CBAM is a tariff on carbon-intensive products such as steel and extends carbon pricing to imports coming into the European Union.
Japan and South Korea are the prime movers in the decarbonization space in Asia, with numerous steelmakers already offering green steel products to buyers in the region through a mix of green steelmaking techniques and carbon-level calculations – including Fastmarkets’ Asia green steel premium, which is being launched on Friday September 8.
Fastmarkets’ weekly green steel, flat-rolled, regional differential to cfr Vietnam HRC index, Japan/South Korea/Taiwan, will apply to steel produced with maximum Scope 1,2 & 3 emissions of 1.3 tonne of CO2 per tonne of steel.
In Japan, Nippon Steel is using the mass-balancing method to measure its carbon dioxide emissions footprint per tonne of steel produced, while simultaneously using a new electric-arc furnace (EAF) at its Setouchi Works to cut emissions in its “Carbolex” steel.
Nippon Steel is also looking into using hydrogen to produce low-carbon steelmaking raw materials, including direct-reduced iron (DRI), which will have a growing role to play in the production of green steel.
JFE Steel has started marketing its “JGreeX” green steel, which is produced with “highly-advanced steelmaking processes [that] produce significantly less carbon dioxide.” JFE Steel plans to achieve carbon neutrality by 2050, with planned developments including carbon recycling blast furnaces, carbon recycling DRI, hydrogen-based processes and large EAFs. The company is already running trials using ferro-coke as a new raw material.
In South Korea, Hyundai Steel is ramping up the marketing of its low-carbon “HyECOsteel” and is aiming to produce high-quality automotive steel by using ferrous scrap, blast furnace-based molten iron and hydrogen-based DRI. It has successfully produced low-carbon, high-strength steel plate using its “Hy-Cube” EAF technology, in collaboration with downstream automotive partner Hyundai Motors and its subsidiary Kia.
Compatriot steelmaker Posco is banking on its “Greenate” brand of steel products to fulfill downstream buyers’ ESG needs. It plans to use its “HyREX” hydrogen reduction steelmaking technique, which uses iron ore fines and 100% hydrogen in a reduction furnace to produce DRI, which is then fed into an EAF to produce hot metal.
In local media reports, Posco has said that it had already sold low-carbon steel to LG Electronics, has signed an offtake green steel deal with car producer Volvo and named Samsung Electronics as another potential customer.
Elsewhere in Asia, Baosteel is looking to start up a hydrogen/natural-gas based DRI plant at its Zhanjiang facility in southern China, while Hebei Iron & Steel in northern China is to supply automaker BMW with steel made from hydrogen-based DRI. In Thailand, Meranti Steel is looking to produce high-grade HRC with hydrogen-based DRI, and in Singapore, major steel market participants expect to see price differentials for low-carbon rebar.
While Fastmarkets’ new Asian green steel premium aims to make clearer the nascent price differentials for low-carbon steel, this process does not start or end with steelmakers and many others in the steel and ferro-alloys supply chain are also looking at green premiums.
Iron ore producers, for instance, are watching green steel premiums keenly to calculate the capital expenditure needed for new beneficiation plants and are looking at investing in areas such as the Middle East, where abundant natural gas makes it an ideal location for natural gas or hydrogen-based metallics production.
While such metallics output will undoubtedly first be funneled toward the European market, it is also likely that it will find its way to various other destinations – wherever steelmakers find they require low-carbon steelmaking raw materials. And these raw materials will naturally incur their own green premiums if rising demand creates an obvious price differential to non-green steelmaking raw materials.
Even coking coal miners can benefit from green steel premiums if their metallurgical coal is high-strength, low-ash and low-sulfur, Fastmarkets understands. And miners that own Tier-1 premium hard coking coal assets will continue to reap the benefits of decarbonization as steelmakers continue to try to reduce emissions by using higher-strength coke.
Low-carbon steel premiums are a brand new tool in the transition to greener steel, but they will undoubtedly start to take firmer shape in the years to come when raw materials and steel products start to adhere to Scope 1-3 standards and steelmakers fight to stay relevant and retain market share.
Published by: Paul Lim