The transition of the steel industry will be one of the largest parts of the cost of decarbonising Polish industry by mid-century.
The road to transformation of the Polish steel industry
Over the past few years there is a growing gap between the needs of the Polish economy and declining steel production. Polish construction and manufacturing industries are experiencing rapid growth, leaving the steel sector behind. A contributing factor to the modernisation and development of Poland’s steel sector is the growing availability of steel scrap, which is a key raw material for the secondary smelting of steel in electric arc furnaces (EAFs). Today, Poland is its net exporter, which means that the potential for increasing domestic steel production based on this technology is high, potentially enabling a 20%-30% improvement in the steel trade balance.
While EAF technology is an opportunity to increase the country’s steel production in a way that is aligned with global environmental requirements, it alone is not enough to meet the demand for steel in Poland. A separate public policy challenge is therefore also the decarbonisation of the BF-BOF blast furnace steelmaking process. This will require the development of carbon capture and storage facilities in the country, or the replacement of traditional BF-BOF furnaces with alternative technologies using hydrogen or based on direct electrolysis of ore
The future of the Polish steel industry
Consequently, the future of the Polish steel industry depends on investments that both increase its production capacity and enable carbon-free production of steel. This is because sustainable development of the steel sector requires a combination of traditional production methods with modern low-emission solutions. Increasing steel production while reducing greenhouse gas emissions will be facilitated by the cooperation of various industrial sectors (energy, metallurgy, cement, chemicals, etc.) and the support of an appropriate industrial policy that takes into account economic and environmental requirements and thus supports not only innovations but also the development of modern production capacity.
Challenges of the Polish steel industry
- One of the biggest challenges for the Polish steel industry is the need for transformation in the face of the sector’s less than ideal financial situation. The costs of transforming Poland’s steel sector are estimated at 0.04% of GDP in the baseline scenario and 0.07% in the ambitious plan, which corresponds to an amount of about €10-20 billion spread over 25 years.
- Changes in the steel sector in Poland are also associated with significant technological barriers. They concern three key steelmaking technologies – BOF oxygen furnaces, EAF electric arc furnaces and DRI direct iron reduction technology. In order for BOF furnaces to participate in the global decarbonization trend, it is necessary to implement carbon capture and storage (CCS) technologies. These systems must be individually tailored to the specific conditions of each smelter and to local CO2 transport and storage considerations.
- The lack of a well-thought-out, long-term strategy for the decarbonization of heavy industry, including the steel sector, is also a key problem. Poland does not have a coherent industrial policy to guide long-term development, including decarbonization. The lack of a strategy means that actions taken in this regard are often piecemeal and dependent on short-term political decisions.
