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Wind and sun the new kids in town for US steel market under Biden

Highlights

US steel demand expected to gain traction from rising renewables investments

Future steel demand outlook from oil and gas sector remains uncertain

Uncertainty whether demand gains will offset potential losses from oil & gas

Houston — US President Joe Biden's administration has signaled a strong shift toward renewable energy, while stepping away from more traditional fossil fuels.

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While the switch will reduce steel demand for oil- and gas-related pipeline projects, greener energy still needs significant amounts of steel.

By 2030, offshore wind projects alone could generate as much as 7 million st of new steel demand, according to a recent statement by the US Department of Interior, Energy and Commerce. When combined with planned onshore wind projects and solar investments, steel demand appears poised to surge for renewable energy markets.

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On his first day in office Biden revoked the permit of Keystone XL, a pipeline owned by TC Energy, that would transport 830,000 b/d of oil from Alberta to Steele City, Nebraska. According to a report by the Canada Energy Regulator, the company had already installed about 95 miles of pipe.

A week later Biden signed another executive order that would suspend new oil and gas leases on federal land.

The actions signaled the new administration's stance toward the oil and gas industry, one which accounted for 2.66 million st of direct steel demand from domestic mills in 2019, according to the American Iron and Steel Institute. The true value of generated steel demand from oil and gas is significantly higher given steel shipped to service centers serving the markets and other tangential demand created by the industry.

The impact on steel from a loss of oil- and gas-related demand was on full display when oil prices collapsed in 2015. US hot-rolled coil prices, the bellwether finished steel product, crashed to $365/st, below even their lowest point in the Great Recession.

In contrast to its stance on oil and gas, the Biden administration has followed up with a set of bold actions to catalyze offshore wind energy. The Departments of Interior, Energy and Commerce shared a united goal of deploying 30,000 megawatts (MW) of offshore wind by 2030.

US investments in wind projects have been gaining steam with 60,849 MW of new capacity scheduled to be under development or construction through 2025, according to S&P Global Market Intelligence data. The bulk of these expansions appear to be onshore projects with the government goal for offshore capacity potentially boosting overall totals.

Most of the steel used in wind projects comes from the construction of the towers, which utilizes high-strength plate. In a positive trend for steel demand, towers continue to grow in size.

General Electric introduced Haliade-X, the most powerful offshore wind turbine operating to date as of November 2020, with 13 MW of capacity. Its prototype with 12 MW capacity was installed in Rotterdam, Netherlands, and has a tower height of 450 ft, weighing about 2,750 st, according to a permit request from a local government.

In addition, offshore wind turbine projects are much more steel-intensive than onshore as they require as the foundations for the towers also consume more steel. For example, each of the 102 foundations that are used at Iberdrola's Anglia One Project, located in UK waters, are 215 feet and consume about 900 st of tubular steel, according to company data.

Most onshore wind turbines are smaller in size though. Vestas, a major wind turbine producer, said the company's most popular turbine has tower heights of 262-410 feet, weighing 227-369 st, according to company data.

Solar another bright spot for steel demand

Investments in solar energy are also gaining momentum. At the end of 2020, there was 47,002 MWs of utility scale solar capacity installed in the US, according to the data from S&P Global Market Intelligence. The capacity set to be under development or construction through 2025 will be more than double existing capacity with 96,467 MWs of new utility-scale solar capacity projects slated, according to Market Intelligence data.

Mounting systems for the solar panels generate most of the steel demand. Multiple solar project suppliers told Platts that hot-dip galvanized sheet steel, most commonly grade G90, is used in the mounting systems due to its corrosion resistance.

A solar mount manufacturer told Platts environmental factors impact the steel intensity of solar projects. Steel consumption from projects tends to be 32-60 st/MW, according to the manufacturer.

Given the total 96,467 MW of announced solar projects through 2025 and industry sources' estimates of steel demand per MW of power, there could be as much as 3.1 million-5.8 million st of new steel demand.