Austrian steel producer voestalpine says it has developed an industrial-scale process for carbon-neutral steel production without the use of fossil carbon, for which it has secured the intellectual property rights from the European Patent Office.
The patent is valid in all major European steel manufacturing countries and specifically covers the production of sponge iron (DRI or HBI) using green hydrogen and biogas in the direct reduction process, the company said in a press release.
The company’s announcement comes as Europe’s climate goals are posing profound technological challenges to the steel industry.
“We are convinced that transforming Europe’s steel industry is only possible when we all pull together. We are focusing on cooperation and dialogue with all stakeholders,” said Herbert Eibensteiner, chairperson of the management board of voestalpine.
Aiming for carbon-neutral steel by 2050
voestalpine says the process it developed uses green hydrogen and biogas in the direct reduction process, which offers other advantages in addition to carbon neutrality. “For example, the biogenic carbon allows carburisation of the sponge iron, for efficient melting in the electric arc furnace,” the company explained.
The company will grant patent licences for the carbon-neutral prematerial used in steel production, and plans to work with licence holders to transfer the necessary know-how.
voestalpine has an ambitious plan to decarbonise steel production. As a first step, it plans to reduce CO2 emissions by 30% until 2030 using hybrid technology and electric arc furnaces.
Its long-term goal is to then increase the share of green electricity and hydrogen used in the steel production process, together with climate-neutral prematerials DRI and HBI, to achieve the goal of carbon-neutral steel production by 2050.
In the first phase, voestalpine will convert two blast furnaces at its Linz site and one at its Donawitz site to electric arc furnace-based steel production by 2030, the company told S&P Global Platts on 9 June. However, the project is dependent on sufficient renewable energy being available at competitive prices.
Back to profit despite challenging year
voestalpine recorded an 11.4% drop in revenues to €11.3bn during the 2020/21 business year amid the economic downturn. However, the company says that demand for its products recovered in the second half of 2020.
“The automotive industry, in particular, showed surprising strength once it emerged from its COVID-19-induced low, triggering substantial growth in demand for high-quality steel products,” the company said in its financial report. Meanwhile, aerospace, oil and natural gas were hit particularly hard by the crisis.
Despite the revenue decline, the company managed to cut costs and boost efficiency. As a result, it posted a net profit of €32m, compared to losses of €216m in the previous year.
The gearing ratio, representing net financial debt as a percentage of equity, improved year-on-year, from 67.2% to 48.5% as of the end of March 2021, as the group significantly reduced its net financial debt.
Higher dividends and positive expectations for this year
Given its improved financial position, voestalpine proposed a dividend of €0.5 per share for the 2020/21 business year, standing for about 2% of the average share price during the year. The dividend is 2.5 times higher than last year, when it was just €0.2 per share.
The company also expects better results this year amid the fast post-pandemic recovery. It has been seeing high demand from almost all of its major customer segments, and some areas even seem to be overheating due to catch-up effects.
“Assuming that the current economic momentum will continue and that there will be no new, unexpected distortions of the market, the management board of voestalpine AG expects EBITDA for the business year 2021/22 between €1.6bn and €1.9bn,” said Eibensteiner. That’s compared to an EBITDA of €1.1bn in the 2020/21 business year.
voestalpine has been one of the top-performing stocks in Vienna in the last year, with an increase of over 80%. By comparison, the Austrian blue-chip index ATX has gained 54% in the same period.