By Rajiv Shah
A new report by Paris-based non-governmental research and campaigning organization, Reclaim Finance, has blamed the MNC ArcelorMittal – formed in 2006 following the takeover and merger of the western European steel maker Arcelor (Spain, France, and Luxembourg) by Indian-owned Mittal Steel – for using use “climate destructive” metallurgical coal for its projects in India.
In its report, “Steeling Our Future: The banks propping up coal-based steel”, the NGO, a winner of the Goldman Environmental Prize, says, ArcelorMittal, which is the second largest steel producer in the world, is also one of “largest and most polluting” steel producers, too. Yet, it regrets, the world’s major banks continue to support its projects.
Stating that “continuing to finance the production of steel from coal is both a climatic and a financial risk”, the report regrets that banks continue supporting use of coal in steel projects, despite the fact that the “demand for carbon-free steel is growing and technologies are becoming increasingly competitive”, and “the production of carbon-free steel, particularly from green hydrogen, is a real opportunity for banks.”
Believes Reclaim Finance, the adoption of policies is even more urgent, given that ArcelorMittal announced in 2024 investments to “decarbonize its Dunkirk site with the help of the French government”. It did this even as it “produces 70% of its steel from blast furnaces using coal”, including in its projects in India. Ironically, it has “only 1.2% of its capacity in the country of its headquarters, Luxembourg.”
Offering example of ArcelorMittal’s recent joint venture with the Japanese MNC Nippon Steel in India, the report notes, “With a combined capacity of 176 Mtpa, ArcelorMittal and Nippon Steel are two of the world’s biggest steelmakers. Together they have entered a joint venture in the Indian steel sector, AM/NS India, to take advantage of rapidly growing demand.”
However, the report regrets, “While ArcelorMittal and Nippon Steel present themselves as decarbonization leaders, they continue to build and expand new coal-fired blast furnaces, at odds with their respective commitments to reach net zero by 2050”. It adds, “ArcelorMittal is in fact pursuing a two-speed decarbonization strategy, by investing in innovative and cleaner technologies in Europe and Canada, while building new coal-fired blast furnaces in India.”
According to the report, the expansion plans of the two companies in India “include two additional blast furnaces that will become operational in 2025 and 2026, and an upgrade of an existing blast furnace from 2 Mtpa to 3 Mtpa” – both of which “are considerably at odds with climate imperatives.”
“Additionally”, it asserts, “ArcelorMittal and Nippon Steel are planning two new production sites located in Odisha – one of 24 Mtpa, the other 7 Mpta – and the companies have entered a memorandum of understanding to further expand the Hazira steel plant by 2030 to bring total production capacity there to 24 Mtpa.”
“While technologies have not been disclosed yet, the company’s last expansion plans were coal-based, which raises concerns about their next technology choices”, underlines the report.
The report note, on one hand, ArcelorMittal is “part of several leading initiatives on steel decarbonization, including the Science Based Targets initiative (SBTi), the Mission Possible Partnership, and the Responsible Steel Initiative”, thus using its “leading position to bring about meaningful change”. But on the other, “it continues to head in the wrong direction by extending its coal dependency.”
The company’s public declarations claim it is committed to Paris-aligned objectives, but its lobbying practices are a cause for concern
“Furthermore”, the report states, “Although the company’s public declarations claim it is committed to Paris-aligned objectives, its lobbying practices are a cause for concern.” Thus, “ArcelorMittal and Nippon Steel were among the 25 most influential companies blocking climate policy action globally, according to the independent think tank InfluenceMap in its 2022 ‘Corporate Climate Policy Footprint’ report.”
Accusing ArcelorMittal of “human rights and pollution violations”, the report says, the company’s “track record is disastrous...” It has “been found guilty and fined in several instances, including in Ukraine, France, India, the US, Liberia and Canada.”
“More recently, the deadliest accident in Kazakhstan’s post-Soviet history occurred at ArcelorMittal’s metallurgical coal mine, where a methane explosion killed 46 people. This is the latest in a list of over 180 fatalities and numerous severe injuries at the company’s mining operations in Kazakhstan since their establishment in 1995”, it notes.
“In light of all these elements, financiers of ArcelorMittal and Nippon Steel should question their expansion plans and technology choices. The two companies must be required to adopt comprehensive climate strategies across all geographies”, the report insists, noting, “In March 2023, ArcelorMittal benefited from a US$5 billion loan involving Japanese bansk Mizuho Financial, Sumitomo Mitsui Trust and SMBC, all of whom have “have not adopted decarbonization targets.”
Other banks which funded ArcelorMittal recently, the report says, are BNP Paribas, ING, Société Générale and UniCredit, which together granted a US$2.2 billion revolving credit facility, with a book ratio of US$156 million each, in September 2022, even though the company “till plans to continue developing blast furnaces and to extend the life of existing furnaces”.
“This runs counter to the projections of the International Energy Agency, which states in its Net Zero Emissions scenario that to achieve net zero, emissions from the steel sector must be reduced by 90% by 2050, meaning there is an urgent need to produce steel without fossil fuels”, it thinks.
What is the alternative to coal for India ? Even lignite which was to be phased out as a fuel is still being merrily burnt .
ReplyDeleteGood story. Unmindful of environmental hazards, banks may continue to fund such coal-based projects to enhance and sustain their banking business. And such industrial projects may continue to flourish until Adani remains into coal business in a big way.
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