"Many thermoprocessing companies must reinvent their business model"
What are currently the biggest challenges for companies in thermoprocess technology?
René Branders: With the war in Ukraine, the pressure to deliver solutions that incorporate the energy transition has increased significantly. We have noticed that this issue is particularly sensitive in Europe and the Middle East, where dependence on fossil fuels has become a problem. Both regions have reoriented their energy supply systems; hydrogen and electrification are the pillars of the future. The question for the European thermoprocess sector is how to operate using an economically sustainable model without the guarantee of a constant gas supply and with energy prices reaching unprecedented heights. The early warnings of gas shortages, particularly in Germany, have heightened awareness within the sector. All this has taken place at a time when inflation and its impact on wages and materials were already proving difficult to manage. Furthermore, the Covid crisis has highlighted the industry’s reliance on skilled workers and on rapid support from suppliers when troubleshooting operations arise.
Decarbonisation is the central issue for energy-intensive industries. How can CO₂ emissions from heat treatment be reduced and brought down to net zero by 2050?
Many Member States have differing policies on this issue. This does not make the task any easier for global suppliers. It is surprising that, having witnessed the trend towards using hydrogen, many customers are now considering a return to electricity. Each company’s individual choice depends heavily on the country in which it is based: the Netherlands, the Czech Republic and Romania, for instance, are focusing on electricity, whilst Germany and Luxembourg are still focusing on hydrogen production. There is no unified technical approach amongst the member states. Hybrid systems combining both electricity and gas combustion are currently a trend for certain types of equipment. They combine the advantages of using gas with the assurance of having electricity. However, the question of the levelised cost per kilowatt (for both electricity and gas) is still the key factor driving market choice. It is certain that if we are to meet the EU’s 2050 commitment, we will need significant amounts of electricity or gas to produce hydrogen. It is a long road to establishing the necessary infrastructure, and it will require substantial investment.
Will decarbonisation lead to a surge in investment in the industry?
Yes, it certainly will! When it comes to electricity, we are talking about a fundamentally different infrastructure. Just consider the operation of the power station for an industrial thermoprocessing plant. In addition to the equipment itself being very different, heat transfer via electricity is based on the principles of radiation, induction or, in some cases, conduction. This fundamentally alters the size of the equipment compared to direct-fired systems, as well as the way it is operated. It also means a different approach to atmosphere control and the metallurgical process itself!
What impact are the exponentially rising energy and raw material prices having on the industry?
Many thermoprocessing companies must reinvent part of their business model, as rising energy prices are affecting the entire product value chain. The fixed-price annual contracts we used to have no longer make sense. Meanwhile, we are seeing a resurgence of interest in optimising energy consumption, an area that was often neglected by maintenance teams who tended to focus more on a ‘fix and repair’ approach. We are finding that the prices of refractories, stainless steels and electrical components are almost impossible to predict, not to mention their delivery times. We have implemented a policy to buffer
the storage of critical components and have strengthened certain proactive measures to adhere to our usual delivery times as much as possible. On the commercial side, as the equipment needs to be supplied within six to eight months, a proactive relationship with the customer must be established on a fair and open basis regarding pricing.
What role will hydrogen or other green gases play in the future for heating industrial furnaces?
Hydrogen will be an important fuel gas within more than a decade. However, the roadmap to large-scale availability is unclear. Most heat-processing plants will not have immediate access to pure hydrogen. The approach of using a gas blend – likely up to 25 per cent – to prevent excessively high NOx emissions is, for them, the most realistic solution to take a step towards decarbonisation. The use of pure hydrogen as a fuel raises genuine technical concerns when the flue gases produced by combustion are used as a reducing atmosphere in contact with steel products. Indeed, to achieve equivalent reducing atmospheres using flue gas products, we are close to explosive atmospheres; furthermore, hydrogen embrittlement of the steel may be an issue for some applications. Validation tests to clarify these issues must be carried out before it is safe to implement these solutions.
There is a trend towards deglobalisation. What impact might this have on companies with a strong export focus?
The turmoil caused by uncertain shipping dates due to the recurring closure of ports, particularly in China, has highlighted the vulnerability of global supply chains. More recently, the sanctions on steel products from Russia and Belarus have highlighted that the reliability of a supply chain depends on the proximity of the supplier. Consequently, we are indeed seeing the strengthening of small ‘pockets’ of markets as transport costs for both raw materials and finished products become very expensive. For instance, regions such as East Africa are beginning to work towards independence from China and are operating locally with raw materials sourced from much closer areas. The same is true for Central America. For exporters, transport costs have become a greater concern than ever. There must now be a sharper focus on key elements, whilst the manufacture of simple structures needs to be carried out locally. However, if the product you sell reduces maintenance costs and improves performance, end users will often choose it even if your company is based far away. Thanks to the remote maintenance systems available today, distance rarely poses an obstacle to high-quality service.
How do you rate Europe as a business location compared to other economic regions?
European economic partners are regarded as the most reliable: that’s a good thing! However, as the European market cannot be driven by a growing consumer base due to low birth rates, the continent suffers from a lack of a transnational investment programme in large-scale infrastructure that could boost its domestic market. I believe the Green Deal will help in this regard. Nevertheless, it is often
noted that the EU tends to produce too many regulations and directives, leaving economic stakeholders without sufficient time to adapt or to develop a sustainable business model. For example, I have noticed that in the thermal processing sector, even our EN 746-X standards are still unknown to some regulatory bodies or are subject to a great deal of confusion regarding their interpretation. We are seeing, however, that more and more European companies are reinvesting in Europe. Steel is a sustainable material, and having our own ‘green steel production’ makes sense. Meanwhile, the non-ferrous industry has its place in green electrification. But how to make such an approach economically sustainable is a difficult question. Therefore, the European Commission must remain vigilant.
What role will the Chinese market play in the future?
The Chinese economy is also in the midst of a transition. We are seeing the first signs of economic decline. But we have also recently seen the decision to phase out coal-fired power generation. China remains the largest investor in green energy production, but there is still a lack of awareness regarding environmental disasters caused by companies. I am sure that the Chinese government will address this issue soon. A new phase of investment is on the horizon, and it will be beneficial for their domestic economy. It would certainly be an opportunity for our companies to meet this environmental demand. However, we must wait and see how the Chinese government’s policy on importing technology develops.
What were your initial thoughts when the Russian attack on Ukraine began?
I never imagined that such an event would occur, even though I know both countries well. Both have family in the other country, and Russian investment in Ukraine is significant. I realised immediately that this situation would cause chaos for Europe, as Russia was a close trading partner – both as a gas supplier and as a buyer in several markets. Many European companies have invested in that country. It was obvious that energy would become the top priority on the European economy’s agenda. Furthermore, Russia is a market that has been investing for many years in the modernisation of its steel industry. Ukraine, too, was investing in this sector – in fact, three days before the attack, our technicians had only just returned from there. I believe those markets will now remain closed for at least three years.
So what does the war mean for the industry?
War brings uncertainty in all areas and requires us to navigate much more ‘on the fly’ and to be creative with our business model. In this regard, the sanctions imposed by both the US and Europe are not helping the industry, and some companies are suffering greatly. War also means the need to focus on markets that are safe from the direct economic consequences, or to adapt your offering to customers in order to support them during this period. We see a very different perspective on the American continent, where it is ‘business as usual’, whilst in Europe, investment decisions are being made much more slowly. However, they are maturing in terms of the future prospects to be considered.
How can Europe accelerate the roll-out of the hydrogen economy and renewable energies to become independent of Russian gas?
The hydrogen transition will begin as soon as we have low and stable electricity prices. I believe we must start with a local approach, form hubs, and from there expand the network. Boosting investment in on-site green electricity generation ‘by the community’ (e.g., by an industrial estate) is a good start, particularly when combining these systems with green hydrogen production facilities. Projects such as the Port of Antwerp are developing this kind of ‘hydrogen ecosystem’. The use of hydrogen must also be supported by tax incentives. Furthermore, a public–private partnership approach to investment has facilitated adoption by users and reduced the considerable investment costs. One thing is certain: the path towards widespread production and use of hydrogen will be a very long and winding road.
Thank you very much for the interview!