Brazil’s Gerdau to invest $277mln into solar-, wind-powered steelmaking

Brazil-based Gerdau will invest up to 1.5 billion Reais ($277 million) in solar and wind power projects by acquiring a third of energy generation and commercialization company Newave Energia, advancing its decarbonization goals, the steelmaker said on Friday November 25

Greenfield projects carried out by Newave will have around 2.5 gigawatts in capacity and are expected to start operating in 2025 and 2026, according to Gerdau. Newave also has some brownfield energy commercialization projects in the pipeline.

Gerdau’s goals are to cut carbon dioxide equivalent emissions by 10.75% by 2031, based on 2020 levels. Emissions averaged 0.93 tonnes per tonne of steel produced in 2020 under scopes 1 and 2, and the company aims to reduce that volume to 0.83 tonnes in a decade.

The steelmaker is already better positioned than most peers, considering 73% of its operations use ferrous scrap as input via electric arc furnaces (EAF), processing circa 11 million tonnes per year. According to data from steelmaker association Instituto Aço Brasil, average emissions in the country were 1.72 tonnes of CO2 per tonne of steel produced in 2020.

Gerdau also aims to become carbon neutral by 2050.

The company will have a 33.33% interest in Newave via the Gerdau Next subsidiary, and its partner NW Capital will subscribe to 66.67% of Newave’s shares. The steelmaker will also agree to a long-term electricity purchase deal for 30% of all energy generated by Newave’s projects.

Gerdau will invest 500 million Reais throughout 2023, the company said, with up to additional 1 billion Reais if undisclosed milestones are reached. NW Capital and investment funds from the Brazilian bank XP Investimentos will first spend 1 billion Reais, with an additional 2 billion Reais pending new funding — totaling 4.5 billion Reais invested into Newave.

“Newave is a company that was born with the purpose of accelerating [Brazil’s] energy transition… promoting power of choice for a renewable, competitive and less bureaucratic energy,” the statement read.

Recently, the Latin American steel industry discussed during the Alacero Summit in Monterrey, Mexico, how renewable energy can have a bigger role in decarbonizing the sector as EAFs become more prevalent.

British plant supplier Primetals, for example, said during the conference held on November 16-17 that EAF usage — be it with scrap or direct-reduction iron as input — will grow to 49% by 2050, from 25% currently. Blast furnaces will become a third of steelmaking, falling from 71%, it said.

“We are well positioned to help steelmakers achieve [decarbonization] with high capital expenditures and renewable energy,” Eduardo Sattamini, chief executive officer at power company Engie Brasil, said.

“Latin America has an abundancy of resources and relative small prices compared with the rest of the world, so that is a big opportunity,” Sattamini added.

Executives also manifested concerns at the Alacero summit that the steel market is heading toward tougher years due to expectations of weaker economic conditions and lower inventories throughout the value chain.

Steel prices have already taken a plunge in Brazil, Latin America’s largest market, amid the first signs of that poorer market.

Fastmarkets’ price assessment for steel hot-rolled coil domestic monthly, exw Brazil, for example, was 4,400-4,620 Reais per tonne on November 11, stable from the previous month but down by 7.58% from 4,770-4,990 Reais per tonne on September 9, and falling by 32.99% from the 2022 high of 6,500-6,960 Reais per tonne on April 8.

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