successfully led Tibnor Denmark since 2020, in addition to overseeing Tibnor's parts business and managing logistics and production for Tibnor Sweden in the past.

Fredrik Haglund will assume his new role on July 1, 2023, and will be based at Tibnor Headquarters in Solna, Sweden.
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Tenaris Bags Contracts for Fenris Project
By Strategic Research Institute on May 24, 2023 01:17 pm

Tenaris has secured two contracts from Aker BP and Subsea7 Norway for the prestigious Fenris project. This venture entails the development of a gas reservoir through an unmanned installation spanning 8 slots, with a subsea connection of 50 kilometers to the Valhall field center on the southernmost part of the Norwegian continental shelf.

In support of the Fenris project, Tenaris will deliver approximately 7,000 metric tons of pipes ranging from 10" to 17" OD, featuring the cutting-edge TenarisHydril Blue® Max and Blue® Heavy Wall premium connections.

These pipes will incorporate Dopeless® technology, a revolutionary dope-free solution that not only enhances operational efficiency but also offers environmental advantages by reducing running times and minimizing rejects and remakes. With a sour service grade of TN 125SS, these highly sophisticated products have undergone rigorous testing to meet the project's demanding requirements.

The line pipe aspect of the project, managed by Subsea7 Norway, involves the engineering, procurement, and installation of a 50-kilometer subsea tieback linking the Fenris unmanned installation to the Valhall production and wellhead platform. Tenaris's contribution includes the provision of approximately 10,000 metric tons of 14", 12", and 4" OD line pipe, along with the application of a reliable anti-corrosion coating.
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US Steel Closed Financing to Bankroll Second Mini Mill in Arkansas
By Strategic Research Institute on May 24, 2023 01:15 pm

The Pittsburgh-based steelmaker US Steel acquired mini mill operator Big River Steel for $1.4 billion in 2021. It's now expanding its mini-mill operating in the south, where it's building Big River 2. The new $3 billion mill is under construction in Osceola, Arkansas.

US Steel lined up $240 million in unsecured Arkansas Development Finance Authority environmental improvement revenue bonds to help finance the project. They have a coupon rate of 5.7% and become mature in 2053.

The steelmaker will have to pay interest on a semiannual basis.
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US Steel Production Capacity Utilization Slips
By Strategic Research Institute on May 24, 2023 01:13 pm

American Iron & Steel Institue announced that in the week ending on May 20, 2023, domestic raw steel production was 1,728,000 net tons while the capability utilization rate was 76.8 percent. Production was 1,771,000 net tons in the week ending May 20, 2022 while the capability utilization then was 81.1 percent.

Broken down by districts, here’s production for the week ending May 20, 2023 in thousands of net tons: North East: 147; Great Lakes: 576; Midwest: 212; Southern: 728 and Western: 65 for a total of 1728.

The last week production represents a 2.4 percent decrease from the same period in the previous year. Production for the week ending May 20, 2023 is up 0.2 percent from the previous week ending May 13, 2023 when production was 1,725,000 net tons and the rate of capability utilization was 76.7 percent.

Adjusted year-to-date production through May 20, 2023 was 33,615,000 net tons, at a capability utilization rate of 75.0 percent. That is down 4.0 percent from the 35,003,000 net tons during the same period last year, when the capability utilization rate was 80.5 percent.
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JSW Steel Forges Ahead with Ambitious Projects
By Strategic Research Institute on May 24, 2023 01:11 pm

The formidable 5 million metric tons per annum brownfield expansion at Vijayanagar progresses resolutely, with construction activities and equipment erection diligently underway for all packages. This ambitious project, characterized by its audacity, is slated for completion by the culmination of FY24, standing as a testament to JSW Steel's unwavering commitment to growth and development.

Meanwhile, the Phase-I expansion at BPSL, elevating its capacity from 2.75 million metric tons per annum to 3.5 million metric tons per annum, was successfully concluded in FY23, exemplifying JSW Steel's astute project management capabilities. Encouraged by this accomplishment, the company remains steadfastly on track to realize the Phase-II expansion, augmenting the capacity further from 3.5 million metric tons per annum to an impressive 5 million metric tons per annum, with a projected completion date in FY24

During Q4 FY23, the company allocated a substantial sum of ?3,507 crores towards capital expenditure, and for the entire fiscal year of FY23, the total spend amounted to ?14,214 crores, slightly below the revised planned amount of ?15,000 crores.

Looking ahead, JSW Steel anticipates an expenditure of ?18,800 crores for FY24, primarily dedicated to the finalization of the 5mtpa brownfield expansion at Vijayanagar, the Phase-II expansion at BPSL, and various downstream facilities, accentuating their unwavering focus on sustainable growth.
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Cuban Antillana de Acero Commissions EAF
By Strategic Research Institute on May 24, 2023 01:09 pm

Cuba's long steel manufacturer, Antillana de Acero, has successfully inaugurated its cutting-edge electric arc furnace steel mill, known as Unidad Empresarial de Base, as reported by various media outlets. The newly commissioned EAF plant boasts an impressive annual production capacity surpassing 200,000 metric tons.

This remarkable achievement, made possible through a project funded by a loan from Russia, is set to significantly bolster the country's steel production and export capabilities.

The comprehensive modernization project, geared towards enhancing the company's operations, is slated for completion in 2024, culminating in the launch of the rolling mill.
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Salzgitter Orders Energion DRI Plant
By Strategic Research Institute on May 25, 2023 01:35 pm

Salzgitter has engaged a consortium comprising Tenova, Danieli, and DSD Steel Group to undertake the construction of a DRI plant at the site of Salzgitter Flachstahl. Envisioned as an integral component of the SALCOS® program, Salzgitter's ambitious undertaking to achieve low CO2 steelmaking, this prodigious sub-plant boasts an impressive annual production capacity exceeding 2 million metric tons of DRI.

The overarching objective of SALCOS® entails the realization of near CO2 free steel manufacturing, an aspiration that will be actualized through a meticulously planned three-stage implementation process.

The inaugural phase, scheduled for deployment by the end of 2025, encompasses the establishment of a direct reduction plant, an electric arc furnace, and a 100MW electrolysis facility for hydrogen generation.

Pioneering the forefront of sustainability, Salzgitter aims to complete the transformation of its steel production operations at the Salzgitter location well in advance of regulatory mandates, culminating by the close of 2033.
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