28 EN: greentec steel – Austria's largest climate protection project at a glance (Best of episode)

00:00:02:

00:00:03: Welcome to my podcast, a first Alpina medium for all

00:00:07: employees, as well as fans

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00:00:10: who wants to become part of

00:00:11: First Alpina

00:00:12: in the future.

00:00:13: This episode was translated

00:00:15: from the German interview with AI.

00:00:21: Last week, the official groundbreaking ceremony for High Force Melt, the world's first industrial demonstration plant, took place at the Fustalpina site in Linz.

00:00:32: It combines two innovative processes, hydrogen-based direct reduction for ultrafine iron ores and an electric melting process.

00:00:40: Commissioning is planned for the end of twenty twenty seven.

00:00:44: High Force Melt is thus Austria's largest research project for climate protection.

00:00:49: With Green Tech Steel, First, Alpena has a clear step-by-step plan for transforming its steel production.

00:00:57: The plan is modular in structure, but the long-term goal is clear.

00:01:02: Steel production with NetZero's CO-II emissions by two thousand fifty.

00:01:07: To this end, the group is already researching various new processes and investing in pilot and demonstration projects such as High Force Melt.

00:01:16: In episode twenty-eight, all the content already covered in my podcast on the topic of green-tech steel is summarized for you in a compact format.

00:01:24: In this episode, we focus on the topic of green-tech steel.

00:01:28: This is the name given by Frust Alpine to its plan for decarbonizing steel production, which will make a significant contribution to achieving climate targets.

00:01:37: Frust Alpine is the largest source of CO-II emissions in Austria.

00:01:42: Decarbonization is therefore a top priority for the Austrian steel producer.

00:01:47: CEO Herbert Eibensteiner explained why this is the case in episode three of my podcast in September,

00:02:01: thirty percent, four million tons of CO-II savings.

00:02:05: That means a lot in a country like Austria, which emits around eighty million tons per year.

00:02:10: That's simply five percent.

00:02:12: But what does that mean for Füste Alpina in concrete terms, Mr.

00:02:16: Eibensteiner?

00:02:17: For us, it means a clear plan for this decarbonisation.

00:02:20: And we would like to talk about this first step in particular today.

00:02:25: From twenty twenty seven, we want to replace the first two blast furnaces in Linz and Donowitz with green electricity based electric furnace technology.

00:02:34: For us, this means producing around two point five million tons of CO two reduced steel per year.

00:02:40: And it is also particularly important that this first step will enable us to achieve a thirty percent reduction in CO two emissions.

00:02:47: The investment volume for this first step is around one point five billion euros.

00:02:52: in March two thousand twenty three.

00:02:54: the supervisory board gave the green light for an investment in decarbonisation.

00:02:59: In twenty twenty three, the groundbreaking ceremonies for the construction of the electric arc furnaces took place in Linz and Donowitz.

00:03:07: The company began construction of two electric arc furnaces, known as EAFs, in twenty twenty four.

00:03:14: In twenty twenty seven, one electric arc furnace each will go into operation in Linz and Donowitz.

00:03:21: The integration of the two green electricity-powered electric arc furnaces into steel production will enable energy-intensive processes to be electrified.

00:03:31: In Linz, one point six million tons of green steel will be produced, while in Donowitz, eight hundred fifty thousand tons will be produced.

00:03:40: In contrast to the LD process, known as the Linz-Donowitz process, which uses coal and coke as reducing agents, the EAF can be operated without fossil fuels.

00:03:51: Depending on the quality requirements, a mixture of scrap, liquid iron, green steel and HBI, known as hot briquetted iron, is used.

00:04:01: Firstalpina obtains the required HBI, mainly from its direct reduction plant in Texas, USA, in which the company still holds a twenty percent stake.

00:04:11: Mr.

00:04:12: Eibensteiner, why is it important to you to be able to continue Firstalpina's quality strategy?

00:04:18: We believe that green steel may be something special from twenty twenty five to sometime after twenty thirty but once everyone has made the switch green steel will no longer have a USP.

00:04:29: The USP can then only be that the strategic focus.

00:04:33: continues to be on this high value, high quality steel.

00:04:36: And it is important to us that this remains the case in the long term, because we are now investing in plants that will be in operation for thirty or forty years.

00:04:46: And I believe that is also the crucial point, which also has something to do with the fact that the raw material mix is actually suitable.

00:04:55: From two thousand thirty, the company plans to replace two more blast furnaces in Linz, and Donowitz, and invest in another electric arc furnace in Linz.

00:05:04: The company is already researching new processes and investing in pilot projects to achieve its goal of CO-II neutrality by two thousand fifty.

00:05:13: A concrete example of this is the H-II future hydrogen pilot plant in Linz, which produces and uses large quantities of green hydrogen.

00:05:22: At the Donowitz site, there are also pilot plants that use hydrogen to directly reduce ores in order to enable CO₂ neutral steel production.

00:05:31: The exact plan until two thousand thirty is in place.

00:05:35: Nevertheless, you are keeping your options open for alternative courses of action, such as future decarbonization measures.

00:05:43: Our approach combines maximum CO₂ reduction with good management of the risk associated with these investments.

00:05:51: The company has long established itself as a pioneer in environmental and climate protection in the steel industry.

00:05:59: Over the past ten years, more than €two.

00:06:02: four billion has been invested for this purpose.

00:06:05: Since twenty twenty-two, the company has been offering all its flat steel products with a reduced carbon footprint, including electrical steel for wind turbines and high strength steels for lightweight construction in the automotive industry.

00:06:19: This is made possible by the use of innovative raw material mixtures and more efficient processes.

00:06:27: In this way, the company can meet the growing demand in the high-quality segment of its customers' markets while also contributing to global climate targets today.

00:06:37: The company has a clear goal in mind to be the leader in climate-friendly and carbon-neutral steel production.

00:06:44: This is very gratifying for us and also positive for all our employees.

00:06:49: You can imagine that the employees will also be very intensively involved in these projects, which is why I am confident that we will be able to implement this transformation very well.

00:06:59: The course has been set for achieving the climate targets, the Green Tech Steel step-by-step plan is in place and on schedule.

00:07:07: We also listened to how the project is progressing on my podcast and spoke to the then project manager Kurt Satzinger and Bernhard Kaiser in episode seven in January, two thousand twenty four.

00:07:19: Green Tech Steel is not only Austria's largest climate protection program, but also the most extensive investment program in the history of the group.

00:07:28: In autumn, twenty-three, groundbreaking ceremonies in Linz and Donowitz marked the start of construction of the Electric Arc Furnaces, or EAFS.

00:07:39: At the time, we talked about how and when this groundbreaking work had already begun.

00:07:45: My guests in the seventh episode, Kurt Satsinger and Bernhard Kaiser, explained the special features of the Green Tech Steel Project and the TransMet Investment Programme to us.

00:07:55: Most listeners are probably already familiar with the term Green Tech Steel.

00:08:00: The groundbreaking ceremony took place in October, two thousand twenty-three.

00:08:05: Mr.

00:08:05: Satsinger, let's take another look at the reasons that were decisive in launching this program in the first place.

00:08:11: To put it simply, customer pressure.

00:08:14: In recent years, customer pressure for steel with a reduced carbon footprint has become incredibly strong.

00:08:20: And at the beginning, this customer pressure was not yet so noticeable.

00:08:25: We realized that something was coming our way and that we needed to take a closer look at it.

00:08:30: And step by step, in a relatively short period of time, we realized that this was really important to our customers.

00:08:38: Customers are also willing to pay for it.

00:08:40: That's something quite extraordinary.

00:08:42: After all, they are getting the same product just with less CO².

00:08:46: And that has been a change in mindset.

00:08:49: Yes, actually unimaginable until that point.

00:08:52: And then there have been various regulations which have been implemented since two thousand nineteen and have become effective, making it clear that we need to reduce CO² emissions permanently.

00:09:04: This is not just a short-lived hype, but a real trend that we want and need to be part of.

00:09:10: This has also helped us make a better decision to have fewer CO-II certificates in the long term.

00:09:17: These CO-II certificates that we have available will be incredibly expensive and we have to provide our customers with materials that can meet the requirements placed on us.

00:09:28: Mr.

00:09:29: Kaiser, my question now is for you.

00:09:31: On the one hand, we are talking about an investment program.

00:09:34: But on the other hand, we are also talking about a project.

00:09:38: What is the big difference?

00:09:40: How does a program differ from a project?

00:09:42: Yes, ultimately, many individual projects make up a program.

00:09:47: Our investment program consists of twenty independent individual projects.

00:09:52: The largest is certainly the EF core plant, the electric arc furnace itself.

00:09:58: But beyond that, there are many other large projects, such as the high voltage power supply.

00:10:04: which is actually a huge jumbo project in itself.

00:10:07: We have combined these twenty projects in our investment program.

00:10:11: They are very closely interlinked, both in terms of timing and technology.

00:10:16: At the kickoff of our investment program, our Chief Technology Officer Helmut Gruber coined the term gear box, which actually sums it up perfectly.

00:10:26: Each individual project must mesh with the others, be ideally interlinked, and only then will the implementation of the entire investment program ultimately work.

00:10:37: We are ultimately on the right track, and our task in the program is precisely to control the individual COGs and ensure that the implementation of the overall program then also works.

00:10:49: That sounds like a mammoth task, and it is a mammoth task, Mr.

00:10:52: Kaiser.

00:10:53: I assume it is also an extreme logistical challenge, isn't it?

00:10:58: Absolutely.

00:10:58: Yes, I have brought along a few figures, data and facts to give you an idea of how big the whole program really is.

00:11:06: If we just look at the steel construction that we will be installing by twenty twenty seven, that amounts to twenty three thousand five hundred million tons.

00:11:16: To give you an idea of the scale, A fully fueled and loaded jumbo jet, a Boeing seven forty seven weighs four hundred tons.

00:11:25: That means we are talking about a total weight of sixty jumbo jets.

00:11:28: in terms of the steel we will ultimately use.

00:11:31: We have sixteen thousand square meters of roof space and thirty four thousand square meters of facade space that we will construct by twenty twenty seven.

00:11:42: That is an area equivalent to five football pitches if you take the façade alone.

00:11:47: Solid construction.

00:11:49: We will use sixty seven thousand cubic meters of concrete in a concrete mixer in a conventional eight cubic meter space.

00:11:58: That means we will ultimately use eight thousand three hundred seventy five concrete mixers here in Linz.

00:12:05: That would be a distance from Linz to Kemunden.

00:12:09: So it's an incredible scale even for us.

00:12:12: We are used to doing large projects, but as you said, this is an absolutely mammoth task.

00:12:19: and it can only work because we have the optimal support of all our internal departments involved in project implementation, as well as our external partners.

00:12:31: To date, we have commissioned no fewer than two hundred and thirty-five external partners, working with them on an equal footing, and that will ultimately be crucial in ensuring that we can implement the whole project successfully.

00:12:45: Those are incredible figures you are presenting there.

00:12:48: Mr.

00:12:48: Satsinger, my next question.

00:12:51: Let's take a look at the Donowitz site where an electric arc furnace is currently being built.

00:12:57: Is this actually a completely separate investment program?

00:13:00: Yes, there are many reasons why it makes sense to do it this way, but we face very similar challenges and that means we work closely together.

00:13:10: We are in regular contact with each other so that we can simply handle things in a similar way.

00:13:16: This also allows us to implement lessons learned immediately, depending on who is ahead in the individual project phases.

00:13:24: So in that sense, it's a collaborative effort, but we still work separately from each other.

00:13:31: How big is your team?

00:13:34: Our core team in Linz covers several divisions and comprises around fifty people.

00:13:39: Overall, if I think of the twenty individual projects, then around two hundred fifty colleagues are working on the implementation of those twenty projects.

00:13:48: In total, we actually have everything we need in terms of specialist trades.

00:13:53: So we cover everything from all technical disciplines, purchasing and marketing, to product quality and environmental specialists.

00:14:02: Mr.

00:14:02: Kaiser, the project is in full swing at the lint site.

00:14:05: We've already talked about that.

00:14:07: We've already heard about everything that's happened there.

00:14:10: Now, let's look ahead.

00:14:11: What's next?

00:14:12: What are the next steps in decarbonization in lints?

00:14:15: The next step in our decarbonization plan is EAF-II.

00:14:20: Following on from EAF-A-I, we can then relatively easily build a second electric arc furnace here at the lint site.

00:14:29: We have already included the second EAF in our plans and have also taken many aspects of its supply into account.

00:14:37: Ultimately, this will save us time, but also money, of course.

00:14:41: EAF-II will then be able to replace blast furnace-VI, thereby decommissioning the second small furnace.

00:14:50: Decarbonizing the steel industry requires a different source of energy, namely electricity.

00:14:57: In the ninth episode, we also addressed the topic of raw materials and asked Mr.

00:15:02: Machiko and Mr.

00:15:03: Bresselmeier from the Raw Materials Procurement Company how raw materials procurement will change in the context of green tech steel.

00:15:11: Yes, decarbonisation in the steel industry is certainly one of our biggest issues at the moment and will remain so for some time to come.

00:15:19: Sourcing will change significantly in this area.

00:15:22: This applies to iron ore but also to coal and coke.

00:15:26: which will simply become less available over time as demand decreases.

00:15:30: And yes, we expect scrap HBI and energy to become more important and that there will also be significant increases in volume.

00:15:39: So overall, we need a different sourcing concept for raw materials.

00:15:43: To bring about the sustainable change in our sourcing concept, we have set up a comprehensive project to address this strategic change together with our customers.

00:15:53: This is very important to us because the consumers are the ones who specify our requirements and ultimately their success is also very strongly determined by the raw materials and energy.

00:16:05: With this project we want to secure this future sourcing.

00:16:08: Our sourcing strategy will therefore provide the best possible support for the commissioning of the first electric furnaces in twenty twenty seven but also for the next steps in decarbonization beyond that up to two thousand thirty five.

00:16:23: That will of course be particularly important for the future, because as you already mentioned, decarbonisation will also change sourcing.

00:16:31: What specific changes are actually on the horizon?

00:16:35: Well, the changes and associated challenges span the entire range of raw materials and energies, but it will particularly affect the supply of HBI and scrap as well as electricity.

00:16:46: So here we expect significant increases in demand for electricity.

00:16:50: not only for us but also for our competitors.

00:16:53: I would also like to look at the issue of electricity of course because operating electric arc furnaces requires many times more electricity.

00:17:01: Where will it come from?

00:17:02: To elaborate, electricity consumption will not increase massively overnight but will rise gradually as the EAFs are ramped up and this can be easily managed.

00:17:12: The electricity required for this is available in sufficient volume.

00:17:16: The challenge will certainly be the generation and provision of green electricity, especially competitive electricity.

00:17:23: However, the gradual phasing out of blast furnaces will mean that the cupola gases which we use very efficiently today will no longer be available for our own electricity generation and that we will have to buy in more, so to speak.

00:17:37: Energy is and will continue to be an important cost factor, which is why we are focusing very strongly on the issue of electricity and gas procurement.

00:17:46: You mentioned at the beginning of the conversation that ore, coal and coke will no longer be needed for EAFS, but that HBIN scrap will be needed all the more.

00:17:56: Can you explain this in more detail?

00:17:58: And above all, of course, what challenges do you see ahead of us?

00:18:03: First of all, it should be noted that in most parts of the world, Iron ore and coal will continue to form the basis for steel production.

00:18:11: So here in Europe, we are taking a different path, so to speak, a path towards decarbonisation.

00:18:18: However, as iron ore and coal remain in high demand in other parts of the world, as I said, and we are only phasing them out slowly, we must remain very, very fit in these areas, even over the next few years, as long as we still need these raw materials, at least in our hybrid steelworks.

00:18:36: It has already been mentioned several times.

00:18:38: What exactly does HBI mean and how is it produced?

00:18:42: HBI stands for hot briquetted iron, which is also known as sponge iron.

00:18:48: It is a very high quality material.

00:18:51: It can be compared to the iron that comes out of blast furnaces today, which is produced in blast furnaces.

00:18:57: It is a very high quality material that is also necessary for the production of high quality end products.

00:19:03: We currently source the material from Texas where we have developed and invested in a project ourselves.

00:19:09: We now own twenty percent of the project and have also secured long-term contracts for quantities to cover our own needs.

00:19:17: That alone will not be enough.

00:19:18: We will then need additional material and we are currently in the process of finding opportunities around the world, projects that can also offer us such material.

00:19:28: HBI is also needed to compensate for scrap.

00:19:31: when there is too little of it available.

00:19:33: But basically, it will ensure the quality of our products when less of our own pipe material is available.

00:19:41: Scrap is a big issue and certainly a major challenge.

00:19:45: Let's stay with the topic of scrap.

00:19:47: Scrap is a decisive factor in achieving climate targets.

00:19:51: Scrap is therefore becoming increasingly important as an input material.

00:19:56: Over time, we will need fifty to one hundred percent more scrap, especially high quality scrap, and it is therefore foreseeable that given that our competitors have the same demand trends as we do, we will reach a shortfall of high quality scrap in Europe.

00:20:11: We estimate that around fifteen percent of the scrap currently leaves Europe.

00:20:15: That is approximately fifteen million tons per year.

00:20:18: For example, through grey exports of vehicles outside the EU, we will need these quantities in Europe in the future.

00:20:25: We must secure these quantities and we must also secure our raw materials in Europe.

00:20:31: To this end, it is important that we also create the appropriate political awareness.

00:20:37: For example, Scrap is not currently included in the EU's Critical Raw Materials Act.

00:20:43: This means that this material can flow away and that is not in the interest of European production and industry.

00:20:50: We need to raise awareness of this and that is what we are working on.

00:20:55: So I can see that the raw material supply team still has challenging and exciting times ahead.

00:21:00: It will continue to play a central role and remain an important factor in the success of the company in the future.

00:21:07: A project like Green Tech Steel also needs to be financed.

00:21:11: In the sixteenth episode of my podcast, we spoke to Gunther Passell about the financing of sustainability projects, including Green Tech Steel.

00:21:20: In autumn, First Alpina became the first European company to issue a green bond.

00:21:26: In the sixteenth edition of my podcast in October, twenty-four, Gunther Pastel explained the background to financing at First Alpina and how its financing is structured.

00:21:37: The steel and technology group is in the midst of a major transformation process to decarbonize steel production.

00:21:44: Can the group even afford this?

00:21:46: And if so, how?

00:21:47: Gunther Pastel, head of group treasury, explained the details to us.

00:21:51: First Alpina's strategy essentially has two focal points, value-enhancing growth and green transformation.

00:21:58: We have already produced several podcast episodes on green tech steel, the program for decarbonizing steel production at the Linz and Donowitz sites.

00:22:06: How much will the decarbonization of First Alpina cost in total?

00:22:11: We have a step-by-step plan for decarbonization, and I would like to talk about the first step.

00:22:16: because it is already very concrete and we are planning to invest around one point five billion in this decarbonization.

00:22:22: That's

00:22:22: a huge sum.

00:22:23: Mr.

00:22:24: Pastel, you are responsible for liquidity, i.e.

00:22:27: ensuring that the money flows.

00:22:29: Can you provide these funds and how can First Alpina really afford it?

00:22:33: Yes, indeed, one point five billion is a considerable sum.

00:22:36: Nevertheless, I believe this sum must also be seen in relation to the size of the company.

00:22:41: We will be able to afford it.

00:22:42: Or rather, we must be able to afford it.

00:22:45: But for this to succeed, a number of prerequisites are necessary.

00:22:49: I believe the first prerequisite is a healthy balance sheet structure, a solid balance sheet structure.

00:22:55: And I believe we have done good preparatory work in this area in recent years.

00:22:59: The group has reduced its debt very very well in recent years and has a very very good balance sheet structure on which to build with new investments.

00:23:08: The second essential point is that business continues to run well and a lot of money flows into this pot.

00:23:14: We are talking about the cash flow that is generated which can then be used directly for these investments.

00:23:19: And the third point which is where we come in is that what is still missing for this one point five million will then be financed.

00:23:27: As I said, it is our job to take care of this financing.

00:23:30: First Alpina issued a green bond in autumn, what is a green bond and why was it issued?

00:23:37: A green bond is a bond where the funds raised are used directly for environmentally friendly projects.

00:23:43: In this specific case, for example, for green tech steel, to reduce CO-II emissions in the area of clean mobility for renewable energy, so it can be used directly for environmentally friendly projects.

00:23:55: Why now?

00:23:56: It's because the need for financing has arisen now, hence the timing.

00:23:59: And why green?

00:24:00: I'd like to elaborate on that a little further.

00:24:02: You first mentioned the decarbonization strategy that the group has adopted.

00:24:07: Of course, the financial resources are also needed to implement this strategy.

00:24:10: And we have prepared ourselves by setting up a so-called green financing framework, which we published in June.

00:24:16: Frameworks are the conditions under which we can now issue green financing.

00:24:21: These conditions are very important in ensuring that this is not greenwashing, but that the money is actually being invested in environmentally friendly projects.

00:24:30: This requires compliance with fairly strict conditions, which we have also set out in writing.

00:24:35: Who actually ensures that the funds really do end up where they are supposed to?

00:24:40: In this framework, we define the obligations we have to enter into, and then there are auditors who check whether this has actually been done.

00:24:48: Why was this bond issued in twenty twenty-four?

00:24:51: And why didn't First Alpina use green financing instruments earlier?

00:24:56: Because the need is there now, and environmentally relevant investments are now fully at risk, and a certain minimum volume is required to make it worthwhile to set up this green financing.

00:25:07: Perhaps we can go into a little more detail here.

00:25:10: What returns can investors achieve if they buy the First Alpina green bond?

00:25:15: The bond issued has an interest rate, a yield of approximately four percent.

00:25:18: This interest rate is now slightly higher than the old bonds issued.

00:25:22: This is due to the fact that the general interest rate environment on the market has changed in recent years.

00:25:29: Is that more than you would get with a traditional bond without a green label?

00:25:33: Well, the terms of the bond are exactly the same, whether it's green or not.

00:25:37: The risk that an investor takes is the same.

00:25:40: This means that the interest rate will hardly differ between green and non-green bonds.

00:25:44: The only thing we expect is that we will attract additional investors who place particular emphasis on sustainability.

00:25:51: But otherwise, the return will be roughly the same as for any other bond.

00:25:56: Who actually invests in green bonds?

00:25:59: Who exactly is first Alpina targeting with this?

00:26:02: Definitely anyone who has money to invest and in a second step, anyone who cares about sustainability and the environment, for whom it is important that their money actually goes to environmental projects.

00:26:13: These could be fund companies, pension funds, but also private investors.

00:26:18: Why should one invest in the first alpina bond?

00:26:20: Because first alpina stands for stability and reliability, so you can sleep well and expect to get your money back.

00:26:27: And you also know that this money is going into projects that benefit the environment.

00:26:31: It's also worth mentioning that this money is primarily being invested in the GreenTech Steel project, which is one of Austria's largest climate protection programs, reducing five percent of Austria's total CO-II emissions.

00:26:44: And we could all do with a good night's sleep, so that's a good thing.

00:26:47: How can I, as a private individual, invest in these green bonds from Firstalpina?

00:26:52: The basic requirement is that everyone has a securities account where they can buy the bonds.

00:26:57: How they buy them then depends on whether they have their securities account with an online broker or with a bank.

00:27:03: Anything is possible.

00:27:04: You can either buy during the subscription period, which is the first five working days after the bond is issued.

00:27:10: During this period, the banks guarantee that the price will not change.

00:27:14: After that, the bond begins trading on the stock exchange and the price may change, but it can then be purchased on the so-called secondary market on the stock exchange.

00:27:26: There will be a listing in Vienna and certainly also in Frankfurt, Stuttgart and other stock exchanges where orders can be placed.

00:27:33: From the groundbreaking ceremony to raw material procurement and financing, the current episode summarizes all the topics related to Green Tech Steel.

00:27:42: For you, dear listeners.

00:27:44: That was the twenty-eighth episode of my podcast, covering many aspects of Green Tech Steel, Austria's largest climate protection program.

00:27:52: On the subject of hydrogen production, there will soon be a detailed episode on the High Force Melton Age to future follow-up projects at the first Alpina site in Linz.

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00:28:16: The next episode of my podcast will be released in a month.