Steel giant Arcelor Mittal is considering closing its innovative Steelanol plant in Ghent, a prestigious showpiece for the company’s decarbonization strategy. The plant, which converts CO2 from blast furnace gases into ethanol, is struggling with strict and unfavorable European regulations, threatening to make the project financially unsustainable.
The Steelanol plant captures residual gases from the steel production process – gases that would otherwise be converted to electricity. It then converts them through fermentation into ethanol, which in turn can serve as a material for chemistry (to produce bioplastics, for example) or as a fuel for the transportation sector.
Itransportation Steelanol turns a residual product into a valuable product and reduces C02 emissions. At full capacity, the plant can avoid some 120,00 tons of CO2 emissions annually. A reduction that the plant could use since it emits about 8 million tons of CO2 annually, or more than 10% of Flanders’ emissions, although Ghent claims to be one of the least polluting plants worldwide per ton of steel.
€215 million investment
The investment in the Ghent project now stands at € 215 million. Together with the linked Torero project, which converts waste wood from container parks into bio-coal to replace coal, the total rises to 250 million euros. Europe, Flanders, and the federal government together invested 35 million euros. The Investment Bank of Europe provided a loan of 75 million euros, and ArcelorMittal itself contributed 140 million euros.
The project is unique in Europe, with only a forerunner in China. Originally, Ghent was a test site for further rollout of this technology in other plants. But unlike ethanol produced from corn, wheat, sugar, or straw, the ethanol produced remains unrecognized as a biofuel, and the CO2 savings may not be deducted from the emissions balance sheet.
“We expected this project to be recognized as ‘advanced biofuel,’ but that recognition has not materialized,” CEO Frederik Van de Velde told the Belga news agency. “It shows how difficult it is to harmonize regulations in Europe. We often don’t know what will happen in five to eight years.”
The EU stands in the way
According to Arcel or orMittal, the dossier shows a broader European problem. “The European Commission is staring blindly at hydrogen as the only route to climate neutrality,” says Van de Velde, even though hydrogen is having a hard time getting off the ground. “Other technologies, like this one, that already work today and save CO2 directly, don’t get a fair chance.” Hydrogen projects, he says, remain heavily subsidized, despite their large power consumption, limited availability, and feasibility.
“We are giving ourselves about another year to decide on closure,” the CEO warns. “Even if we solve the technical problems and achieve the anticipated 60,000 tons of ethanol per year, it will remain difficult to make it economically viable without regulatory changes.” With the current price of allowances hovering around 75 euros per ton, that would amount to 9 million euros of additional operating costs for the ethanol plant.
Also, uncertainty about other climate projects
If the plant closes, it currently employs 35 people, for whom internal reemployment is planned; there is not only the threat of a substantial financial write-off, but also the potential for significant job losses. But there is also growing uncertainty about the steel group’s other climate projects.
Besides Steelanol, ArcelorMittal in Ghent is also working on carbon capture and storage projects, an electric furnace for scrap metal, and a DRI plant to run on green hydrogen. However, each of these technologies faces significant challenges.
CSS requires a heavy investment and complex infrastructure. Electrification of steel production is challenging due to the lack of green power – the electricity needed to produce hydrogen is not readily available.
Consequently, the multinational seeks a viable framework for producing green steel. To make for the European steel market, it must be better protected against cheap, often subsidized imports. “We pay sky-high CO2 taxes,” says Van de Velde. “We can only survive that if Europe protects us from subsidized steel from abroad.”
According to Eurostat, Russia, Turkey, India, China, and South Korea are the five countries that import the most steel into the EU. Those countries together account for imports of 21 million tons. Europe produces about 140 million tons of finished steel annually.
