bold spirit - ArcelorMittal South Africa

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82 ArcelorMittal South Africa Annual Report 2010 Energy and climate change At a global group level, the company’s goal is to reduce C0 2 emissions by 8% (170kg/tonne of steel produced) by 2020. While we do not believe that it is possible for the South African industry and business to achieve our government’s target, outlined in the 2009 Copenhagen Climate Change Summit, to reduce CO 2 emissions by 34% by 2020, we remain full committed to engaging with key stakeholders to set realistic targets. Climate change is of material importance to our corporate citizenship, but it also presents a potential risk to our business. Global warming precipitated by increased carbon emissions is likely to result in weather pattern disturbances that may hamper our ability to do business. Drought will severely impact steelmaking operations, which rely heavily on water, and flooding will disrupt our supply chain and could result in the flooding of mines that supply our most important raw materials. Structures to manage energy, CO 2 emissions and their impact on climate change We are mindful of the role our operations play in contributing to global warming, and the responsibility it has to minimise its carbon emissions and manage its energy usage more efficiently. At a global level, ArcelorMittal Group’s goal is to reduce CO 2 emissions by 8% (170kg/tonne of steel produced) by 2020. The ArcelorMittal Group’s Climate Change Steering Committee oversees the achievement of this target and other climate change matters for all international operations. In South Africa the issues of climate change and energy form part of the Chief Technology Officer portfolio and are the responsibility of the Manager, Corporate Energy. The Safety, Health and Environmental (SHE) and Energy Policies guide our management of these issues. We do not believe that it is possible for the South African industry and business to achieve government’s target outlined in the 2009 Copenhagen Climate Change Summit, to reduce CO 2 emissions by 34% by 2020. Nevertheless, we remain fully committed to engaging with key stakeholders to refine these targets so as to arrive at something more achievable. Quantifying the challenge Iron and steel making relies heavily on coal and natural gas as reducing agents and fuel to enable the chemical reactions required for the process. Electric arc furnace technology, which uses scrap metal, provides a lower-carbon alternative but the availability, quality and cost of scrap steel prevents us from being able to use this technology more extensively and still meet the country’s demand for steel. In South Africa, a company’s carbon footprint is inextricably linked to electricity usage because the national electricity supply is derived from coal. This makes benchmark comparisons with other steelmakers across the globe – many of whom use nuclear energy and cleaner forms of electricity – inherently problematic.
83 ArcelorMittal South Africa Annual Report 2010 Reducing our reliance on the national electricity grid and investigating cleaner forms of energy provide the most significant possibilities for reducing indirect carbon emissions. As a signatory to the national energy accord, ArcelorMittal has already committed itself to reducing its electricity consumption by 12% by 2014. In addition, proposed electricity tariff increases over the next three years will strengthen the business case for alternative energy projects. The company’s annual electricity cost has increased from R700 million in 2007 to R1.7 billion in 2010. In the past, low electricity tariffs meant that the return on investment made most energy efficiency projects unfeasible. Status of energy efficiency projects We have invested in various electricity generation and alternative energy projects, chief among which is the 40MW capacity power generation plant at Vanderbijlpark Works which uses waste heat from the DRI kilns to generate power. This plant, in operation during the year under review, brings to 80MW the company’s own power generation capacity. However, this plant is designed for a production facility running at full capacity. If both kilns 5 and 6 are not running at full capacity, there is not enough steam generated in the boilers to turn the power plant’s turbines. The 71% production rate for 2010 has therefore hampered the plant’s ability to produce electricity at an optimal level. When operated erratically the plant’s lifespan is severely limited. The possibility to add an additional boiler which will enable stable power generation, even if one of the kilns is out of operation is under investigation. As the economy recovers and production increases, along with a growing demand for steel, we look forward to reaping the full benefits that this power plant is capable of delivering. In the meantime other major co-generation plans, which were linked to the company’s expansion plans, remain shelved. Such projects are highly capital intensive and it will increase the risk of starving operational capital requirements. All efforts will focus on repairing existing power generation facilities, before investigating new, smaller projects. Last year we reported on research being conducted at Saldanha Works into the viability of a large wind power generation facility. The research concluded that, under current conditions and taking into account expected price escalations going forward, pure wind energy is too costly to be included in the generation mix. A smaller wind project is currently under investigation which will limit capital expenditure and allow further research into wind as an alternative green electricity supply option. Steel as an energy saver While steel making consumes considerable energy and is associated with a significant carbon footprint during production, steel products can help to save energy over the long term. With high levels of durability and strength, the material’s lifecycle is long but recyclable. Steel products and infrastructure last and do not need to be replaced as often as those made from other materials. This product characteristic reduces production costs and thus carbon emissions.
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Annual Report 2010 bold spirit
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I in brief
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Brand values Our goal is to provide
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