Region: Europe

Serbian environmental protesters hijack mining conference

Environmental activists interrupted a closed-doors conference on mineral resources in Belgrade, organised by international mining companies on November 7, in protest against mining pollution in the country.

The organisers argue that mining is already damaging Serbia’s environment, and want to prevent major new mining projects going ahead. The main focus is on Rio Tinto’s plans to build a huge lithium mine in Serbia, which have already been blocked, but campaigners say the project has not been fully abandoned.

Protesters broke into Belgrade’s Metropol hotel, where industry representatives were gathered, unfurled banners and disrupted the event by shouting out against mining in Serbia.

Before breaking into the conference, representatives of environmental organisations addressed the media at a press conference outside the hotel.

“Today, democracy was raw because it had to be,” said a statement on the Ecological Uprising movement’s Facebook page, saying that protesters “broke the barrier of lies and media fog over the lithium mining disaster in Serbia”.

Mining mega project blocked

The Serbian government revoked licences for Rio Tinto’s Jadar lithium project in January 2022. The decision was made less than three months ahead of the April 2022 general and presidential elections, following a wave of mass protests that threatened to harm the ruling Serbian Progressive Party (SNS) and incumbent President Aleksandar Vucic’s re-election prospects.

That blocked the $2.4bn project, under which British-Australian mining giant Rio Tinto planned to open a lithium mine in the Jadar River area.

However, representatives of the Alliance of Environmental Organisations claim that the project has not been fully scrapped, and they have continued sporadic protests and other actions. They want the law to be changed to permanently ban lithium mining in Serbia and ensure the Jadar project is never reactivated.

Their fears are backed up by comments from CEO of Rio Tinto, Jakob Stausholm, who said in December 2022 that the company has not given up on the Jadar project.

Lucrative deposit

The Jadar project near the town of Loznica would have turned the company into Europe’s largest producer of the metal — dubbed ‘white gold’ — for a period of 15 years and established Serbia as a major global producer.

Demand for lithium is set to continue increasing in the coming years as it is an input for batteries for both electric vehicles (EVs) and electronic products such as smartphones.

Vucic said in November 2022 that he “bitterly regrets” the decision to prevent the project going ahead. Pointing to the high price of lithium at the time, the president added that no country in the world “can be proud of such stupidity” in renouncing lithium as Serbia has done.

Despite the uncertain future of the Jadar project, Serbia, along with other Southeast European countries, is already being eyed as a location for EV and battery manufacturing.

US-based EV manufacturer Rivian has opened a technological centre in Belgrade. Stellantis, owner of the automotive factory at Kragujevac, is preparing to switch to electric car production.

In the battery manufacturing space, Slovakia-based EV battery technology company InoBat signed a declaration of intent with the Serbian government on the construction of a new EV battery factory in December 2022. The new gigafactory will help to meet the growing demand for electric car batteries in Europe.

Portuguese precedent

Campaigners in Serbia have pointed to the resignation of Portuguese Prime Minister António Costa on November 7, his official residence was searched in a probe into alleged corruption. Prosecutors said that they were looking into concessions awarded for lithium mines and hydrogen production.

Portugal is seen as an important supplier of lithium for the green transition, which would help EU companies reduce their dependence on imports from China and other countries. However, as in Serbia, lithium projects in the country have faced strong opposition from local residents.

“The government has enthusiastically supported numerous lithium extraction schemes in different areas of Portugal as part of the wider EU EFFORT to provide CRITICAL RAWS [raw materials], but those projects were immersed in controversies due to the low quality of elements that will be extracted and the disproportionate damage to the environment expected from the operation. Does this sound familiar?” said a post from the Ne Damo Jadar NGO on Facebook.

“[Junior ruling Socialist Party of Serbia] SPS and SNS get ready! Arrests in Portugal over lithium, search of prime minister’s residence over allegations of corruption,” reads a post from Ecological Uprising.

November 10, 2023
ArcelorMittal summarizes investments in Krakow. They will build new hydrogen furnaces at the steelworks for PLN 135 million

The construction of hydrogen furnaces in the cold rolling mill in Kraków is just one of the large investment projects that ArcelorMittal Poland is implementing in its branches this year. – They will cost almost PLN 1.5 billion and will increase the quality of the products offered and improve energy efficiency and installation efficiency – says Marzena Rogozik, from the Krakow branch of Arcelor Mittal.

New hydrogen furnaces

The pickling plant in the cold rolling mill of the Krakow branch was modernized; work is currently underway in the annealing shop. The company will build new hydrogen furnaces there, which will replace the old installations. The cost of all works in Krakow is over PLN 135 million.

This year, the ArcelorMittal Poland coking plant in Zdzieszowice could also count on a cash injection for investments in a heat and power plant and the construction of a flue gas denitrification installation. Important environmental projects cost more than PLN 165 million.

– Aware of the challenges posed by the constantly changing market situation and unexpected economic fluctuations caused by completely unexpected events, such as the pandemic or the outbreak of war in Ukraine, we constantly invest in those areas of our activity that allow us to confidently compete on the steel market and maintain our plants are in good condition – emphasizes Wojciech Koszuta, CEO of ArcelorMittal Poland.

The steel industry is the driving force of the Polish economy

– The huge financial outlays are not only the result of the need to replace some installations with new ones or to meet the stringent requirements of EU directives. It is primarily a strong desire to improve quality and implement product innovations in our steelmaking processes in Poland, despite the challenges faced by steel producers throughout Europe – emphasizes Sanjay Samaddar, president of the management board of ArcelorMittal Poland. – Steel industry is the key driving force of the Polish economy. We want to develop them here, on the Vistula River, and at the same time we have the ambition to become pioneers in the difficult and expensive, but necessary, decarbonization process – he sums up.

Since the beginning of its operations in Poland, in 2004, ArcelorMittal Poland has already invested PLN 10.5 billion in its plants located in six cities in the country.

November 10, 2023
Britain targets Russian gold, oil sectors in new sanctions

Britain sanctioned two of Russia’s largest gold producers, Nord Gold Plc and Highland Gold Mining Ltd. Britain’s National Crime Agency (NCA) also issued an alert to financial institutions, warning them about Russian attempts to use gold to evade sanctions.

The two companies did not immediately respond to requests for comment.

Those sanctioned also include a United Arab Emirates-based network which Britain said was responsible for channelling more than $300 million in gold revenues to Russia, as well as businessmen Vladislav Sviblov and Konstantin Strukov.

“Today’s sanctions will hit those who have provided succour to (Russian President Vladimir) Putin by helping him to lessen the impact of our sanctions on Russian gold and oil – two critical sources of revenue for the Russian war machine,” British Foreign Secretary James Cleverly said.

The NCA said it hoped its notice would put banks and traders in Britain, a key location for precious metal trading, on alert so that Russian attempts to launder sanctioned gold by masking its origin could be spotted and stopped.

“This alert will aid efforts, in partnership with the regulated sector, including the banks and high value dealers, to ensure that sanctioned individuals or those who represent them cannot use gold to circumvent UK sanctions,” said Adrian Searle, director of the National Economic Crime Centre at the NCA.

Britain also sanctioned energy trading firm Paramount Energy & Commodities DMCC, saying its opaque ownership structures have been used by Russia to blunt the impact of the G7’s oil-related sanctions. Paramount did not respond to requests for comment.

November 10, 2023
Portugal activists urge suspension of lithium projects after PM quits

Antonio Costa resigned on Tuesday, hours after prosecutors detained five people, including his chief of staff, and named two formal suspects close to him in an investigation into lithium mining and hydrogen projects.

Costa’s possible role is also being investigated by the Supreme Court of Justice after prosecutors said they had become aware the suspects allegedly used his name and authority to “unblock procedures” related to the deals. He has denied wrongdoing and said his conscience is clear.

With more than 60,000 metric tons of known lithium reserves, Portugal is Europe’s biggest lithium producer, but its miners sell almost exclusively to the ceramics industry.

They are now preparing to produce the higher-grade lithium used in electric cars and electronic appliances, as Europe seeks to develop its own strategic energy resources to reduce dependence on suppliers like China.

Environment agency APA earlier this year gave environmental approvals for local company Lusorecursos to extract battery-grade lithium and for London-based Savannah Resources to develop four open-pit mines. Both projects are in northern Portugal.

Lusorecursos did not reply to a request for comment. Savannah said in a statement it was cooperating with the authorities who visited some of its locations, but that neither the company nor anyone one its staff was a target of the investigation.

Lithium projects have faced strong opposition from local residents and environmentalists. They say the processes lacked transparency and have repeatedly warned of the “dangerous promiscuity” between decision-makers and mining companies.

They have also been demanding stronger regulation.

In a joint statement, eight anti-mining groups said the current situation was proof their concerns were legitimate, namely because APA President Nuno Lacasta was named a suspect along with Infrastructure Minister Joao Galamba, who previously served as energy secretary.

“Lithium mining projects in Portugal must be immediately cancelled to not allow territories and populations to be affected based on corrupt and unclear processes,” the groups said.

Exploration rights

They accused APA of working in the interest of mining companies and said the government had “created a network of business opportunities to benefit very few (people)”.

APA did not reply to a Reuters request for comment about the criticism. It confirmed on Tuesday that its offices had been searched as part of the investigation, but has made no further comment. Galamba’s ministry has not responded to requests for comment.

In 2019, Portugal’s government came under fire from lawmakers for signing a contract giving exploration rights for lithium mining to Lusorecursos when the company was only three days old.

The UDCB movement, which is campaigning against mining expansion in the Barroso region, where Savannah Resources wants to develop its project, said in a separate statement that the environmental approvals given by APA should be reviewed.

Catarina Scarrott, from the UDCB, told Reuters the movement had been denied access by APA to environmental documents related to the project in Barroso. APA did not immediately to a request for comment on this accusation.

“The consequences of things going wrong are very serious,” Scarrott said, referring to the potential environmental impact of the mines, which according to UDCB include water contamination and threats to the region’s fauna.

UDCB said the “suspension of any licensing, prospecting or exploration licences is imperative until criminal responsibilities can be properly ascertained”.

November 10, 2023
Fierce community opposition to copper, lithium projects threatens energy transition

While nothing new, resource nationalism has ignited high-profile disputes in recent weeks, with First Quantum’s struggles in Panama and lithium miners’ in Portugal the two most radical examples.

Panama’s ratification of a deal with the Canadian miner allowing it to operate its flagship Cobre Panama copper mine for the next 20 years, triggered violent protests that brought Panama’s capital city almost to a halt. It also scared away investors, forced authorities into a chaotic retreat, wiped out about $6.5 billion of value for shareholders of the company, and led to a nationwide ban on new mines.

Throughout the controversy, and as the market waits to see if the Supreme Court will kill the agreement, the mine has continued to operate.

Portuguese anti-mining groups are asking the government to halt and reassess all lithium projects, following allegations of corruption that led Prime Minister Antonio Costa to resign on Tuesday.

Costa handed in his notice just hours after prosecutors detained his chief of staff in a probe into alleged corruption in his administration’s handling of lithium mine concessions near Portugal’s northern border with Spain. The investigation is also looking into permits granted for a green hydrogen plant and data centre in the town of Sines, about 100km south of Lisbon.

Portuguese Environment agency APA earlier this year gave environmental approvals for local company Lusorecursos to extract battery-grade lithium and for Savannah Resources to develop four open-pit mines. Both projects are in northern Portugal.

Savanna, which has hired investment bank Barclays and financial consultancy Barrenjoey to find partners for its Barroso lithium project, said it was cooperating with the authorities. It noted, however, that neither the company nor anyone one of its staff is a target of the investigation.

Lusorecursos, which plans to start construction in the northern Montalegre in early 2025 and kick off lithium production in late 2027, did not reply to a request for comment.

The challenges faced by miners in Panama and Portugal, two relatively investor-friendly nations, provide a cautionary tale for foreign investors on the vulnerability of mining projects to public hostility and resource nationalism.

The developments come only five months after Chile announced a new public-private model for its lithium industry, which will see the state having a majority interest in all new contracts.

They also cast doubt on plans to invest billions of dollars in the decades to extract copper, lithium and other critical minerals needed for the world to transition away from fossil fuels.

November 10, 2023
France’s Strategic Pivot to Central Asia: Strengthening Ties with Uzbekistan and Shaping Regional Dynamics

In the wake of Uzbek President Shavkat Mirziyoyev’s visits to Paris in 2018 and 2022, French President Emmanuel Macron paid a two-day official visit to Uzbekistan on November 1 and 2. The visit holds profound symbolism, as it coincided with the 30th anniversary of the signing of the Treaty of Friendship and Cooperation between Paris and Tashkent. The visit’s importance resonated not only within Central Asia but also across Europe, given France’s substantial influence within the European Union (EU).

The rationale behind France’s proactive efforts to bolster cooperation with Uzbekistan and the other Central Asian nations amid intense global power competition can be understood through several key factors.

First and foremost, France is driven by its own ambition to adjust its status as a secondary actor in the strategically vital Central Asian region. The region is often viewed through a “great game” framework, with Russia striving to maintain its strong presence through organizations like the Collective Security Treaty Organization (CSTO) and the Eurasian Economic Union (EAEU), and China deeply embedding itself through the Shanghai Cooperation Organization (SCO) and the Belt and Road Initiative (BRI). France’s enhanced engagement with Central Asian countries serves as a counterbalance to ensure that no single power dominates the Eurasian region.

Second, France is keen on intensifying cooperation with Central Asian countries, especially with Uzbekistan and Kazakhstan, to diversify its sources of energy. Recent disruptions in global energy markets, along with political tensions, have underscored the need for France to expand its energy import partners. Central Asia, with its untapped hydrocarbon reserves, offers a promising solution. Notably, Kazakhstan and Uzbekistan have significant uranium reserves, with Kazakhstan being the world’s largest producer and Uzbekistan the fifth largest. Given that approximately 70 percent of France’s electricity comes from nuclear power, deepening partnerships in the region could ensure a steady supply of uranium for French reactors.

Third, France aims to enhance cooperation with Central Asian countries to reduce risks associated with the import of critical minerals, vital for the green energy transition. These minerals are essential in the production of a wide range of technologies, from smartphones and wind turbines to rechargeable batteries for electric vehicles. Despite being relatively underexplored, Uzbekistan and other Central Asian countries have the potential to assist France and other EU countries at large in reducing their heavy dependence on China for these essential minerals, thereby mitigating the risks associated with their technological advancement.

At the same time, France’s deliberate efforts to step up cooperation with some Central Asian countries on a strategic level could open up various opportunities for Tashkent across political, economic, and environmental dimensions. Strengthened ties with France offer Uzbekistan a chance to diversify its international engagement and enhance its international standing, creating opportunities for collaborative diplomacy in light of recent global trends and geopolitical developments in Eurasia. Addressing crucial regional issues can foster stability not only in Central Asia but also in Afghanistan, promoting peace in the broader region. Furthermore, political cooperation with Paris can significantly support the Uzbek government’s “Uzbekistan – 2030” strategy, outlining the country’s vision for the next seven years. France’s expressed willingness to support Uzbekistan and Kazakhstan in their reform and modernization efforts aids in diversifying their international relations effectively.

In addition to political collaboration, closer ties between Paris and Tashkent could facilitate greater economic and investment partnerships. The economic relationship between the two nations has flourished, marked by a tripling of joint ventures involving French companies in Uzbekistan. With an active project portfolio exceeding 10 billion euros, French businesses are poised to boost investments in Uzbekistan’s growing sectors. This collaboration not only promotes economic growth and job creation but also facilitates technology transfer. France’s expertise in technology, smart agriculture, and tourism can help Uzbekistan reduce its dependence on traditional industries, fostering economic diversification. Moreover, France, home to leading nuclear energy companies, can assist Uzbekistan in addressing the complexities of constructing a nuclear facility. This collaboration could promise a comprehensive and enduring partnership, contributing significantly to Uzbekistan’s energy sector.

Beyond economic collaboration, Paris and Tashkent can join forces to tackle shared challenges related to water resources management. France’s expertise in sustainable water practices can assist Uzbekistan in efficient water use and conservation. Additionally, France can help mitigate the adverse effects of climate change by sharing green technologies and best practices. This support aids Uzbekistan in environmental conservation and sustainable development. Importantly, Paris can also mobilize public and private funding, particularly through guarantees and blending, to further increase investments for European initiatives like the Global Gateway on Water, Energy, and Climate.

Despite all these positive rationales, there is a persistent challenge hindering enhanced cooperation between the two countries. This is the limited capacity of the Trans-Caspian Transport Route, also known as the “Middle Corridor.” which links China and Central Asia via the Caspian Sea to the Caucasus, Turkey, and Europe. In 2022, transit volumes through the Middle Corridor witnessed an impressive surge, nearly tripling compared to the previous year. This spike in trade activity has placed considerable strain on already overburdened borders, resulting in visible delays in cross-border transport operations.

To address these challenges, France should collaborate closely with not only with Central Asian nations but also other EU countries to foster the development and prominence of the Middle Corridor. If achieved, it would reduce transit times from 38-53 days in the previous year to just 12-23 days. This would not only provide Europe with alternative optimal trade routes but also encourage the active participation of Central Asian nations in global connectivity and collaboration.

In conclusion, France’s strategic moves in Central Asia, exemplified by Macron’s visit to Uzbekistan, are driven by a multifaceted approach, aiming to balance regional power dynamics, diversify energy sources, and ensure a stable supply of critical minerals for sustainable technological development. These efforts underscore France’s commitment to fostering cooperation and stability in the region, bearing broader implications for both Central Asia and Europe. At the same time, France’s deliberate efforts to strengthen cooperation with Uzbekistan can result in a multitude of opportunities for Tashkent. By focusing on political collaboration, economic growth, and environmental initiatives, both countries can foster mutual benefits, regional stability, and global partnerships.

Looking ahead, the future prospects of the partnership between France and Uzbekistan are promising, offering mutual benefits in political, economic, and environmental dimensions. By leveraging each other’s strengths and addressing challenges collaboratively, both nations stand to gain significantly, contributing to regional stability, economic growth, and sustainable development in the years to come.

November 8, 2023
Scottish gold and silver miner on brink of collapse

THE company which runs Scotland’s only gold and silver mine is on the brink of collapse, putting the future of around 80 jobs at risk.

In a statement to the stock market, Scotgold Resources said it could call in the administrators in a matter of days after talks over emergency funding were unsuccessful.

It came after discussions with a potential new investor, which were first announced to the market on October 16 and which the firm had hoped would provide it with sufficient funding to continue as a going concern, failed to result in a deal.

Scotgold, which owns and operates the Cononish mine near Tyndrum, had just two weeks earlier announced that the “most advanced prospective investor” had withdrawn from discussions with the firm, having decided not to proceed with investment.

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The company said to the market yesterday: “On 16 October, the company announced that it was in advanced financing discussions with a strategic investor. Unfortunately, these discussions have not resulted in an investment at this time.

“Therefore, the directors, having assessed the options open to them, are now considering the appointment of administrators over the coming days.

“Further announcements will be made in due course.”

The latest development is likely to deal a decisive blow to those hoping the Cononish project could ultimately forge a global reputation for gold and silver mining in Scotland and bring a boost to the economy of the Tyndrum area in the process.

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Scotgold has seen the prospects for the mine steadily deteriorate over the course of this year, after first signalling problems with its plans for Cononish in March. That was when it first raised concerns over its ability to continue as a going concern, after disclosing that significantly less mineralised ore would be yielded from the mine than originally envisaged.

The discovery triggered a change to the company’s mining strategy in a bid to make the most of the resource. But it came with the caveat that if there was a delay to the start of the new approach, involving a technique known as long hole stope mining, or if the yield was subsequently below plan, “then a material uncertainty would exist that casts significant doubt over the ability of the consolidated entity to continue as a going concern in the very immediate term”.

A review commissioned by the company in July subsequently found there were no “fatal flows” in the mining resource estimate and grade control modelling process. But it also concluded that an initial assessment of the draft mine plan and associated cash flow forecasts indicated that “significant capital investment is required”.

The prospect of Scotgold falling into administration was then raised by the company on September 11, when it warned it could fail in the following weeks if a new payment plan was not agreed with one unsecured creditor. Shares in the company were suspended.

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The outlook for Scotland worsened further in late September when it announced it had put the majority of its employees on short-term unpaid leave as it entered talks with an administration specialist “as a precautionary measure”.

Scotgold, which employs around 80 people at the Cononish mine, said at the time that it had taken the step while efforts to secure an emergency funding deal took place.

The employees affected remain on unpaid leave, a spokeswoman for the company said today.

The biggest shareholder in Scotgold is non-executive director Nat le Roux, who holds a 33% stake. Its other biggest shareholders are directors of the company.

November 8, 2023
Fresh calls to scrap Cumbrian coalmine amid steel industry’s green push

News of the likely closure of the UK’s steel blast furnaces has prompted calls for the government to reconsider approval for a controversial Cumbrian coalmine that had been planned to supply the industry.

On Monday, British Steel announced that it plans to replace its two blast furnaces at Scunthorpe, while Tata Steel is considering closing its two at Port Talbot, in a dramatic reshaping of the UK steel industry. Both companies will instead rely on much cleaner electric arc furnaces, which use 87 times less coal.

West Cumbria Mining plans to produce 2.8m tonnes of coking coal a year at Woodhouse colliery in Whitehaven for use by “steelmakers in the UK and EU”. However, the blast furnace closures would mean a dramatic reduction in coal use by the UK industry, and would probably mean that the vast majority of the Cumbrian coal would have to be exported.

Tim Farron, the MP for Westmorland and Lonsdale in Cumbria and former leader of the Liberal Democrats, said the announcement from British Steel “means that any economic case for a new coalmine in Cumbria is now completely dead in the water”.

He said: “We need to see the government wake up to the fact that the steel industry is now going full steam ahead to decarbonise steel and start to invest in long-term renewable jobs for the future.”

The former Woodhouse colliery site where West Cumbria Mining have been given approval to once again extract coal. Photograph: Christopher Furlong/Getty Images

Michael Gove, the government minister in charge of planning, approved the UK’s first new coalmine in 30 years last December, despite criticism from former Conservative ministers including Alok Sharma and Lord Deben.

Electric arc furnaces require only 9kg of coking coal a tonne of steel against 780kg for a tonne of blast furnace steel, according to the lobby group UK Steel.

British blast furnaces produced 4.8m tonnes of steel in 2022, suggesting they may have used 3.7m tonnes of coking coal. Based on UK Steel’s figures, producing the same amount of steel in electric arc furnaces would require only 43,000 tonnes of coal, or about 1.7% of the Cumbrian mine’s output.

The UK government’s decision notice last December approving the coalmine made reference to electric arc furnaces and other low-coal technologies, but said that there was “no certainty that electric arc furnaces will make a significant contribution to UK steel production”.

Tony Bosworth, coal campaigner at Friends of the Earth, said: “Michael Gove’s justification for approving the mine last December was largely that the steel industry would need coking coal for decades to come.

“But it now seems the UK market will soon disappear. This follows similar signals from EU steelmakers who have already announced they’re moving to greener production methods.

“This is all before construction on the mine has even begun, with the promised local jobs looking increasingly shaky in the medium term.”

However, the mine still has the support of some Conservative MPs who argue the UK would benefit from 500 local jobs and would not have to import coal.

Mark Jenkinson, the Conservative MP for Workington in west Cumbria and a former apprentice with British Steel, said he still 100% supported the new mine because of the continued need for coking coal in electric arc furnaces, and the desire to avoid emissions associated with transporting it into the UK.

“They do use a lot less [coal], as they’re not using it for its thermal properties,” he said. “That would not be a good excuse to ship it from halfway across the world with the incumbent emissions.”

West Cumbria Mining did not respond to a request for comment.

November 8, 2023
New EU power market, same old problems for metals sector

The proposed changes to the EU’s “electricity market design” are a response to the spike in European power prices following Russia’s invasion of Ukraine in February 2022.

They will, according to Spain’s Energy Minister Teresa Ribera, mean that “consumers across the EU will be able to benefit from much more stable prices of energy, less dependency on the price of fossil fuels and better protection from future crises”.

But will it be enough to save Europe’s struggling industrial metals production sector?

The brutal reality is that half of the region’s primary aluminum and zinc capacity and almost a third of its silicon capacity is currently offline due to high power prices.

The immediate impact comes with potential future impact as well.

Producers are reluctant to invest in the new metals capacity needed to achieve Europe’s self-sufficiency goals because they can’t model power prices over the time-frame to build a new mine or smelter.

“We need bold action to get out of a dead-end street,” was the stark warning from Bernard Respaut, head of the European Copper Institute (ECI), speaking at a debate on Europe’s power crisis jointly hosted with industry association Eurometaux.

Light-tough reform

European power prices have fallen a long way from their 2022 peaks, when the region was still reeling from the reduction in Russian gas supplies.

However, they are by no means back to levels trading before Russia’s invasion of Ukraine, and that isn’t going to change any time soon.

Wholesale pricing will continue to be determined on a pay-as-clear model, where bidding goes from the cheapest to the most expensive source, which tends to be gas. It’s just that it’s now LNG rather than Russian gas that sets the price.

EU member states were deeply split on proposals for more fundamental reform of Europe’s power market to allow for a complete break of the gas-power price linkage.

The hard-won compromise keeps the existing market mechanism, which its supporters claim is more efficient than other models in a liberalized electricity market.

Rather, the focus will be on longer-term price stabilizers such as power purchase agreements (PPA) between generators and users and two-way contracts for difference (CFD) for investment in new green generation.

The PPA problem

US aluminum producer Alcoa is a poster child for Europe’s PPA model, using it to help secure the long-term future of its San Ciprian smelter in Spain.

The company has PPAs with local power suppliers Endesa and Greenalia covering around 75% of the smelter’s base load power when it returns from care and maintenance next year.

Alcoa has the advantage of being in Spain, which has been aggressively building out renewable energy capacity and has Europe’s most developed PPA market.

The country is Europe’s third highest renewable energy generator, much of it solar, and has by far the highest PPA contract capacity at a current 4.2 gigawatts, according to the European Commission. (“The development of renewable energy in the electricity market”, June 2023).

Others are not so fortunate.

“We can’t buy a PPA because it’s not available on the market,” Mats Gustavsson, head of energy at Swedish base metals producer Boliden, told the Eurometaux meeting.

With limited forward liquidity in the company’s local Nordpool power market, “no-one’s willing to take the risk on a fixed-term PPA”, he said.

Even if the local market structure allows for PPAs, many smaller companies struggle to pass the credit tests needed to sign what can be as long as a 10-year contract.

Moreover, many power suppliers will only offer PPAs on a pay-as-produced basis rather than the base-load structure that metal producers would prefer.

The EU reform package is intended to iron out some of these problems by, for example, mandating member states to ensure guarantee schemes for smaller companies looking to enter PPAs.

But it offers neither short-term relief for Europe’s many mothballed production facilities nor the levels of certainty needed to build the next generation of mines and processing plants.

Strategic dialogue

Europe’s focus on the longer-term solution, pivoting towards cheaper renewable energy, leaves untouched the immediate problem of tying spot power pricing to a volatile gas market.

The bloc’s power prices have historically been twice those of the US, but are now three or four times higher.

Metals producers are not only having to adjust to currently high electricity costs, but face even higher costs as they seek their own pathway to net zero.

The danger is that the cost of going green “is going to kill us”, Gustavsson said. Boliden, it’s worth noting, has just shuttered its Tara zinc-lead mine in Ireland at least partly due to high energy costs.

The answer, according to the ECI’s Respaut, is to take a more comprehensive approach to Europe’s industrial base and connect the disparate dots of critical metals production, renewable energy and power pricing.

Europe has to decide which strategic sectors it wants to keep and what it needs to do to help them not just survive but thrive.

And it needs to do so sooner rather than later.

As Respaut concluded: “We need to get to action, because time is running.”

November 7, 2023
Fresh calls to scrap Cumbrian coalmine amid steel industry’s green push

On Monday, British Steel announced that it plans to replace its two blast furnaces at Scunthorpe, while Tata Steel is considering closing its two at Port Talbot, in a dramatic reshaping of the UK steel industry. Both companies will instead rely on much cleaner electric arc furnaces, which use 87 times less coal.

West Cumbria Mining plans to produce 2.8m tonnes of coking coal a year at Woodhouse colliery in Whitehaven for use by “steelmakers in the UK and EU”. However, the blast furnace closures would mean a dramatic reduction in coal use by the UK industry, and would probably mean that the vast majority of the Cumbrian coal would have to be exported.

Tim Farron, the MP for Westmorland and Lonsdale in Cumbria and former leader of the Liberal Democrats, said the announcement from British Steel “means that any economic case for a new coalmine in Cumbria is now completely dead in the water”.

He said: “We need to see the government wake up to the fact that the steel industry is now going full steam ahead to decarbonise steel and start to invest in long-term renewable jobs for the future.”

Michael Gove, the government minister in charge of planning, approved the UK’s first new coalmine in 30 years last December, despite criticism from former Conservative ministers including Alok Sharma and Lord Deben.

Electric arc furnaces require only 9kg of coking coal a tonne of steel against 780kg for a tonne of blast furnace steel, according to the lobby group UK Steel.

British blast furnaces produced 4.8m tonnes of steel in 2022, suggesting they may have used 3.7m tonnes of coking coal. Based on UK Steel’s figures, producing the same amount of steel in electric arc furnaces would require only 43,000 tonnes of coal, or about 1.7% of the Cumbrian mine’s output.

The UK government’s decision notice last December approving the coalmine made reference to electric arc furnaces and other low-coal technologies, but said that there was “no certainty that electric arc furnaces will make a significant contribution to UK steel production”.

Tony Bosworth, coal campaigner at Friends of the Earth, said: “Michael Gove’s justification for approving the mine last December was largely that the steel industry would need coking coal for decades to come.

“But it now seems the UK market will soon disappear. This follows similar signals from EU steelmakers who have already announced they’re moving to greener production methods.

“This is all before construction on the mine has even begun, with the promised local jobs looking increasingly shaky in the medium term.”

However, the mine still has the support of some Conservative MPs who argue the UK would benefit from 500 local jobs and would not have to import coal.

Mark Jenkinson, the Conservative MP for Workington in west Cumbria and a former apprentice with British Steel, said he still 100% supported the new mine because of the continued need for coking coal in electric arc furnaces, and the desire to avoid emissions associated with transporting it into the UK.

“They do use a lot less [coal], as they’re not using it for its thermal properties,” he said. “That would not be a good excuse to ship it from halfway across the world with the incumbent emissions.”

West Cumbria Mining did not respond to a request for comment.

November 7, 2023