Meanwhile, the drought in Latin America reduced the power generated in hydroelectric plants and increased the domestic consumption of NG, thus reducing the Latin American offering of fuel for export. This imbalance caused by the high demand and low offering for fuel reached unmatched levels when, due to the Russian war against Ukraine, the supply of Russian fuel, which accounted for nearly 30% of the NG and 20% of the oil consumed by the EU and the UK, was drastically reduced. All these factors are directly reflected in the exponential increase in the price of fuel and electric power, and are threatening the economic viability of Europe’s basic industries. Thus, the increase in steel production in 2021 that occurred after release from the Covid-19 lockdown, turned into a decrease in 2022.

According to Axel Eggert, general director of EUROFER (The European Steel Association), basic European industries are suffering from unfair competition by the basic industries in countries outside of the EU, which are not subject to the same instabilities in the prices of fuel and electric power, and which do not have the same level of goals for climate change measures. Also according to Eggert, this crisis is resulting in the closing down of steel plants due to cuts in production and to massive layoffs.

The response to the crisis

A definitive solution to the energy problem requires an immediate, multi-disciplinary effort so as to institute measures that will have an effect in the short, medium and long terms.

Among the short-term measures, flexibility in the use and supply of raw materials and contracts can help the sector momentarily get around the shortage of natural gas and the volatility of the prices of the raw materials. However, in the long term, that measure could harm the sector. Using alternative raw materials, such as fuels other than NG, increases the options for inputs offered and can help stabilize the fluctuation in the prices of conventional raw materials, but this involves the risk of a reduction in the efficiency and/or quality of the process. Renegotiating sales contracts with those industries that use steel, stipulating floating rather than fixed prices, can help increase profit margins momentarily, but will limit steelmakers’ profits at a future time when the price of the raw materials eventually drops. This crisis also demands cost reductions that were not visible when steel prices were up from 2016 to early 2019.

The long-term measures involve moving the energy matrix towards more renewable sources and increasing distributed generation. This change will also require the implementation of energy storage systems so as to make the energy from renewable sources available on demand. Changes in the types of production will also have to be avidly pursued, such as the production of green steel, which uses clean fuels (such as H2) in its production process. Likewise, such actions will have to be supported by interventions in the political and economic realms.

The search to increase energy efficiency must start now and be on-going, with effects in both the short and long terms. There are those who think that increasing the energy efficiency of a production process always engenders an increase in costs and the replacement of equipment. In reality, with a relatively low level of investment it is already possible to obtain noticeable increases in the energy efficiency of a plant or production process. It is possible, for example, to optimize the use of steelmaking gases in integrated plants, where some gases produced in a process as by-products can be used as fuel for other processes. There are challenges in optimizing the use of such gases, i.e. predictability, intermittent availability, and a great number of technical restrictions. However, optimizing this type of use has direct benefits, such as minimizing flaring in combustion stacks, reducing natural gas consumption and maximizing in-house energy production.

How do digitalization and integrated management drive the energy efficiency of industries?

In order to support the search for energy efficiency and accelerate the implementation of all the other measures, there is an immediate action that produces results in the short, medium and long terms: digitalization. According to data provided by McKinsey & Co., more than 80% of their clients in the worldwide metallurgy sector have raised the topic of digitalization to be a Top Priority. Different from the vision that some have of it, digitalization goes far beyond automation. By using artificial intelligence, digitalization transforms data into knowledge and guides decision making assertively all along the entire value chain.

Digital solutions like Viridis help plant operators to improve energy along the entire process chain

SMS offers the key technologies for energy management

Thanks to smart digital solutions like the Viridis Energy & Sustainability Suite, the transformation of an entire industry is made possible. Comprehensive energy management solutions like Viridis improve the energy performance of the production system while reducing energy-related costs, raw material consumption, and even carbon, greenhouse gas, and waste emissions. Its applications help accurately calculate the energy and resource consumption of dozens of energy sources within a single plant and carefully balance them to achieve cost- and environmentally efficient production, while maintaining the desired levels of quality. Process data are collected by the instruments and fed in real time into robust computational models based on artificial intelligence. Those models can make accurate predictions about the process, such as the demand for fuel and electric power on the production line, and the rates of gas emissions. The models transform those data into applied knowledge and guide decision making in real time in various areas, such as the optimal distribution of combustible gases and utilities (cryogenic gases, steam, water and compressed air). It is also possible to predict and manage the demand for electric power and natural gas online - which avoids both technical overloads as well as financial penalties due to consumption being outside contractual ranges. This set of guided decisions makes the process more efficient and allows one to produce the same quantity of product, with the same quality, using less electric power, less fuel, while emitting fewer greenhouse gases.

Investing in energy efficient initiatives has become a matter of the highest importance for major companies. Gains in energy efficiency obviously make companies more competitive and responsible for the environment, and digitalization can be the next arm to be deployed in response to the energy crisis.