ENVIRONMENTAL INVESTMENTS AND EXPENSES
The voestalpine Group’s environmental expenses reached a new record level in the business year 2023/24 with an increase of more than 7%, while investments were maintained at a consistently high level.
Current operating expenses related to the environment increased by 7.2% from EUR 479.9 million to EUR 514.4 million. Over the past ten years, voestalpine’s environmental expenses have already totaled around EUR 3.3 billion.
Investments in environmentally relevant assets increased to EUR 45.8 million (previous year: EUR 28.9 million).
Environmental expenditures
In millions of euros
EU EMISSIONS TRADING/CO2 CERTIFICATES
In the first half of the business year 2023/24, the price of certificates from the EU Emissions Trading Scheme largely ranged between EUR 80 and EUR 90. However, the price subsequently weakened significantly and reached its lowest point in the 2023/24 business year in February 2024 at around EUR 50. Over the entire reporting period, the certificate price fell by 32.8% from EUR 89.24 as of March 31, 2023 to EUR 59.98 as of March 31, 2024.
The voestalpine Group’s purchase requirement is calculated from the total quantity of certificates required (amount of emissions) minus the allocated free certificates. On average in recent years, it has amounted to around one third of total CO2 emissions.
As a result, the burden from certificate trading recognized in profit or loss amounted to EUR 231.6 million in the business year 2023/24 (previous year: EUR 242.1 million).
CLIMATE PROTECTION
The greentec steel climate protection program, with which voestalpine aims to achieve net-zero emissions by 2050 at the latest, is being implemented as planned. The political-regulatory framework for European and national energy and climate policy was fleshed out in certain aspects during the reporting period, but remains open in key areas.
POLITICAL FRAMEWORK
At EU level, a number of key issues, such as the directives on energy efficiency, were adopted in 2023 and industrial and raw materials policy decisions will be taken in spring 2024 shortly before the final trilogue agreement between the Commission, Council and Parliament. These include the “Net-Zero Industry Act” (NZIA), which is intended to support important industrial activities for the transformation, and the “Critical Raw Materials Act” (CRMA) to secure the (domestic) supply of the necessary raw materials.
October 2023 also saw the start of the three-year trial phase of the CO2 carbon border adjustment mechanism (CBAM), the political objective of which is to treat imports of certain products into the EU in a comparable way to the level of CO2 pricing that applies here. Accordingly, anyone importing goods into the EU must either provide evidence of a CO2 pricing system corresponding to the EU Emissions Trading Scheme (ETS) or otherwise pay import duties.
CBAM initially covers the iron, steel, aluminium, cement, electricity, fertilizer and hydrogen sectors, as well as selected upstream and downstream products. With the “live operation” of the world’s first such border adjustment from 2026, a gradual phasing out of the free allocation of emissions trading certificates is planned in these sectors by 2034.
However, solutions for exports from the EU to compensate for additional costs due to higher climate protection standards compared to other regions and thus create reasonably comparable competitive conditions on the global market are still outstanding.
Despite their fundamentally understandable intentions, what all of these European and national regulations have in common is that they are in some cases associated with excessive additional administrative work. It therefore remains to be seen whether they will actually have a positive impact on both climate and industrial policy. What is certain is that the reduction in bureaucracy originally promised by the EU Commission has not yet materialized.
While important components of the “Green Deal” have not yet been finally adopted or implemented, the new 2040 climate targets are being discussed at EU level. The EU Commission published its ideas on this at the beginning of February. Specifically, a net target of minus 90% compared to 1990 is proposed in conjunction with an “Industrial Carbon Management Strategy” for unavoidable residual emissions. This primarily concerns carbon capture and utilization or storage (CCUS).
Although decisions will no longer be made in the legislative period of the EU Parliament or by the current Commission, which ends in the first half of 2024, the implications of a renewed tightening of targets would be considerable, as all matters of the “Fit for 55” package, including the legal implementation at national level, would have to be adapted.
Similar discussions are currently taking place in the individual EU member states. Both Austria and Germany are working on a carbon management strategy, which voestalpine believes should be an integral part of the corresponding EU plans.
The key question for all energy-intensive sectors will be how the industrial transformation can be made economically viable in the long term. The key aspects remain the future European and national subsidy regime, the development of “green” lead markets for CO2 -reduced products as well as availability, secure supply, infrastructure and competitive price levels in relation to renewable energies. These challenges can only be met to a limited extent by individual companies themselves and require a coordinated industrial policy geared towards them. The discussion about a new “Industrial Deal” for the European Union in the coming legislative period, which has been gaining momentum since the beginning of 2024, should not only create greater awareness of the fact that all relevant issues such as climate, energy, competition, trade, finance, research/innovation must be considered in an integrated and coordinated manner, but should ultimately also lead to a long-term, sustainable industrial policy agenda for the EU and its member states.
greentec steel: voestalpine’s FUTURE-ORIENTED CLIMATE PROTECTION PROGRAM
With greentec steel, the voestalpine Group is gradually implementing an ambitious step-by-step plan. greentec steel encompasses all of voestalpine’s activities and innovations on the path to steel production with net zero emissions. As part of the Science Based Targets Initiative (SBTi), the voestalpine Group is committed to reducing the sum of Scope 1 and Scope 2 emissions by 30% and Scope 3 emissions by 25% by 2029 compared to the reference year 2019. Achievement of the 2029 target is also subject to external factors and influencing variables such as raw materials, energy and the economy. greentec steel envisages various technological options with high CO2 reduction potential. The phased plan thus offers voestalpine a certain degree of flexibility in order to be able to react to changing conditions and at the same time limit the economic risk to a manageable level.
greentec steel comprises an initial investment volume of around EUR 1.5 billion. This will initially involve installing two green electricity-powered electric arc furnaces at the Linz and Donawitz sites and decommissioning two coal-based blast furnace units. Depending on the quality requirements, a mix of input materials consisting of scrap, liquid pig iron and hot briquetted iron (HBI) will be used. voestalpine obtains the required HBI primarily from the direct reduction plant in Texas/USA, which has been majority-owned by a global steel producer since 2022; 20% is owned by voestalpine with long-term purchase agreements.
In the meantime, the decisions for the facilities and suppliers have been made and construction of the electric arc furnaces has begun. The Austrian federal government had approved funding of around EUR 90 million for this as part of the “Transformation of Industry” program. The environmental impact assessment procedure for the necessary upgrading of the electricity grid has been completed at the Donawitz site and is imminent at the Linz site at the time of reporting. After planned completion in 2027 and successful ramp-up, 2.5 million tons of CO2 -reduced steel can be produced annually.
voestalpine’s long-term concept for achieving net zero emissions by 2050 at the latest, in line with the target path of the EU Emissions Trading System, consists of several modular technology steps and options. These focus equally on the greatest possible CO2 reduction effect, taking into account the actual feasibility (e.g. with regard to the availability of raw and input materials and renewable energies, including the corresponding infrastructure).
An overview of the key elements and milestones of the greentec steel climate protection program (reference year 2019 for Scope 1 and 2):
By 2029: Phase 1 with a target of minus 30% CO2 emissions
- Investment in two electric arc furnaces powered by renewable electricity in Linz and Donawitz and decommissioning of two coal-based blast furnaces.
From 2030 to 2035: Phase 2 with a target of minus 50% CO2 emissions
- Focus on direct CO2 avoidance through the further replacement of fossil pig iron production and the likely additional use of CO2 capture and utilization technologies (carbon capture storage and utilization).
By 2050 at the latest: Phase 3 with net zero CO2 emissions target
- Focus on replacing the remaining fossil pig iron capacities using fossil-free energy sources, such as “green” hydrogen and bioenergy, as well as the capture of CO2 (CCUS) with the aim of achieving the greatest possible flexibility while ensuring that the net-zero strategy is actually economically viable.
- The final decisions will be made at a later date in line with investment cycles and in accordance with foreseeable conditions.
OPERATIONAL MEASURES
In the business year 2022/23, voestalpine launched a Group-wide expansion offensive for the generation of its own renewable energy. This includes the installation of PV systems on technically suitable building roofs and open spaces as well as investments in wind and hydropower. The expansion of renewable energy production continued in the business year 2023/24. In addition, the construction of e-charging stations will be further accelerated at European locations.
The High Performance Metals Division’s sites are continuously working to reduce energy consumption and increasingly cover it from renewable sources. In the business year 2023/24, a 187.5 kWp photovoltaic system was installed at the Johannesburg site in South Africa, among others. Initiatives to replace fossil fuels with sustainable alternatives are also underway at production sites. These include projects for the production of biomethane and the evaluation of the effects of hydrogen as an energy source on the products and processes of the High Performance Metals Division. At the Hagfors plant in Sweden, 50% of natural gas requirements are already covered by biomethane and the conversion of heat treatment furnaces to electricity is being accelerated.
The High Performance Metals Division is continuously driving forward improvements in energy efficiency. In the past year, around 70 GWh of energy was saved. The measures implemented include the optimization of combustion technology, the conversion of heating technology in furnaces, the installation of efficient LED lighting systems, various optimizations of the plant control system and numerous process improvements.
The High Performance Metals Division has set itself the target of reducing CO2 emissions (Scope 1 and Scope 2) by 50% by 2029 compared to 2019. Progress and target achievement are monitored using a detailed roadmap based on individual projects.
With its highly efficient technology, closed water circuits and efficient heat extraction, the new special steel plant in Kapfenberg, Austria, makes a significant contribution to reducing environmental impact and sets new standards worldwide.
The opportunities to leverage the remaining energy-saving potential at sites that produce crude steel conventionally are limited. Nevertheless, significant progress has been made at the Metal Engineering Division’s Donawitz site in Austria. A newly installed system for preheating combustion air has led to energy savings of 27,000 MWh per year. In addition, the implementation of a natural gas expansion machine reduces the annual energy requirement by a further 2,200 MWh by converting the energy from the pressure difference between the external and internal gas network into electricity and thus making it usable. In addition, measures were taken to generate renewable electricity at the site. For example, PV systems were installed on the plant restaurant and an industrial building, which feed the electricity generated directly into the plant grid.
At the Metal Engineering Division site in Kindberg, Austria, the expansion of PV system capacity is underway. Process optimization measures and improvements to exhaust gas recirculation at various heating units minimized heat losses in the reporting period. Another highlight at the site is the extraction of district heating, which can feed up to 15,000 MWh into the district heating network of the town of Kindberg when completed, which will significantly reduce the use of primary energy in the region.
PV systems were also installed at various locations in the Metal Forming Division. In many cases, mounting systems produced in-house (“iFIX”) were used. Several sites also switched to energy-saving LED hall lighting, which further reduced electricity consumption.
In addition, voestalpine Precision Strip GmbH has increased the proportion of electricity it generates itself by modernizing its own hydropower plants and installing a PV system. The use of waste heat from the company’s own plants and the procurement of waste heat from the neighboring company (sector coupling) for hall heating reduced the purchase of natural gas and thus CO2 emissions.
In the Steel Division, work on greentec steel is already in full swing. Construction of the electric arc furnace began in the past calendar year. Work has already begun on the new power supply system using the microtunneling process and a new conveyor belt bridge for supplying raw materials has been implemented.
In addition to greentec steel, the division also focused on expanding its own renewable energy generation. In the past calendar year 2023, for example, another PV system with an output of almost 1,400 kWp was commissioned on the foundry’s production hall.
Another key focus was on the CO2 -reduced product portfolio. Since 2021, voestalpine has also been offering all flat steel and heavy plate products manufactured at the Linz site in a greentec steel edition. Thanks to optimization measures in process management, such as the use of scrap and reducing agents, and the use of renewable electricity, these products have a CO2 footprint that is around 10% lower, resulting in savings of more than 200,000 t CO2 along the entire value chain since the start of the project. In addition to the automotive industry, steel produced in this way is already being used by customers in façade construction, building technology, crane construction and the heating and heat pump industry, among others.
PRODUCT SUSTAINABILITY
The political and legal framework in Europe aims to transform the economic system towards a circular economy. Sustainability along the supply and value chains is of particular importance here.
The concept of the circular economy requires a consideration of the entire value chain of products in terms of ecological, economic and social aspects across all phases of the life cycle — from raw materials through production, use and consumption to the end of life, which in turn represents the beginning of a new life cycle.
At voestalpine, the circular economy has long been implemented at process and product level in many areas and is constantly being developed further.
Steel products are inherently durable and contribute to the further development of the circular economy approach. Modern lightweight steels and manufacturing processes such as additive manufacturing make it possible to reduce the amount of material used in products. During the use phase, steel products can be repaired and refurbished using various processes, thereby extending their service life. Due to their durability and longevity, steel products can also be reused and recycled again and again. At the end of their service life, they serve as a secondary raw material from which new high-quality steel products can be manufactured. Steel is multi-recyclable, which means that the cycle is closed and can be repeated as often as required. The use of waste and recycled materials from our own steel production, as well as waste and secondary raw materials from external production processes, also contributes to the circular economy. The by-products from steel production can in turn be used as secondary raw materials for the manufacture of products in other industrial sectors. One example of such industrial symbioses is blast furnace slag, which is a by-product of steel production. They are used by the cement industry as additives, which conserves natural resources and reduces CO2 emissions in the production of cement. Through research and development, voestalpine promotes the efficient use of alternative or secondary raw material sources.
voestalpine’s current focus in determining the sustainability of products (product sustainability) is on ecological aspects, i.e. analyzing the environmental impact of products and their decarbonization. Life cycle assessment (LCA) is a central element and methodological tool in this process. This requires standardized, reliable and globally comparable methods that can help to create an international level playing field and thus promote sustainable economic growth.
Environmental Product Declarations (EPDs) are an essential tool for voestalpine to determine and communicate the environmental impact of products based on a life cycle assessment. EPDs are based on the international standards EN 15804 and ISO 14025 and are checked and verified by independent third parties. voestalpine has listed and published environmental product declarations for numerous products (such as hot-rolled steel strip, hot-dip galvanized steel strip, hot-formed pressed steel parts, prestressed concrete turnout sleepers, rails and seamless tubes) from the Group’s various units in the declaration program of the Institut Bauen und Umwelt e.V. (IBU). EPDs for various other voestalpine products are being prepared on an ongoing basis.
Product development is inextricably linked to the circular economy. The transformation towards largely CO2 -free production should ensure the consistently high quality of products and materials. A technology transformation also has an impact on existing substance and material cycles and industrial symbioses and therefore requires the further or new development of sectoral and cross-sectoral circular economy approaches.
Regular dialog with the various stakeholders on decarbonization and product sustainability along the supply and value chains contributes to the ongoing specification and step-by-step implementation of voestalpine’s strategy for CO2 -reduced and, in the long term, climate-neutral steel production.
In order to create the greatest possible transparency for stakeholders and make the transformation steps comparable, the voestalpine Group has committed to setting targets for reducing greenhouse gas emissions as part of the Science Based Targets initiative (SBTi). The proposed targets for voestalpine’s Near-Term Science Based Targets have been reviewed and validated by SBTi and are in line with the 2-degree reduction pathway (well-below 2°C trajectory).
As part of its comprehensive decarbonization strategy, the Steel Division has already implemented short-term decarbonization measures at the Linz site with the “CO2-reduced steel” climate project. The goal is to reduce direct CO2 emissions along the existing steel production processes. The environmental impact of the products manufactured in this process, in particular the carbon footprint, is determined and reported on the basis of a life cycle assessment in accordance with internationally recognized methods and standards.
Sustainable and decarbonized products are playing an increasingly important role in supply and value chains. It is therefore essential to create uniform definitions, methodologies and framework conditions and thus a level playing field in international competition for sustainable products.
Cross-industry initiatives can support this development. These include, for example, the ResponsibleSteel initiative, which voestalpine was one of the first steel companies to join in 2019.
