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Thyssenkrupp carbon surplus balloons in 2011/2012

11 Dec 2012 18:16:32 | edcm

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Steel giant Thyssenkrupp's surplus of carbon credits ballooned further in 2011/2012, the company's results show, due to lower-than-expected emissions. A difficult outlook means emissions are likely to remain lower than previously thought, into phase III. The company presented its annual results on Tuesday.

While Thyssenkrupp had received 21.6m free EUAs in 2011, its actual annual emissions only stood at 18.7m - leaving it 2.9m EUAs spare. Thyssenkrupp confirmed that it would carry these over to the next phase of the EU ETS, and that it has already bought EUAs - the price of which has hit record lows in phase II - to hedge for phase III.

It reportedly held a surplus of around 6m allowances at the end of last year (see EDCM 9 December 2011). However, the company expects a significant shortfall in allowances as of 2013, prompting it to lock-in healthy prices in phase II. This is because Thyssenkrupp's European business emits around 1.7 tonnes of CO2/tonne of crude steel produced − below the global average, but well above the benchmark 1.48 tonnes of CO2e that steelmakers must meet to receive all their carbon allowances free post-2012.

A bearish carbon price impacted negatively on the company's financial results, as the financial value of its surplus, or carbon assets, fell. "The €168m decline in other current provisions related mainly to onerous contracts, litigation and financing risks, and provisions in connection with CO2 emissions allowances," Thyssenkrupp's annual report said.

While falling emissions prices have cut its compliance cost, and also diminished the value of a carbon credit surplus as an asset, the company added that it expects the cost of energy in the region to rise. It will try to limit the soaring cost to its business by cutting emissions.

"We expect the energy transition in Germany to permanently push up the price of electricity, as to increase the share of renewable energies it will be necessary, alongside the rising renewable energy surcharge, to expand the electricity grid," it said. "The considerable investment needed for this will be reflected in the price of electricity."

The company's outlook is gloomy, which could keep its production and thus emissions down again over the coming year.

"The economic climate remains difficult and is beset with uncertainties, mainly due to the unresolved debt problems in the eurozone and the slower growth of the emerging economies," said chairman of the executive board Heinrich Hiesinger in a letter to shareholders. "Though no major recovery is in sight for the 2012/2013 fiscal year, we expect the group's sales to remain steady at the prior-year level." MLDB

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