Consumers want green steel, state aid inevitable: Arnaud Guerendel

Given the vast cost involved, state aid is inevitable for steelmakers to be able to transition to low-emission steelmaking, while the majority of consumers have shown a willingness to pay a premium for green steel, says Vulcan Green Steel vice president of sales Arnaud Guerendel.

“Steelmakers’ limited financial sources make it questionable to transition current carbon emissions to zero, as the capex is $1 billion needed for every million tonne of steel capacity for hydrogen-based DRI and EAF route production transformed from blast furnaces,” Guerendel said during Kallanish Flat Steel 2024 in Istanbul last week. “Government aid is unavoidable.”

Some 30-35% of steel applications will be sustainable in Europe by 2035, equating to 25-35 million tonnes/year of low-CO2-emission flat products demand.

Citing a BCG survey of consumers in a few major countries, Guerendel said 57% of consumers care about net zero carbon emissions and consider this when making their next purchases of food packaging, DIY, household, and other consumer goods. When it comes to buying cars, the willingness of consumers to pay a premium for zero carbon emissions varies between 84% and 88%, depending on the type of engine (combustion engine and EV). For white goods, this willingness is at 94%.

The sensitivity and goodwill of buyers is being exploited, however. A study in Europe found that 42% of green claims were exaggerated, false or misleading, suggesting greenwashing on an industrial scale.

Scrap shortages are meanwhile also inevitable, Guerendel observed. In the best case scenario, the recyclability ratio even for the most advanced circulation system will reach only 30%. Whatever scrap trade restrictions are chosen therefore, these will not prevent a shortage.

Demand for green direct reduced iron will therefore be the primary beneficiary. DRI’s share of total metallics demand is projected to rise from the current 6% to 13% by 2050, with production expected to grow nearly five times faster than total metallics demand, reaching 320mt.

It is anticipated that by 2050, almost half of all DRI produced will be hydrogen-based. As new processing hubs emerge, it is expected that by 2050, approximately 25% of DRI supply will be traded, compared with just 7% at present. DRI exports from the Middle East are expected to reach 35-40mt, Guerendel concluded.

Burak Odabasi Turkey

kallanish.com