Alexei Mordashov, the owner and chairman of Severstal’s board of directors, projected that the transformation of Russian metallurgy to carbon-free manufacturing would cost 10 trillion rubles. In addition, he stated in an interview with Russia 24 TV that green metallurgy will necessitate 110 GW of green power.
“We don’t know whether we’ll be able to achieve carbon neutrality since there are no proven technologies,” Mordashov added.
According to Severstal’s “initial and very preliminary estimations,” Russian metallurgy will require around 10 trillion rubles. when it comes to moving production
As of present, the technique of direct reduction of iron utilizing hydrogen from iron ore raw materials and subsequently remelting in electric furnaces produces 70 million tons of steel each year.
“At the same time, somewhere about 110 GW of green electricity should arise in order to melt this raw material into steel,” Mordashov continued, noting that the Russian energy sector’s total installed capacity is little over 200 GW. (As of January 1, 2021, Russia’s UES has a total installed capacity of 245 GW of power plants.)
The move to green metallurgy is a costly and difficult enterprise, according to Severstal’s owner.
In an interview with RBC, the company’s general director, Alexander Shevelev, stated that “the usage of hydrogen increases the cost of steel manufacturing by three to four times.” “In the medium future, I don’t believe commercially viable alternatives for carbon-free steelmaking technologies will be discovered,” he added.
According to Mordashov, the implementation of a cross-border carbon tax (Carbon Border Adjustment Mechanism, CBAM) on the import of steel, pipelines, cement, aluminum, fertilizers, and energy in the EU will cost Severstal around $ 70 million (in their current estimate). “This is a significant sum, but it is not vital for us,” he explained.
The carbon footprint and tax base reporting scheme will go live in early 2023, with a three-year transition period for importers before the levy takes effect on January 1, 2026. According to Mordashov, Russia’s new carbon policy threatens businesses with “even larger tariffs than cross-border carbon control in Europe.”
According to Vedomosti, the administration is deciding on the framework for introducing the Russian carbon levy. There are three options being considered: levying a specific fee for exceeding emissions criteria, implementing an emissions trading system, or a combination of the two.
Steel prices, according to Mordashov, would fall as facilities ramp up production. He believes that they are only using around 80% of their resources. “We do not expect prices to fall to the levels of minimal values in a major way.” Nonetheless, we believe they will decline slightly if seasonal swings, which have traditionally been cyclical in our business, are preserved, “added Severstal’s owner.
Export charges are in effect from August through December 2021, and he described them as “extremely unpleasant” for the business. The increased tax charges connected with them are anticipated to be 25 billion rubles for Severstal Mordashov. According to him, the firm would pay the same amount in 2022 as a result of the implementation of a steel excise tax and an increase in the mineral extraction tax (MET). In September, the government proposed a 2.7 percent excise tax on steel made in Russia, as well as a hike at the MET on iron ore, coking coal, and fertilizers, if the export price of steel goods in Russian ports surpasses $ 300 per ton. All of these changes will take effect on January 1, 2022.
