The Australian Financial Review Opinion Pages (p55 - 27/04/11)
by David Hetherington
(unedited)
The pitiful cries now emanating from the steel sector bring strongly to mind Jean Baptiste Colbert's famous observation that, “The art of taxation consists in so plucking the goose as to get the most feathers with the least hissing.” The hissing is now powerful enough to operate a battery of pneumatic jackhammers.
What AWU National Secretary Paul Howes, Opposition Leader Tony Abbott and BlueScope Chairman Graham Kraehe are all practicing is a form of NIMBYism - but NIMBYism on steroids. We might call these pumped-up NIMBYs “Bananas: Build Absolutely Nothing Anywhere Near Anyone.” Hitherto thought to be the preserve of the radical greens, our three musketeers have adapted it to carbon pollution schemes. If a single soul is financially worse off, we cannot have it. And the result will be economically catastrophic, because these Bananas will prevent the building of cleaner steel plants in Australia in the future.
In the meantime, in the real world, perhaps we could look at what saner folk are doing (not just saying).
The Europeans, for instance, have a consortium called ULCOS - 48 companies from 15 countries working to halve emissions from the steel sector. In our neck of the woods, a small New Zealand start-up called Lanzatech has formed a joint venture with China’s Baosteel, the second largest steel maker in the world, to build a pilot plant to capture carbon rich gases from the steel making process. After cooling and cleaning the gases, those gasses are fed to bugs that produce ethanol. Depending on the processes, the carbon-rich gases from 1 ton of steel can make up to 100 litres of ethanol, which is currently selling for more than $1 per litre.
Paul Howes, a numbers man par excellence, should immediately see that the money you can make from this ethanol far exceeds the cost of any carbon tax. 1 ton of steel emits about 1.5 tons of CO2 in manufacture, so at $20 a ton carbon tax you are $70 in front if you make ethanol from the carbon-rich gases. Call me old fashioned, but this sounds like profit to me. And that $70 doesn’t include the generous exemptions that are presently the subject of the hissing fits.
Posco, Korea's national steel maker, and the world third largest, has also signed with Lanzatech for another type of zero carbon steel making. In Posco’s case, the coking coal used in its steel making will be used to "reduce" the iron ore (essentially rust plus sand) to more or less pure iron. You can also do this with hydrogen and get very low emissions of CO2 from the process.
When coking coal gets expensive (the spot price is currently more than $300 a ton, to the joy of Queenslanders) hydrogen reduction becomes viable. The Koreans were going to use hydrogen from nuclear reactors, but post-Fukushima that may be more problematic.
Of course our three musketeers will dismiss this as pie in the sky fantasy. But there is another plentiful source of hydrogen, natural gas. Conveniently God put lots of natural gas just near where he put lots of iron ore - Western Australia.
And this is why BHP built, then closed, a hot briquetted iron (HBI) plant near Port Headland. It’s a long complex story, because there are technical challenges, but in the end BHP decided that it was easier to dig up more iron ore for $20 a ton and sell it to China for $130 a ton than make it into iron briquettes that now sell for $400 a ton.
This is a perfectly rational decision that will help BHP and its executives attain their profits and bonuses. But since the total resources of iron ore will only last 20 years if we ship it off at 1 billion tons per year we have to ask ourselves just what is in the best long-term interest of Australians (including Australian workers, Mr Howes).
Clearly the long-term international demand for iron ore is gigantic. Study after study has showed there is no end to the demand from China, India, Vietnam, Indonesia as they use steel to rehouse billions in the hundreds of giant cities springing out of the ground across Asia.
Clearly the future international requirements will be for low CO2 emission steel. This is what is known in the trade as a prediction.
Clearly Australia could supply low CO2 steel and capture the difference between the $130 it gets now for iron ore and the $800 a ton that is currently the world price of steel. And we can use our resources more slowly and extract more value from it. And employ many more workers.
Clive Palmer, for one, can certainly count. His company Austeel (part of his Mineralology group) has proposed to build an integrated iron-ore-to-slab-steel plant using natural gas in WA. This could, if configured correctly, make very green steel, for many years.
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David Hetherington is executive director of the progressive think tank Per Capita.
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