Poland’s steel industry is on a slippery slope amid still high energy prices, reliance on coal and unclear climate and trade policy signals. Deprivatisation, closures and production shutdowns are evidence of a deeper crisis in Poland’s steel sector. A report from Instrat, a Warsaw-based think tank, sheds light on how to revamp the industry’s potential and looks into domestic low- and zero-emission steel production costs.
Europe’s race to decarbonise steel production
Across Europe, countries are investing in green steel technologies. In Romania, a new steel plant utilising hydrogen-based direct reduction of iron (DRI) is under construction. Germany is similarly pushing forward with many green steel projects backed by significant state funding, though not without challenges.
Yet, in Poland, Europe’s growth champion and a major industrialised economy, the steel industry is still stuck with outdated technologies reliant on coal and no clear divestment strategies. The steel sector in Poland is facing significant problems, resulting in deprivatisation, closure of successive plants and production haltdown. The country is now the fifth-largest steel importer globally (according to the World Steel Association), underscoring the erosion of its domestic production capabilities.
The new government lacks initiative and strategic plans, even with a new ministry with ‘industry’ in its name. Despite the steel sector’s privatised status, Instrat’s experts point out that steel remains a strategic asset, and its poor condition requires government intervention. – I fail to understand why we are spending nearly more than 2bn EUR (ca. 10 billion PLN) to subsidise the never-profitable coal mining industry just next year. At the same time, this amount of money could fund, for instance, a new green steel mill capable of producing low- or zero-emission steel for decades – comments Michał Hetmański, co-author of the report and the Instrat’s CEO, also Visiting Senior Fellow at London School of Economics.
Instrat’s research, based on its new tool, Calculator of Steel Production Cost in Poland, confirms what other major intelligence providers (Agora, BNEF) and investors have been confirming in recent years. Europe could have its strategic autonomy and produce cost-competitive steel using Direct Reduced Iron technology with hydrogen as a reduction agent. For this to happen, we need to secure large volumes of electricity.
European steelworks are facing cheaper imports and unclear trade policies, amid CBAM entering right now into force. On top of that, the Polish industry has a problem with the highest energy prices in Europe – due to years of delay in RES development and still reliance on coal.
The decline of the Polish steel industry is dangerous for security interests as the country is a proud NATO member and leader in defence spending exceeding 4% of GDP. We need a managed transition for the industry, which also includes domestic coal production and refineries.
JSW, Jastrzębska Spółka Węglowa, the last European producer of coking coal and employer to nearly 30 thousand people, is producing more than the Polish steel sector uses today and relies on revenue from export to other countries in Central Europe relying on coal-based blast furnaces. When ArcelorMittal’s last plant in Dabrowa Gornicza closes in 10-15 years from now, and other plants in the region follow, JSW’s will be hit too.
Other big investments planned by the government, like the Central Transport Hub and the development of RES or nuclear power plants, will also require high volumes of steel. Private businesses, driven by consumers and the EU, will also increasingly require green steel.
In the new report, Instrat experts claim that decarbonising the country’s steel industry is bound to reinforce the potential of the whole economy, with many export-oriented industries currently using coal-based steel. The report explores the competitiveness of different steel decarbonisation pathways and provides the answer on how to secure steel supply in a long-term perspective.
We can’t expect private investors to take the lead solely. If Poland doesn’t act now, we’ll be forced to rely even more on imports while our neighbours strengthen their industries. Poland must choose whether to be a supplier or an importer in this new era – finally remarks Kamil Laskowski, co-author of the report.