Czech Steelmaker Navigates Economic Headwinds, Eyes Decarbonization
A pivotal Czech steel producer, Tลineckรฉ ลพelezรกrny, is showing resilience in a challenging market. Despite a downturn in sales, the company has managed to boost its profits through strategic economic measures while facing the pressures of high energy costs and the need for sustainable practices.
Financial Performance Amidst Challenges
Tลineckรฉ ลพelezรกrny, the last Czech steel manufacturer operating “from the ground up,” reported strong results. The company saw its profits jump from 44 million crowns to 316 million crowns year-on-year, attributing the success to careful cost-management strategies. However, sales dipped slightly, from 49.7 billion to 47.4 billion crowns.
The Moravia Steel group, which includes Tลineckรฉ ลพelezรกrny, generated 543 million crowns last year. Most of their output is exported. Germany is their major customer, receiving 30 percent of exports, with only 30 percent of its production staying within the Czech Republic. This highlights the company’s dependence on international markets for its products.
โThe company has confirmed its position as a stable steel manufacturer even in a demanding economic period, which has been struggling with lower apparent steel and low demand for the third year. The European industry has seen a decline in steel consumption in all major customers in 2024,โ
โPetra Mackovรก Jurรกskovรก, Moravia Steel spokeswoman
The steel industry confronts complex issues, including high energy expenses. According to the World Steel Association, global steel demand is expected to grow by 1.7% in 2024, a slower pace than the pre-pandemic average, placing pressure on manufacturers to remain competitive (World Steel Association).
Decarbonization and Future Prospects
A major concern for the company is the shift towards decarbonization in steel production. Tลineckรฉ ลพelezรกrny has calculated that decarbonization will cost around a billion euros, approximately 25 billion crowns. They plan to construct an electrical arch furnace, crucial for reducing carbon dioxide emissions from its operations.
The ironworks had initially planned to build the furnace in 2028, but postponed it to 2030 due to funding shortages. While the European Union has provided 50 percent of the investment needed, subsidies would have to cover 70 percent of total costs to start construction. The firm may be forced to suspend the project if they cannot get the funding.
Energy Costs and Market Dynamics
Energy expenses have significantly impacted steelmakers. In 2019, before the pandemic, Tลinec ลฝelezรกrny spent about 3.5 billion crowns on energy, which surged to 8.65 billion crowns in 2023, and 6.69 billion crowns last year. Petr Popelรกล, Chairman of the Board of Directors of Moravia Steel, doesn’t expect energy prices to fall back to pre-COVID levels.
The business is also building a briquetting line, which combines raw materials needed for steel production, in an effort to reduce emissions. The line is scheduled to be operational in 2027, a move that is economically sensible and should cut annual emissions by up to 70,000 tons.