De-globalisation: Can Europe supply itself with steel and aluminium?

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Steel plays an outstanding role as a material in Germany. In 2021, per capita consumption in this country was 426 kilograms. This figure includes not only the 180 kilograms from applications for private consumption. Steel consumption for buildings, infrastructure, transport and mechanical engineering is also included in the statistics.

Last year, Germany was able to cover its steel needs at least theoretically from its own production. Steel is produced at more than 20 locations in this country. But the metal is often not used at home, but exported. In 2020, about 60 percent of German steel production went abroad - around 22 million tonnes. At the same time, however, 20.4 million tonnes were imported. This back and forth arises from different uses of the steel. Before the embargo, for example, Russia supplied bulk steels to Europe that are used in the construction industry. Germany, on the other hand, exports steel that is used in the car industry or in mechanical engineering.

About raw materials and de-globalisation:

The past months have painfully shown that dependence on resources comes at a high price. But can the wheel still be turned back? So let's take a look at the supply situation.

How far Europe could supply itself with strategically important raw materials and what that means for industry is what we want to explore with a raw materials article series.

• New Series: De-Globalisation - How Independent Can Europe Be?
• De-globalisation: Can Europe supply itself with lithium?
• Rare earths and platinum group metals: Can Europe be self-sufficient?
• De-globalisation: Can Europe supply itself with steel and aluminium?
• De-globalisation: Can Europe supply itself with copper?

EU balance sheet negative

The fact that Germany's export balance for steel is positive is not a matter of course. From 2014 to 2018, imports were higher than exports. The balance for the EU has been negative for a long time. Europe has not been able to cover its steel needs from its own production since 2015. Those who have to buy steel will almost certainly do business with Chinese producers.

Almost two billion tonnes of steel were produced worldwide in 2021, more than half of which came from China. The country dominates the market. The largest Chinese manufacturer, the China Baowu Group, alone produced more steel than India in 2021. India, as the second largest manufacturing country, produces only one tenth of what is produced in Chinese smelters.

Even if the steel balance is positive at first glance, Germany remains dependent on imports. Iron ore is needed to produce steel, and Germany must import this raw material in its entirety. This also applies to coking coal, which is used to extract iron from the ore. In the past, the mines in Saarland and the Ruhr area supplied the German steel industry with coal. Since the last miners have left the pits, hard coal must also be imported.

Although German manufacturers are already testing hydrogen as an alternative, these processes cannot yet be used on an industrial scale. The switch to hydrogen was originally intended to improve the steel industry's carbon footprint, but the method also reduces dependence on the world market.

Recycling almost without loss of quality

Germany is well positioned when it comes to recycling steel. About one third of new steel is already made from scrap metal. To do this, scrap is melted into steel in an electrically operated electric arc furnace. According to the German Steel Federation, the recycling circuit for scrap steel is well organised. The collection rate for construction steel at the end of construction use in Germany, for example, is around 97 percent. Steel can be recycled with virtually no loss of quality. Every tonne of steel extracted from iron ore is equivalent to four tonnes of new steel products after being recycled six times, reports the industry association.

Aluminium: Demand and recycling

For aluminium, the other bulk metal product, the balance does not look so good from a German perspective. More than three million tonnes of aluminium are needed in Germany every year. About half of it goes into aircraft and car manufacturing. The construction industry, mechanical engineering and electrical engineering as well as packaging manufacturers are the other customers. This contrasts with German production of 1.2 million tonnes in 2019.

Germany relies on recycling of recyclable materials. 692 thousand tonnes come from this source, reports the Gesamtverband der Aluminiumindustrie (GDA). There is a good chance that the production of recycled aluminium will increase worldwide. This is because the technical effort required to recover the aluminium is much smaller compared to the production of new aluminium, because the metal melts at low temperatures. This reduces the energy costs to about five per cent. Currently, 20 per cent of global production comes from recycling.

Hardly own production

Without recycling, neither Europe nor Germany will be able to meet their aluminium needs. Aluminium is the third most common element in the earth's crust, but in Europe there are only small deposits in Greece that are worth mining. The most important aluminium mineral is bauxite. But the technical process of producing it is complex. According to calculations by the Federal Institute for Geosciences and Natural Resources, almost nine tonnes of rock have to be mined for one tonne of aluminium, a third of which ends up as overburden on the slag heap.

Raw materials series

We take a look at the supply situation. How far Europe could supply itself with strategically important raw materials and what that means for industry is what we want to explore with a series of articles.

• New Series: De-Globalisation - How Independent Can Europe Be?
• De-globalisation: Can Europe supply itself with lithium?
• Rare earths and platinum group metals: Can Europe be self-sufficient?
• De-globalisation: Can Europe supply itself with steel and aluminium?
• De-globalisation: Can Europe supply itself with copper?

Typical bauxite deposits are only two to ten metres thick, so open-pit mining requires a lot of land to extract larger quantities. Australia, China and Guinea in West Africa are currently the largest mining countries. When there was a military coup in the West African country in September 2021, the price of aluminium immediately rose on the world market.

Germany has hardly any possibilities to process the bauxite-containing rock itself. This only happens in small quantities; the ores used in this country come from Guinea, Liberia and Australia. The rocks have to be processed via an intermediate product. First, alumina (aluminium oxide) is extracted from bauxite; this often does not happen in the mining countries.

Aluminium world power China

China, Australia and Brazil shared more than 75 per cent of the world market for alumina in 2020, with more than half coming from China. Mostly, mining, transport and processing are in the hands of the same company. The Chinese process their own bauxite deposits and also import from Guinea, Australia and Indonesia.

The alumina is also often further processed in an aluminium smelter in another country. For this purpose, the aluminium oxide is converted into pure metal at high temperatures using a lot of energy during electrolysis. Anyone who wants to produce aluminium needs a lot of electricity and is dependent on cheap energy. That is why energy prices also have a major influence on the choice of location.

According to the International Aluminum Insititut (IAI), 57 percent of newly produced aluminium in 2021 will come from China. This is followed by India (5.7 per cent), Russia (5.4 per cent) and Canada (4.6 per cent). The Gulf states UAE and Bahrain are also among the seven largest producers worldwide.

(jle)