Global CO2 reduction policies are here to stay and demand for “greener” steel will significantly increase in the coming years, EUROMETAL president and Layde Steel managing director Fernando Espada said at Monday’s Kallanish Europe Steel Markets 2022 conference in Milan.
The impact of CO2 regulations on steel is causing a permanent change, affecting electricity prices because of emission rights and the cost of electric arc furnace steelmaking. Increasingly more customers are asking for low-carbon steel products and are ready to pay a premium, as well as accept the longer lead times.
“At the end of the day … if you, as a consumer, want the material to be CO2 neutral, you will have to pay more because the entire supply chain needs to accept the change. We are seeing this already with electric cars,” Espada explained.
On the current changing price trends and demand slowdown in Europe, he said the price increases seen since mid-2021 originate from China’s decision to abolish tax rebates on steel exports. Such a move has reduced exports from China to the rest of the world by 20%.
“What we are seeing today is a realignment in the market. We will have to reallocate production because China is not going to flood it [the global market] anymore and that is really the fact that explains, in my opinion, what is happening with prices in Europe,” Espada observed.
China is to embark on Xi Jinping’s prosperity programme, a middle-class growth plan. The country does not intend to emit carbon for the sake of producing low-value products for export. “If China continues with an added-value policy, wealth sharing, oligarchic control, and middle-class growth, if it leaves behind its role of cheap producer for the rest of the world, the balance in many different markets will be broken, not only in steel,” Espada opined.
If China continues to export less, new capacities will have to be built in Europe according to the needs of each country. This however will take time as Europe is now threatened by a high inflation rate that may launch a stagflation cycle, Espada concluded.
Natalia Capra France