The heat treatment process may be in-line or off-line depending on whether it is a component level heat treatment or substrate level. The substrate may include flat rolled steel product – plate, hot rolled coil, cold rolled and others – and long products such as wire rod, bar and others. The substrate heat treatment is carried out in-line in the form of annealing, quenching, normalising and others employing furnaces in-line. The component level heat treatment involves specific components such as blanks for fabricating automotive structural components, crank shafts and others. These are generally off-line heat treatment processes.
Both in-line and off-line heat treatment processes require significant amounts of energy and majority of the energy is fossil fuel based such as natural gas, in case of off-line heat treatment. Whereas, in case of in-line heat treatment a mix of natural gas and off gases such as blast furnace/ coke oven gas may be used. As a result, the process is quite carbon intensive irrespective of where it is carried out.
The steel decarbonisation initiatives particularly in the EU is transitioning from fossil fuel based to renewable hydrogen DRI in the long-term resulting in significant reduction in the availability of off-gases to support in-line heat treatment furnaces. As a result, the heat treatment facilities may have to develop alternative sources such as electricity-based heat treatment furnaces, which is still to be employed at scale. However, being part of the steel mill production landscape, a feasible alternative will be developed in due course. Moreover, with the steel mills already funelling large amounts of capital into the transition from BF-BOF to Hydrogen DRI processes, it is not unreasonable to expect capital support decarbonisation to enable heat treatment furnaces in the long term.
However, off-line heat treatment facilities do not have the same advantage and especially given the scale of operations may not be able to access capital and other resources easily. The global market for heat treatment was estimated to be $80-100bn and the growth is mainly driven by China, India and others. Automotive sector is a key driver of the growth especially with the development of sophisticated high strength to weight structural components that requires differential heat treatment. This enables enormous weight savings and ultimately enhance the fuel efficiency in IC/ Hybrid or range of the vehicle in case of EV.
Figure 1: Role of heat treatment across industry sectors (Source: VT Advisory and Istanbul Chamber of Industry)
Figure 1: Role of heat treatment across industry sectors (Source: VT Advisory and Istanbul Chamber of Industry)
Heat treatment, particularly off-line, has a global presence and the nature of the industry is broadly similar catering to multiple sectors consistently all over the world. Heat treatment industry is a critical link in the global supply chain across the sectors. The companies operate on job order basis responding to specific heat treatment requests from larger companies. Although individually they may be smaller in number and revenues, collectively they are extremely critical in supplementing the strength of the larger product manufacturer be it an automobile production, turbine production, large industrial structure manufacture and others.
Figure 2: Characterisation of off-line heat treatment industry in Germany (Source: VT Advisory and Rehfeld et al.)
Figure 2: Characterisation of off-line heat treatment industry in Germany (Source: VT Advisory and Rehfeld et al.)
Although majority of the heat treatment companies are small scale in nature, it may vary with the sophistication of the industry landscape. For example, the heat treatment industry in Germany, is estimated to produce ~4.5 mtpa of ferrous products which may include forged and other components that require heat treatment. There are ~900 installations in the country delivering a unit scale of 5 ktpa per installations. This underscores the small-scale nature of the industry has a high concentration of SMEs with 50 % of the installations producing 26 ktpa. The scale of operations varies quite widely ranging from 1.6 kt/ installation to 47 kt/ installation. The larger scale may be attributed to some of the tier 1 / 2 suppliers to automotive and other industries.
The off-line heat treatment industry consumes about 9 PJ/yr in energy and majority of this energy is likely to be in the form of fossil fuel leading to enormous carbon load. Similar such industries and perhaps on an even smaller scale exist around the world, especially in India, and others. With limited access to capital and resources managing a transition to decarbonised heat treatment facility may be a significant challenge. Moreover, several companies are struggling under stressed economic conditions and not to mention the high cost of energy and electricity.
Heat treatment industry is a vital aspect of the manufacturing industry since it transcends every sector and is extremely critical in enabling the sector to meet their decarbonisation goals at a product and corporate level. Hence it is imperative to study the heat treatment sector in greater granularity to understand and segment the issues faced across the sector. Although, the industry players are of smaller scale, the specific requirements be it capital/ resources and competitive differentiators are hardly uniform.
To decarbonise the sector, it is important to establish linkages between the companies and larger OEMs that they serve to enable optimal technology transfer. Government incentives and policy level interventions play a critical role in supporting and developing these crucial linkages. Although there may be some incentives at a local/ regional government level, they may not be adequate to address the deep-rooted challenges in this sector. Heat treatment sector is linked to global supply chain across the sectors and in particular automotive sector. Hence it is important to establish international standards that may be either articulated at a process level or component level based on the complexity. The emissions standards thus set is important in preventing any carbon leakage. Standardisation enables better understanding of the industry and plays a key role in developing financial instruments that support the sector and ultimately enable the transition to low carbon processes cost effectively.
References:
[1] Rehfeld et al.; Beyond basic material production: The feasibility of CO2-neutral process heat generation in Germany’s industry; ECEEE Summer proceedings; 9-137-22
[2] Turkish heat Treatment Industry, 2022; Istanbul Chamber of Industry
[3] Various journal and news articles
Abbreviations used in the article:
OEM: Original equipment manufacturer;
SME: Small and medium enterprise;
PJ: Petajoules; TJ: Terrajoules; Blast
Furnace; BOF: Basic Oxygen Furnace;
EAF: Electric Arc Furnace; DRI: Direct
reduced iron; ktpa: Kilotonnes (metric)
per annum
Author
Vijay Thangavelu
Director
London
+44 7957749983
vthangavelu@vtadvisory.co.uk
