Auto component makers will be early adopters of green steel, even ahead of vehicle manufacturers, according to R K Goyal, Chairman, Saarloha Advanced Materials.
This is because many are already shipping out parts to Europe. 'We have a very large component industry which is exporting parts worth $20 billion,' he said.
Incidentally, the European Union is a few months away from levying a carbon tax on components not made with green steel. By definition, steel is termed green when its production does not include use of fossil fuels. 'It is just a matter of time before component makers will have no option than to use green steel,' added Goyal.
The Automotive Component Manufacturers Association of India (ACMA) has, in a report, noted that parts exports grew by 8.6% to $10.1 billion (INR 79,033 crore) in H1FY23, up from $9.3 billion (INR 68,746 crore) in H1FY22.
Regulations Are Key
At present, there are no regulations or laws mandating the use of green steel in India. Neither are there incentives or promotional schemes encouraging its adoption by organisations. 'Unless there is some directive from the Centre, companies might not start using green steel,' said Goyal.
In his view, adopting green steel is more an opportunity than a challenge for OEMs. This is because many developed nations might follow Europe's example of imposing carbon cess not just on components made up of conventional steel, but also on vehicles not made with green steel.
Europe and North America, says the ACMA report, remain the two primary export destinations for Indian auto component makers accounting for approximately 63% of exports ($6,357 million) during the first six months of FY23.
'Companies willing to pay carbon cess will have to settle with lower net realisations,' said Goyal. The additional cost of using green steel as an alternative to conventional steel is nominal and 'more of a mindset problem'.
For the record, the carbon tax on components and vehicles made with conventional steel might range between €100 and €200 per tonne in Europe. Green steel producers will also have to address the problem of increased downtime in production as electric furnaces and other equipment used in the process need to be rested longer than conventional coal-powered furnaces.
Kalyani Steel, via its SaarLoha plant, will only be producing green steel starting March 2023 with a lion's share of production aimed at the export market. It has invested INR 400 crore which includes setting up an 83 MW renewable energy park, and some indirect investments.
Fewer Impurities
According to the company, the quality of green steel is slightly better than conventional steel. Goyal said this has become possible mainly due to the absence of impurities that get mixed with steel produced in coal-powered furnaces. The organisation is also making efforts to help its suppliers in 'Going Green' in terms of what they supply.
'We have informed the steel ministry, our suppliers, and other steelmakers about what we are doing. We are also open to supporting them in going green,' added Goyal.
There are three levels of assessing how much carbon dioxide a company produces. These comprise Scope 1 which can be defined as carbon dioxide generated within a factory, from gate to gate. Then comes Scope 2 which indicates if the company is buying from greenhouse free suppliers or not. And finally Scope 3 includes greenhouse gases generated during logistics.
A total of INR 400 Crore has been invested by Kalyani in order to start Green Steel manufacturing in India, and this includes setting up an 83 MW renewable energy park, and some indirect investments.
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