UK steelmaker SSI plans to mothball its Redcar plant due to low steel prices, likely leaving the firm with a glut of over 1 million freely allocated EUAs to sell as ETS closure procedures are slow to take effect.
Thai owner Sahaviriya Steel Industries plans to axe about 1,700 jobs at the plant, though union leaders are keen that its big-emitting blast furnace remains partially lit to enable it to reopen later without costly refurbishments, local media reported.
The firm had been one of the UK’s biggest emitters and in April surrendered 5.9 million carbon units to cover its 2014 emissions, though was only freely allocated 4.9 million EUAs, EU records show.
Partial closure rules governing the current ETS trading phase mean the plant’s free allocation will be cut roughly in line with its output if production falls by at least 50%.
But because those rules only take effect the year after the partial closure, SSI is likely to have at least three months worth of surplus units available to sell, or around 1.2 million EUAs with a current market value of around €9.5 million, according to Carbon Pulse’s estimates.
The plant’s closure could also lower overall ETS demand if its production shortfall is covered by steelmakers outside the EU.
By Ben Garside – firstname.lastname@example.org