Decarbonization of the European steel industry and the emerging green steel market were at the core of discussions during the event.
Customer willingness to pay for green steel is a game-changer
The steel industry is responsible for around 5% of CO2 emissions in the EU and 7% globally, according to the EU science hub.
The EU intends to be climate-neutral by 2050. This ambitious objective is at the heart of the European Green Deal, and is a legally binding target thanks to the European Climate Law.
To meet this goal, original-equipment manufacturers (OEMs) in the bloc have also set decarbonization goals to comply with the EU requirements, and therefore now show more interest in procuring steel with reduced carbon content.
For example, automaker BMW intends to be climate-neutral no later than 2050, with the share of recycled content in its products set at a minimum of 95%.
For competitor Volvo, the goal is to have 25% recycled and bio-based content in new car models by 2025, and 35% by 2030.
“Customers are signing up for climate targets. Big demand for green steel is coming from OEMs, and customers ask for carbon content [information],” Fernando Pessanha, chief strategy officer with Hydnum Steel, said.
“Demand from end-users is going to go higher and higher in the years ahead,” Matts Nilsson, head of sales at SSAB, said.
A future green steel supplier, H2 Green Steel of Boden in Sweden, has already pre-sold more than 50% of its initial output volumes in binding 5-7 year contracts under so called take-or-pay terms, Sarah Milne, the company’s commercial development manager, said.
“Our initial production volume in Boden is 2.5 million tonnes per year,” a separate spokesperson for H2 Green Steel said. “We have pre-sold more than 50% of that, so well over 1 million tonnes… We will start customer deliveries in 2026, but some customers’ deliveries will start later.”
Industry sources expected to see a “snowball effect” in terms of green steel demand in the EU, with automotive OEMs being the first.
“Automotive was first, and we now see the next wave of construction companies coming through. Interest [in green steel] is coming from [various sectors such as] service centers. Conversations are starting, because they all saw OEMs come in first,” Milne said.
Green steel definition needed for transparency
So far, there is no agreed legal definition in Europe to say what ‘green steel’ is.
“[We need to specify] how many tonnes of CO2 [emissions] you have embedded in 1 tonne of steel [production],” Pessanha said.
“We absolutely need an industry definition of what is green. It doesn’t exist today. We are all talking about same thing, but slightly differently,” Milne said.
“How we measure [the carbon content] is very important. Transparency is the key. We will see different shades of green within that. You would expect to pay more for 90-95% reduced carbon content, but not all sectors need 95% or can afford it. We need that transparency,” she added.
“We need to start with the supply chain,” Jaap-Jan Aardenburg, distribution marketing manager at Tata Steel in Europe, said. “[We need to see] how much CO2 is [acceptable for a specific project], and to develop standards suitable for the market.”
Fastmarkets defines green steel as a steel produced with emissions under Scope 1, 2 and 3 of no more than 1 tonne of CO2 per tonne of steel.
Fastmarkets’ latest weekly assessment of the green steel, domestic, flat-rolled, differential to HRC index, exw Northern Europe, was €180-250 ($196-272) per tonne on May 30, narrowing upward from €150-250 per tonne seven days earlier.
Demand for such material is mainly driven by OEMs in the automotive industry, with construction companies also starting to come through, especially in the Nordic countries and the Benelux area.
Demand for green flat steel was expected to increase to around 49 million tonnes in 2030.
In mid-May, Fastmarkets launched a consultation on a proposal to change the maximum carbon emission content in its green steel assessments to 800kg of CO2 per tonne of steel, down from 1 tonne per tonne of steel previously.
CBAM – saviour or problem?
The European Carbon Border Adjustment Mechanism (CBAM) is a tool which is intended to avoid carbon leakage by applying a carbon-related cost to certain products imported into the EU, including steel.
The transitional phase of CBAM, wherein EU authorities will test the mechanism without imposing any duties, began on October 1, 2023, and will run until the end of 2025.
European steelmakers agreed that CBAM was necessary to ensure a fair and level playing field for all steel suppliers to the EU.
“We aim to reindustrialize Europe into a green economy, so we need to measure the emissions for steel that comes in from abroad, and make sure we are all competing in the same conditions,” Aardenburg said.
“CBAM is about transparency and traceability,” Milne said.
Steelmakers in general were supportive of the idea of CBAM. But at the same time, distributors – while recognizing the importance of the system for the European steel industry – had some criticisms about its implementation.
For steel products, the EU already has a number of trade restrictions, including anti-dumping measures for certain products, and safeguard measures.
And while steel imported into the EU to produce finished goods is subject to CBAM regulations, those same products – such as cars and white goods – can be imported directly without falling under the scope of CBAM.
Steel market participants were therefore worried about the leakage of high-value added production outside the highly regulated European market.
“Instead of bringing steel coil from Asia and processing it in the EU, we buy the ready-made steel structure without any import quota being applied, without anti-dumping [measures] and without CBAM. This means that all this added value for Europe is gone,” a distributor told Fastmarkets on the sidelines of the Oslo event.
“EU manufacturing is suffering because of carbon leakage and finished products being imported,” another distributor said. “This will become visible from 2026 onward.”
Another weak point of CBAM, it was claimed, was that the system itself was not yet well-managed and the portal for submitting declarations was not working properly.
“About 80% of [users] have not been able to report data [for the first quarter of 2024],” another distributor said.
Other sources, however, expressed their hopes that these issues will be addressed before the end of the testing period.
