Possible Locational Effects of Deep Decarbonisation of Basic Industries – at the Example of Steel Production in North-West Europe

  • Project no.151656
  • Duration 07/2018 - 12/2018

The steel industry is an important employer for some regions and is regarded by policy makers as a key industry because it is integrated in many value chains. But how can greenhouse gas neutrality of basic materials production be achieved? The steel industry explores different routes in several pilot projects to switch primary steel making from coal-based blast furnace to hydrogen direct reduction based on hydrogen from renewable energies. Fast adoption of such radical changes in production technologies offer competitive edges. Scaling up may significantly change the location factors of certain steel production sites as existing assets of the old route are devaluated and transport flows may be rerouted. So far, however, there has been a lack of analysis of such possible future trends

The information generated in the project, however, provides strategic insights for steel clusters in North-Western Europe on challenges as well as opportunities of deep decarbonisation. This includes information on potential future market shares under various scenarios of steel market development as well as infrastructural challenges.
The project team built on an existing energy model of steel industry and further developed it into a spatial model that simulates investments at single sites. The team used site specific information on today’s steel production and rolling capacities and analysed changes in locational factors – such as transport costs. With these analyses we derived first insights into how deep decarbonisation strategies might affect different steel location types. The analysis provides a relevant basis for the discussion around threats and opportunities due to the decarbonisation of steel industry in North Western Europe.

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