We are living in interesting years. When completed, that Stegra project will significantly change the steel markets. The plant’s capacity is 5 million tons of steel. The same amount as the new Luleå green steel plant and Raahe combined.
In terms of costs, Luleå will surely stay within budget (4.5 billion euros), because Stegra’s twice-as-large plant has now swallowed 6.5 billion and 1 billion is still needed / being sought. (According to FT, 2 billion is needed)
But not much will be left over from Luleå’s 4.5 billion budget.
Certainly not for those afraid of debt; soon SSAB’s mighty cash reserves will be just a memory. No wonder German steel companies got cold feet. Will there be markets in the Nordics for such an increase in steel volume? Central European steel plants will probably have to shut down for the equation to work.
It would certainly be good if SSAB and Stegra found each other; otherwise, temporary competition might be excessive.
I haven’t really been following Stegra much, but I would still say that there is a long and uncertain road ahead.
However, if 5 million tons (+ 2.5 million tons from SSAB) eventually come to the market, then it’s probably true that at that point, the demand for “green steel” must displace traditional steel. It remains to be seen what kind of premium it will fetch at that point.
SSAB’s cash reserves will indeed diminish in the coming years, but on the other hand, they are making exactly the right moves and investing more towards specialization from bulk. This is significantly better than if they had distributed everything. One of the finest things as an SSAB owner is that they have been able to both distribute good years back to shareholders and invest heavily.
The use of green steel is pure politics, and this news is also related to it. Quote: “Now, according to the legislative amendment presented by the Commission on Tuesday, European car manufacturers could continue the production of internal combustion engine cars to 10 percent of 2021 emission levels, if they use, for example, “green steel” in vehicle manufacturing.”
If this Commission proposal goes through, then isn’t it, if not a lottery win, then at least a nature lottery win for SSAB. Overall, it seems like a reasonable move in the right direction.
This proposal will direct certain demand to SSAB, at least in the short term, assuming that “green steel” is strictly defined, meaning many competitors won’t be able to join yet.
It will be cheaper for car manufacturers to use SSAB’s green steel than to pay fines. In the longer term, competitors will naturally enter the same market, which is not a bad thing for the climate at all.
German car manufacturers themselves have been lobbying for this connection between green steel and emission reductions, which is noteworthy. They are presumably very pleased with this proposal.
One point in the proposal was also “made in EU,” which is one tool against cheap Chinese imports (even if it were green steel sometime in the future).
It will be interesting to see how SSAB comments on this decision; it will surely be discussed at the latest in connection with the interim report. From a shareholder’s perspective, this is at best a protectionist income transfer from car manufacturers to green steel producers.