The government and the country’s industrialists are faced with a choice of several options.

Poland needs a strategic decision on the direction of decarbonizing the country’s steel industry, and delaying it will widen the trade gap and lead to uncontrolled change. This is stated in a new report by Instrat, reviewed by the GMK Center.

According to analysts, the Polish industry, including the steel industry, faces the challenge of decarbonization and maintaining its competitive position. Domestic steel producers are under increasing pressure from non-European competitors. In addition, the free allocation of CO2 emission allowances under the EU ETS will be phased out in 2026 and the CBAM will finally be implemented. At the same time, energy prices in Poland are likely to stay higher than in the rest of Europe.

Instrat notes that new investments are being announced in green steel mills across Europe, with production based on direct iron reduction in electric arc furnaces and hydrogen as a reducing agent. will In the future, their products will become more competitive than steel produced using traditional coal technologies.

All these factors have a negative impact on the situation of the Polish steel industry. Instrat analysts note that no decision has been made for the sector on the path to decarbonisation.

According to the study, the Polish government and producers face a strategic choice with several options.

• Maintaining the existing primary steel plant in Dambrowa Górnicza using the BF-BOF route, equipping the plant with carbon capture technology;
• Construction of a new green steel plant (DRI-EAF + Hydrogen),
• Focus only on producing molten steel from scrap (EAF) and rely on imports of primary steel.

“Every major industrialized economy in Europe has already chosen to deeply decarbonize steel production. Delaying Poland’s decision by several years will only widen the trade gap, the study says. There will be an uncontrollable, “wild” change in the steel sector.

The Polish economy needs a strategic decision on the direction of the local steel market transition and the appropriate attention from the government. It needs regulatory and financial support, as well as investment infrastructure to support low- or near-zero-emission steel production.

The country also needs renewable energy and lower electricity prices to meet strong demand for all low-carbon steel production technologies.

According to Instrat, from 2012 to 2021, steel production in Poland was 8-10 million tons, decreasing to 7.5 million tons in 2022, and 6.5 million tons in 2023. Reasons for the decline in steel production include the closure of ArcelorMittal’s integrated steel plant in Krakow in 2020, the recession caused by the coronavirus pandemic, rising CO2 prices from 2020, and then the 2022-2023 energy Crisis and rapid growth are involved. Electricity prices

At the same time, steel production in Poland does not meet domestic demand. Last year, for example, the country consumed about 5.5 million tons more steel products than it produced, while in 2012 the gap was still 2 million tons. In 2023, steel imports exceeded exports by 6.5 million tonnes, the highest import balance among EU countries.

High electricity prices are increasingly affecting the competitiveness of Polish industry, which generates about 1/5 of national GDP. This sector is very energy intensive compared to other EU countries. High electricity prices are a problem for industries such as chemicals, metals, mining, and fuel and energy.