Finland-headed iron and steel major Outokumpu Oyj has announced that it has signed an agreement to acquire a 20 percent stake in Swedish biocarbon producer Envigas AB and secure an offtake for 50 percent of the company's biocarbon production.
Outokumpu has ambitious sustainability targets and is constantly looking for options to further decarbonize the industry and the company’s stainless steel production.
Switching from the use of fossil raw materials to biomass-based alternatives is a key driver in emission reduction, and value-chain integration is a “key priority in our strategy to strengthen the supply chain of sustainable raw materials for the future”, the company says.
Biocarbon, also called biochar, is a raw material produced using biomass from forest and wood industry side streams.
Biocarbon can be used as such or further processed into biocoke (i.e., densified biocarbon) and it is used to replace fossil coke in ferrochrome smelting and fossil coal in stainless steel melting respectively.
The move towards using new types of biomass-based raw materials is a concrete step forward to significantly reduce our direct emissions, which account for approximately 25 percent of Outokumpu’s total emissions. We have successfully carried out production tests with biocarbon and biocoke and look forward to increasing their usage in the future, said Timo Huhtala, General Manager responsible for Outokumpu’s biocoke initiative.
Aligned with SBTi-approved targets
Outokumpu’s climate target is to reduce carbon dioxide (CO2) emissions by 42 percent by 2030 from the base year of 2016, in accordance with the Science-Based Targets initiative (SBTi) 1.5-degree climate target.
Outokumpu is the only producer of stainless steel with a climate target approved by the initiative.
To decarbonize our stainless steel requires efforts in reducing emissions across all scopes. The utilization of biomass-based raw materials represents an exciting new chapter in our stainless steel production. It also supports the circular economy since valuable, sustainably-sourced, forest and wood industry side streams, currently burned for low-efficient energy purposes, can be utilized to create new types of raw materials for other industries, said Timo Huhtala.
Scale-up biocarbon production
With a production plant based in Bureå outside Skellefteå, Sweden – operational since 2018 – Envigas is one of the first large-scale producers of high-quality biocarbon in the Nordics with a dedicated focus on biocarbon products for the steel industry to help in the shift towards zero emissions.
Several companies in the steel industry have since long validated Envigas biocarbon with good results. Since its inception, Envigas has built significant competence in the area, which has been appreciated by industries throughout Europe, said Lars-Gunnar Almryd CEO of Envigas.
Envigas aims to expand its annual production capacity by 25,000 tonnes in the first scale-up phase by the end of 2026 and Outokumpu has agreed to invest EUR 9.9 million into the company.
Collaboration and strong offtake commitments are key components in the scaling up of high-quality biocarbon production. Envigas has an ambitious growth agenda, and we are excited to partner with Outokumpu, as a leading industrial actor with high sustainability targets. The partnership will be mutually beneficial, reduce risks, and increase speed in the important work to reduce CO2 emissions, said Lars-Gunnar Almryd.
In addition to the new co-owner Outokumpu, as well as management and staff, the list of owners includes Beijer Ventures, Philian, Carbomax, ImranCapital, Palmstierna Invest, and the largest shareholder following the transaction, Concejo AB (25 percent).
Offtake agreement
According to Envigas, the estimated demand for biocarbon for use as an input in the Nordic steel industry is in excess of 350,000 tonnes annually.
With the investment, Outokumpu secures a 20 percent stake in Envigas and the right to 50 percent of Envigas’ expanded production.
We are very pleased that our discussions about collaboration have now resulted in Outokumpu becoming a partner in Envigas, which also guarantees the sale and supply of a significant part of our future production to Outokumpu. Together, we continue to develop the large-scale production for biocarbon, which also includes capitalizing on the side streams of gas and oil that are formed in the pyrolysis process. It will be an important component for building a long-term business with good profitability, Lars-Gunnar Almryd said.
Parallel to this transaction, Outokumpu continues to work on a feasibility study regarding a possible investment into a biocoke production facility of its own in the future.
