Steel buyers welcome green premium, ‘value’ critical: panellists

Steel buyers are prepared to pay a premium to secure low-carbon steel. However, how much they are willing to pay depends on how closely aligned the whole value chain is and on society’s recognition of value addition. So said steel users session panellists at the Hydrogen Iron & Steel Making Forum in Stockholm earlier this month.

The premium buyers are prepared to pay “depends on where we are”, Alfa Laval head of research & development Carina Resare said at the event monitored by Kallanish. “If you look really long term, then we think fossil-free steel will be the new standard. And the pricing will be more like steel is priced today … But if we then look now in the beginning, the pricing of fossil-free steel matters differently to our customers – the first movers will for sure be prepared to pay a larger premium because they see the value or the benefits and they want to boost their sustainability journey.”

Since Swedish industrial equipment supplier Alfa Laval and SSAB partnered to create the first heat exchanger using fossil-free steel, “we have had a great interest from our customers. And I think this is really a strong message from the market”, Resare added.

Ørsted head of commodities Fredric Åberg said “value” must be added to the product as well as price. “We have seen steel price increases of 70% during this year [2022] with no added value. It’s not just about the price, it’s about the value of the product. We need the government to start asking where do the components come from, how are the different products being made, and it’s not just offshore windfarms or renewable energy, but how are cars being made, how are construction, houses, bridges being made,” he commented.

Shape Corporation product engineering director Stephane Anquetil meanwhile pointed out that the premium will ultimately be paid by the final consumer. “How much all of us are willing to pay is also a question,” he observed. The body in white sector is a “very challenging environment”, he continued. Many OEMs are moving into electric vehicles and thus focusing more on software and less on body and structural parts.

“You could think that the impact of a 10 or 20% steel [price increase] would be minimum for the global cost of the car but, from what we can see recently in the market, the vehicles are getting heavier and heavier. And the body in white is also getting heavier and heavier,” Anquetil continued. Increased metal consumption, along with the need to source other materials, mean the sector is keen to secure competitive prices. A 30% premium would therefore be difficult, he added, but possible if the entire value chain’s goals are aligned.

Åberg concluded by saying each wind farm uses 300,000-500,000 tonnes of steel in the foundations and towers, meaning it has a substantial carbon footprint. Ørsted “can be part of the solution” by supplying green energy to the steelmakers that supply it, and recycling the steel once the windfarms are decommissioned.

Adam Smith Poland