Green Steel: buyers more willing to pay premiums for flats rather than longs
Green flats
Fastmarkets’ weekly assessment of the green steel, domestic, flat-rolled, differential to HRC index, exw Northern Europe was €150-200 ($220-330) per tonne on April 10, flat week on week.
Fastmarkets’ methodology defines European green flat steel as “steel produced with Scope 1, 2 & 3 emissions at a maximum of 0.8 tonnes of CO2 per tonne of steel.”
For steel that falls under such specifications, offers from major European suppliers were stable at premiums of €200-300 per tonne. Offers at the higher end of the range were mainly reported from Nordic-based suppliers.
These offers have been broadly stable in the past months, but tradable premiums for the spot market were lower, sources said.
During the assessment week, minor tonnages were traded at a premium of €200 per tonne in Northern Europe.
The latest transactions for green flat steel were reported in March at premiums of €170-180 per tonne for volumes over 1,000 tonnes, sources said.
Buyer sources told Fastmarkets they estimated that achievable premiums for green steel with that level of emissions would be closer to €100-200 per tonne.
Some bids were even reported at premiums of €70-80 per tonne during the week, but suppliers said that such premiums would be acceptable for steel produced with higher CO2 emissions content.
“[A premium of] €70 per tonne is for steel with an emissions threshold of around 1.5 tonnes of CO2 — some suppliers in Europe offer steel with such emissions exactly at such levels,” a mill source said. “But, for steel [made in electric-arc furnaces (EAFs)] with emissions below 1 tonne of CO2 per 1 tonne of steel, this price is too low.”
A mill source estimated achievable premiums at €150-200 per tonne.
Another mill source estimated achievable premiums at €170-200 per tonne.
Overall, activity in the spot market remains sporadic, while increasingly more buyers are looking to sign long-term agreements with green steel suppliers, expecting higher demand in the years to come.
Notably, Nordic green steel startup Blastr signed a memorandum of understanding with Netherlands-based steel service center Vogten Staal for low-carbon emissions steel supply on Monday April 7.
This is the third offtake agreement announced by Blastr in the past few months, supporting a material increase in the supply of decarbonized steel products in Europe.
But when contacted by Fastmarkets, the company did not specify either the start of the deliveries or the volumes.
Established in 2021 with the aim of becoming an integrated low-CO2 steel producer, Blastr planned to produce around 2.5 million tonnes per year (tpy) of hot- and cold-rolled steel.
Final investment decisions on both a direct-reduced iron (DRI) plant and a steel plant were expected by early 2026.
Vogen Staal has processing lines in Maastricht, the Netherlands. The company has recently invested in a second production facility. When all new lines are installed, the production capacity of both facilities will be well over 1 million tpy.
Green longs
On Wednesday April 9, Fastmarkets launched two new European green long steel prices to reflect emerging market interest in low-carbon material.
Fastmarkets’ inaugural weekly price assessment for green steel, differential to steel reinforcing bar (rebar), domestic, delivered Northern Europe was €20-30 per tonne on April 9.
And the first assessment of the green steel base price, reinforcing bar (rebar), domestic, delivered Northern Europe, inferred was €660-710 per tonne on Wednesday.
The latter price is calculated by adding the weekly green long steel differential to the weekly price for steel rebar, domestic, delivered Northern Europe.
The European long steel industry is predominantly EAF-based, which makes it a priori cleaner in terms of emissions compared with the blast furnace-basic oxygen furnace (BF-BOF) route that prevails in flat steel production.
EAF production typically emits around 0.8 tonnes of carbon emissions per 1 tonne of steel. Therefore, “green” requirements for long steel producers are stricter than in the flat steel sector.
Several sources stressed that, to be green, emissions produced by EAF-based mills within all three scopes should not be above 0.5 tonnes per 1 tonne of steel. As a result, Fastmarkets’ methodology defines European green long steel as “steel produced with Scope 1, 2 & 3 emissions at a maximum of 0.5 tonne of CO2 per tonne of steel.”
In such conditions, long steel producers in Europe are squeezed between stricter criteria for being considered green and limited demand.
“Being an EAF producer is both an advantage and a disadvantage,” a producer from Southern Europe told Fastmarkets. “On one hand, we are already green, but on the other, customers do not see why they have to pay a premium for what they had previously been buying without it.”
Even in Northern Europe, which is pioneering the utilization of green long steel, the demand is said to be limited.
“At this moment, I see no willingness to pay extra for low-carbon steel in the rebar sector — only for specific projects where there is an order qualifier and the options are limited,” a trader from Northern Europe said.
In such conditions, customers are not ready to accept mills’ offers, which vary in the range of €30-50 per tonne, depending on the supplier.
A source on the sellers’ side said that customers accept premiums at the lower end of the range, but sometimes, producers accept lower numbers.
“Charging premiums for longs is very difficult in Europe, as the production nature is already greener than for flats,” a trading source said, providing an assessment of a workable premium at a maximum of €20 per tonne.
Evolution of green steel premiums in Europe: flats versus longs
Under the European Green Deal, the European Commission has proposed a new EU goal to become a net-zero emitter by 2050.
The steel industry was responsible for around 5% of the CO2 emissions in the EU and 7% globally, according to Commission data.
But alongside the numerous challenges this has created, there were also opportunities for steelmakers to charge premiums for steel with a lower carbon footprint. The uptake of green premiums, however, has been very different in the flat steel and long steel sectors in Europe.
Fastmarkets has taken a closer look into the matter, investigating the new green steel landscape in the region.
Conventional steelmaking in Europe
Around 55% of the steel produced in Europe is created through the integrated blast furnace/basic oxygen furnace (BF-BOF) route. Carbon emissions from this production method amount to around 2.0-2.2 tonnes of CO2 (direct and indirect emissions) per tonne of steel, according to the Commission
Approximately 45% of the steel produced in Europe is made using the electric-arc furnace (EAF) route, but this share was expected to rise to around 57% when the EU shifts toward clean technologies on the way to net-zero emissions by 2050.
In Europe, 79% of carbon steel long products are produced via the EAF route, while 96% of flat products are produced using the BF-BOF route.
But the EU’s ambitious decarbonization goals and the growing cost of carbon emissions under the Emission Trading System (ETS) in the bloc have been stimulating European steelmakers to invest heavily in the decarbonization of their operations, using steelmaking methods that reduce carbon dioxide emissions.
Major suppliers were offering their own steel brands with lower carbon footprints – XCarb, Arvzero, SSAB Zero, Bluemint, Greentec, PureSteel+, Calibria, etc – but there was no common standard for green steel in the industry yet.
Most flat-steel makers use the same approach, intending to replace BF-BOF capacity with EAFs and hydrogen-fuelled direct-reduction iron (DRI) modules.
Consequently, the transition from traditional blast furnace-based steelmaking, widely used for flat steel manufacturing, to so-called “green” and less polluting routes of production has become an integral element in major European steel companies’ strategies.
Using coal-based DRI reduces CO2 emissions by 38% compared with the traditional BF-BOF route. Using a combination of natural gas and hydrogen and carbon monoxide in DRI reduces CO2 emissions by 61% compared with BF-BOF. And using only hydrogen can allow CO2 emissions to be reduced by as much as 97%.
Evolving green flat steel market
Demand for low-emission steels has been growing slowly due to the notably high premiums for such materials and the lack of regulation in the industry, which would stimulate buyers to “go green.”
Fastmarkets’ methodology defines European green flat steel as “steel produced with Scope 1, 2 & 3 emissions at a maximum of 0.8 tonne of CO2 per tonne of steel.” Under that methodology, in June 2023, Fastmarkets launched its inaugural green flat steel assessment.
Fastmarkets’ most recent weekly assessment of the green steel, domestic, flat-rolled, differential to HRC index, exw Northern Europe, was €150-200 ($166-221) per tonne on April 3, unchanged week on week.
European steelmakers have maintained their offer prices for green flat steel at €200-300 per tonne.
But despite slow demand, the room for discounts was quite limited due to the high costs of green steel production, market sources said.
“To produce green steel, we have to buy green energy, and pay for environmental declarations,” a mill source said. “What’s the point of selling [green steel] below cost?”
At the same time, the majority of flat steel production in Europe was still achieved using traditional BF-BOF methods. Major European mills were also offering reduced carbon emission solutions for flat steel products produced via the BF-BOF route with more “digestible premiums” as opposed to “fossil-free” steel produced via the EAF route.
“There are different shades of green in the market,” a mill source said . “Not everyone needs 80-90% decarbonized steel, and not everyone can afford it. For many buyers, a 30-50% reduction in emissions is enough to meet their needs.”
In January 2024, Fastmarkets launched an assessment for a reduced carbon emissions differential paid for flat steel produced in European blast furnaces, with carbon emissions of 1.4-1.8 tonnes of CO2 per tonne of steel.
Fastmarkets’ most recent assessment of the flat steel reduced carbon emissions differential, exw Northern Europe, was €40-60 per tonne on April 3, also stable week on week.
For steel produced in blast furnaces, with reduced carbon emissions of 1.4-1.8 tonnes of CO2 per tonne of steel, offers of premiums were reported at €60-70 per tonne in April, with some limited room for discounts.
Green long steel
In the long steel sector, which mainly uses the EAF route of steel production, the acceptance of premium charges by customers was comparatively more difficult because this method of production was already considered more ecologically sound.
Traditionally, steel produced in EAFs using scrap feedstock produces no more than 0.8 tonne of carbon per tonne of steel.
“Being an EAF producer is both an advantage and a disadvantage,” a producer from Southern Europe told Fastmarkets. “On one hand, we are already green, but on the other, customers do not see why they have to pay a premium for what they had previously been buying without it.”
As a result, the demand for green long steel in the region remained limited and was mainly concentrated in Northern Europe, where the culture of care about the environment is at a high level.
“If you sell green longs in Scandinavia, that is more in their culture,” a producer with mills across Europe said. “Southern Europe is different, [and] most customers are not ready to pay for low carbon emissions.”
Another producer with assets across Europe confirmed that the construction and automotive industries in Northern Europe were the key consumers of green steel in Europe at the moment.
A push from governments was another reason for better demand for green steel in Northern Europe.
“Demand for green [steel] should be stimulated through public procurement, the way it is in Nordic countries. Otherwise, it’s difficult to motivate buyers to pay a higher price,” a buyer in Germany said.
“In Scandinavia, there are many public projects requiring green steel procurement. There is an actual market for green steel,” a mill source in Europe said. “So distributors and trading companies there are more keen to buy green. They know that they can pass the costs [of green steel] down to the end-user.”
To track the development and prices of this emerging market, Fastmarkets has launched two new weekly assessments for green long steel prices, domestic, delivered Northern Europe.
Fastmarkets’ inaugural weekly price assessment for green steel, differential to steel reinforcing bar (rebar), domestic, delivered Northern Europe, was €20-30 per tonne on April 9.
And the first assessment of the green steel base price, reinforcing bar (rebar), domestic, delivered Northern Europe, inferred, was €660-710 per tonne on the same date.
The latter price was calculated by adding the weekly value for the green steel differential to steel reinforcing bar (rebar), domestic, delivered Northern Europe, to the weekly assessment of the price for steel reinforcing bar (rebar), domestic, delivered Northern Europe.
Stricter green criteria
At the same time, the criteria for green steel produced in EAFs have become stricter. According to market sources, 0.5 tonne of CO2 per tonne of steel is the new maximum level for EAF mills, but this is beyond the capabilities of many producers.
“In Poland, emissions are around 0.75-0.8 tonnes of CO2 per tonne of steel because their electricity is generated using coal,” the producer from Southern Europe said.
One of the main ways to cut emissions for EAF-based producers was to use renewable energy such as solar and wind power, or clean energy from nuclear plants or hydrogen.
During discussions with producers across Europe, Fastmarkets learned that, with the help of clean energy, EAF mills can reduce emissions to 0.2-0.4 tonnes of CO2 per tonne of steel, and ask for a $20-50 per tonne premium for that, while some mills did not charge premiums at all.
Nevertheless, if paid at all, the premiums accepted by customers were normally at the lower end of the offer range, while according to some producers they did not compensate for the investments and costs put into the production of such materials.
“Customers are not ready to pay for low emissions while investments are huge. So they are important, but not the priority. There will be demand later, but as of now the market is not ready,” a source with a group that owns production units across Europe said.
For this reason, market sources said, investment in emissions reductions by long steel producers will be realized at a much slower pace than in the flat steel sector.
Demand for green flat steel muted in Europe, but premiums remain high
Fastmarkets’ methodology defines European green steel as “steel produced with Scope 1, 2 & 3 emissions at a maximum of 0.8 tonne of CO2 per tonne of steel”.
During the assessment week, premiums for such steel were reported at €200-300 ($216.96-325.43) per tonne from major European suppliers.
Buyer sources estimated that achievable premiums for such material were at €100-150 per tonne. But suppliers claimed that the lower end of the range was not workable for electric-arc furnace (EAF)-produced green steel.
Notably, two suppliers told Fastmarkets that they would be willing to knock off no more than €20-30 per tonne from their offers of €200 per tonne.
Buyer sources argued that big tonnages (more than 3,000 tonnes) could be booked with lower premiums – of around €150 per tonne
“The demand [for green steel] is not booming, but we sell 200 tonnes here, 100 tonnes there,” a mill source said.
“Nobody books green steel to stockpile it – it would have been too expensive. So this is back-to-back business – you have a project, you book green steel for it,” the mill source added.
Transactions for flat steel produced with emissions below of 0.7 tonne of CO2 per tonne of steel were reported at €170-180 per tonne, for May-shipment material.
While Nordic countries remained the main demand drivers in Europe, sources have also pointed out that they noted they have heard more inquiries coming from Spain lately.
As a result, Fastmarkets’ assessment for green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe was €150-200 per tonne on Thursday, widening upward from €150-180 per tonne in the previous week.
Meanwhile, Fastmarkets’ assessment of the flat steel reduced carbon emissions differential, exw Northern Europe was €30-60 per tonne on Thursday, unchanged week on week.
For steel produced in blast furnaces, with reduced carbon emissions of 1.4-1.8 tonnes of CO2 per 1 tonne of steel, offers for premiums were reported at €40-70 per tonne during the assessment week.
Notably, premium steel produced with carbon footprint of 1.5 tonnes of CO2 per 1 tonne of steel was reported at €70 per tonne from one supplier.
For steel with produced with 1.8 tonnes of CO2 carbon footprint, the premium was reported at €40 per tonne.
Buyer sources estimated a premium level of €30-60 per tonne, depending on the carbon footprint.
European green steel premiums edge higher in recent deals; traded volumes limited
Across Europe, green steel produced in electric-arc furnaces (EAFs), with Scope 1, Scope 2 and upstream Scope 3 greenhouse gas emissions below 0.8 tonnes of CO2 per 1 tonne of steel, was offered at premiums of €200-300 ($207-311) per tonne during the assessment week.
Bids for such material were reported at €80-150 per tonne. However, several sources pointed out that mills were firmly insisting on prices above €150 per tonne for such specs, considering the costs of production.
“To produce green steel, we have to buy green energy, pay for environmental declarations,” a mill source said. “What’s the point of selling it [green steel] below cost?”
Transactions for such material were reported at €150-170 per tonne over the past seven days.
One large-size deal was also reported within the range of €150-170 per tonne for April-shipment material.
As a result, the green steel premium for flat steel in Europe was stable, with Fastmarkets’ weekly assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe set at €150-170 per tonne on Thursday, narrowing upward from €100-170 per tonne a week earlier.
Even though overall traded volumes for green steel were low across Europe, sources pointed out that there was a positive tendency over the past two years.
“In 2021-2022, traded volumes [for green steel] were zero or close to zero. Now we have a market — small, but evolving rapidly,” a buyer in Northern Europe said.
Besides, demand for green steel remained highly regionalized across Europe, with Nordic countries leading the race, sources said.
“In Norway, Denmark and Sweden, there are state-funded projects requiring green steel procurement. Not mass-balanced, but real physically produced green steel,” a second buyer source in Europe said. “At the same time, in Southern and Central Europe, interest in green steel is very low,” they added.
Sources said that, in addition to the high premiums, the lack of public projects across Europe — projects that could insist on green steel procurement — and the lack of stimulus measures to encourage “going green” were limiting demand for green steel.
“Buying steel with reduced carbon content is great for the environment — it’s a step in the right direction. It’s just not affordable when many companies are fighting for survival in a tough market,” a third buyer source told Fastmarkets.
Despite the looming challenges, however, European steelmakers were committed to the green steel transition and expected the market for green steel to grow exponentially in the upcoming years, supported by regulations.
“It’s a very small market so far, but with big potential. We have already seen an exponential rise in booked volumes [of green steel] year on year, and these volumes are only set to grow in the future, supported by the EU’s decarbonization plans,” a second mill source said.
European green flat steel premiums hold steady; Nordic countries drive demand
Fastmarkets’ methodology defines European green steel as “steel produced with Scope 1, 2 & 3 emissions at a maximum of 0.8 tonne of CO2 per tonne of steel.”
During the assessment week, leading European suppliers maintained the premiums for such steel at €200-350 ($206-361) per tonne.
These offers have been broadly stable during the course of 2024, but tradable values for the spot market were lower, sources said.
“When it comes to deals, especially for bigger tonnages, some discounts can be achieved – depending on supplier,” a buyer in Germany said.
Buyer sources estimated achievable premiums for green steel with such levels of emissions to be at €80-150 per tonne, but the lower end of that range was not considered to be workable by mill sources – at least for the mentioned specifications.
As a result, Fastmarkets’ weekly assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe, was €100-200 per tonne on Thursday, stable since December 12, 2024.
Market participants said there is a lack of projects across Europe requiring green steel and that demand from the key consumer – the automotive industry – has recently been slowing, in line with the general downturn in steel sales.
Consequently, demand for such steel remained subdued and highly regionalized, sources said, with Nordic countries deemed “champions” in green steel procurement.
“In Scandinavia there are many public projects requiring green steel procurement. There is an actual market for green steel,” a mill source in Europe said.
“So distributors and trading companies there are more keen to buy green; they know they can pass these costs [of green steel] down to the end user,” the mill source added.
Two other supplier sources echoed that view, and told Fastmarkets that they were selling most of their volumes of steel with reduced carbon footprint in the Nordic states.
A deal for 17,000-18,000 tonnes of green heavy plate, produced via electric-arc furnace (EAF), with cardon emissions content below 1 tonne of CO2 per tonne of steel, was reported from Bulgaria to Denmark in late December.
The premium for such steel was reported to be €150 per tonne.
European green flat steel suppliers maintain premiums at high levels
In general, European steelmakers were optimistic regarding green steel uptake in the following years, despite ongoing challenges, sources told Fastmarkets.
“We don’t see booming volumes [for green steel sales] now, but we see steady inquiries almost every week — for 100, 500 tonnes — but the interest is growing,” a steel mill in Europe said.
Sources, however, agreed, that economic crisis in Europe was slowing down decarbonization and green steel uptake in the market in general.
“It’s hard to create sustainable demand for green steel in such environment, when businesses are struggling to keep afloat,” a buyer in the Benelux region said.
“[EU] member states must intervene — we need public infrastructure projects that would stimulate buyers to ‘go green,’” they added.
Fastmarkets’ methodology defines European green steel as steel produced with Scope 1, 2 & 3 emissions at a maximum of 0.8 tonne of CO2 per tonne of steel.
Green steel suppliers in Europe maintained premiums for such steel at €200-350 ($209-366) per tonne.
Notably, a premium for steel with carbon emission of under 600 kilograms and Scope 1,2 and 3 upstream was reported at €200 per tonne.
Transactions for such steel were heard at €170 per tonne during the week, but for limited tonnages.
Premiums for steel, carbon neutral under Scopes 1 and 2 were reported at €300-350 per tonne.
And premiums for green steel, with Scope 1, 2 and upstream Scope 3 carbon emissions of less than 0.8 tonnes per tonne of steel, were reported at €200-250 per tonne.
Industry sources estimated achievable prices for such material at €100-150 per tonne.
Some bids were reported at even lower levels — €50-80 per tonne.
Producer sources said that it would be not commercially viable to sell green steel with such low premiums, considering costs of production and short availability.
“We can provide certain discounts on decent volumes [of green steel], but there is a limit — we can’t be selling green steel for free,” a second steelmaker said.
As a result, Fastmarkets calculated its weekly green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe at €100-200 per tonne on Thursday, stable week on week.
Demand for green steel remains sporadic, regionalized across Europe; premiums slightly higher
Sources noted that most demand for steel with reduced carbon emissions was coming from Nordic states.
“This is very simple: if there is fit legislation and public projects requiring green steel then there is a market [for green steel],” a mill source in southern Europe said.
“Nordic countries are champions of green steel procuring, while Central and Southern Europe are lagging far behind,” the mill source added.
“We sell most of our [steel with reduced carbon footprint] in the Nordic states,” a second supplier said.
Also, sources pointed out that publicly listed companies that had to submit sustainability reports have also been expressing more interest in green steel bookings.
“Investors are not only interested in financial data; sustainability is noticeably higher on everyone’s agendas lately,” a second mill source said.
Fastmarkets’ methodology defines European green steel as “steel produced with Scope 1, 2 & 3 emissions at a maximum of 0.8 tonne of CO2 per tonne of steel.”
During the assessment week, leading European suppliers kept the premiums for such steel at €200-350 ($210-368) per tonne.
Buyer sources estimated the achievable premiums for green steel with such level of emissions at €50-120 per tonne, although the lower end of that range was not considered workable by mill sources.
A mill source reported a bid for steel with carbon emissions of 0.8 tonne of CO2 per tonne at €70 per tonne. The bid was rejected by the supplier, however.
Mill sources estimated achievable premiums for steel produced with Scope 1, 2 & 3 emissions at a maximum of 0.8 tonne CO2 per tonne of steel at €100-200 per tonne.
One supplier, however, said that for such a threshold the premium should be no lower than €150 per tonne.
As a result, Fastmarkets’ weekly assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe, was €100-200 per tonne on Thursday, narrowing upward by €20 per tonne from €80-200 per tonne seven days earlier.
Sources pointed out that lack of willingness to pay premiums for steel with reduced carbon emissions content was partially explained by the unfavorable economic situation in Europe.
“Many small and medium-sized steel companies have to fight for their survival, so sustainability becomes secondary in such conditions,” a trader in Germany said.
Meanwhile, Fastmarkets’ assessment of the flat steel reduced carbon emissions differential, exw Northern Europe, was €0-60 per tonne on Thursday, widening upward by €10 per tonne from €0-50 per tonne seven days earlier.
For steel produced in blast furnaces, with reduced carbon emissions of 1.4-1.8 tonnes of CO2 per 1 tonne of steel, premiums were reported at €40-60 per tonne.
A transaction for steel with emissions of 1.6 tonnes of CO2 per 1 tonne of steel was reported at €60 per tonne.
Buyer sources suggested a premium level of €0-50 per tonne for steel with emissions of 1.4-1.8 tonnes of CO2 per 1 tonne of steel, depending on the supplier.
A premium for steel with emissions of 1.8 tonnes of CO2 per 1 tonne of steel was reported at €40 per tonne.
Green steel in focus: five key questions answered by experts
The context
In 2023-2024 Fastmarkets launched 12 green and reduced carbon steel prices to assess the price differential against traditional flat and long steel prices, to establish benchmarks in the emerging markets, bring more transparency for the industry and support the investment decisions needed to reduce emissions.
MB-STE-0904 Green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe, €/tonne
MB-STE-0905 Green steel base price, HRC exw Northern Europe, daily inferred, €/tonne
MB-STE-0907 Green steel import, differential to HRC index, cfr Vietnam, $/tonne
MB-STE-0908 Green steel base price, hot-rolled coil cfr Vietnam, weekly inferred, $/tonne
MB-STE-0911 Flat steel reduced carbon emissions differential, exw Northern Europe, €/tonne
MB-STE-0912 Flat steel reduced carbon emissions, daily inferred, exw Northern Europe, €/tonne
MB-STE-0916 Green steel domestic, differential to US HRC, fob mill, $/short ton
MB-STE-0917 Green steel base price, hot-rolled coil fob US mill, weekly inferred, $/short ton
MB-STE-0921 Green steel import, differential to rebar assessment, cfr Singapore, $/tonne
MB-STE-0924 Green steel base price, rebar cfr Singapore, weekly inferred, $/tonne
MB-STE-0922 Flat steel reduced carbon emissions differential, exw China, yuan/tonne
MB-STE-0923 Flat steel reduced carbon emissions, daily inferred, exw China, yuan/tonne
The subject experts
Alexander Fleischanderl, chief technology officer, Primetals Technologies
Jose Noldin, chief executive officer, GravitHy
Paulo Carvalho, independent consultant and managing director, decarbValue
The Q&A
There are quite a few new green steel projects announced in Europe with new green steel tonnages expected to arrive in the market starting 2025-2026. Volume-wise, how many tonnes of green/carbon reduced steel will be in the market in the next five years?
Alexander Fleischanderl: It’s true that Europe is progressing at high pace with multiple transition projects. However, the first thing required is a definition of “green steel.” We see individual brandings for steel producers in the market, where the carbon footprint is different. And we should stop the proportional green steel allocation system, where the reduced fossils usage is allocated to a specific amount of steel produced.
The real carbon footprint of the individual coil purchased by the end-customer is different to what is allocated. What we need is a coil- or sequence-based carbon footprint certificate.
The ongoing transition projects will still work with a high share of natural gas for their Direct Reduction Plants (DRPs). The steel produced will be low-carbon steel, but not net-zero yet.
But cost competitive real green steel cannot be expected soon. Hydrogen procurement deals are at a level of around €8 per kg instead of earlier reported forecasts of €2-3 per kg before 2030.
The chicken-egg problem is obvious, the hydrogen market must scale, but it hasn’t yet because the demand side is weak.
Despite these roadblocks, we recognize a growing interest for low-carbon footprint steel from the demand side especially for automotive and white goods, but also in terms of public procurement. The share of green steel in Europe in five years’ time could be around 10% of total production.
But its competitiveness compared with “gray steel” (regular steel) can only be achieved by combining three things: the benefits from the avoidance of emissions trading scheme (ETS) payments; a green steel premium; and support from the public for Capex [capital expenditure] and Opex [operational costs].
Jose Noldin: I strongly believe the market will be tight and more than people might anticipate. But that will strongly depend on regulation, standards and definitions, rather than on self-imposed targets. It is carbon pricing developments and broader initiatives, such as the European Union’s “Green Deal Industrial Plan” and “Steel and Metals Action Plan,” that will move the needle in terms of business environment, demand aggregation, etc.
To give some numbers, I expect the demand for truly green, fossil-free steel (less than 400 kg of CO2 per 1 tonne of steel) to be at least 10 million tonnes a year in 2030. As the offer will not be there, people may end up with solutions such as CO2-reduced/mass-balance steels, which, in my opinion, is very borderline from a greenwashing perspective.
Paulo Carvalho: It depends on what we are calling “green steel” here. In terms of hydrogen-based, near-zero-emissions steel (with a CO2 footprint well below 400 kg per tonne, including Scope 3 emissions), for flat products, the available tonnages are [almost non-existent right] now – other than tiny pilot volumes – and will be very limited in the next five years. But before 2030, [availability will be] in the low-single-digits in millions of tonnes in the best case scenario.
Stegra [formerly H2 Green Steel] is likely to have ramped up the plant it is building in Boden, Sweden; Hybrit/SSAB will be scaling up its first demonstration plant; and GravitHy may have started up its H2-DRI [hydrogen-powered direct reduced iron (DRI)] plant in France enabling hydrogen-based green steel production elsewhere.
Various other projects could also be at or close to ramp-up, while some may face delays – so volumes will still be relatively small and that will remain the case even if we add volumes from European scrap-based EAF flat steel plants – because there are only a handful of those.
The bulk of low-carbon flat steel within this timeframe will still be of certificates-based products, or using mass balancing, with a higher carbon footprint. So the supply-demand balance will still be relatively tight. For long steel, a much bigger share of European production already meets lower CO2 emissions thresholds, so the supply-demand balance is much less tight.
Most of the EU flat steelmakers are opting to switch from the conventional, blast furnace-basic oxygen furnace (BF-BOF) route to using electric-arc furnaces (EAFs) or the EAF+DRI steelmaking route, but what other options does industry have?
AF: Well, there are not too many transition options out there, despite opting for EAF, with a flexible feedstock mix, but including DRI/HBI to dilute tramp elements coming along with scrap usage. The DRP can either be integrated or decoupled from steelmaking, allowing for an investment in regions that benefit from much lower energy costs.
A viable option, still not sufficiently supported by governments, is carbon capture utilization and storage (CCUS). We believe the net-zero timeline will be missed without a proper deployment of CCUS technologies.
Last, but not least, there is the option to optimize existing assets. This includes the electrification of burners and furnaces, endless casting & rolling, any energy efficiency measures, waste heat recovery from waste gas as well as improving circularity [through] yield improvement, recycling of by-products and more scrap usage.
JN: Options include 100% scrap (very limited due to scrap availability both in terms of quantity and quality), biomass (huge challenges in supply chain) and CCUS (huge issues with regulation, economics and TRL). Other options, such as Molten Oxide Electrolysis (MOE), still have a long development journey ahead of them.
I, therefore, firmly believe that pursuing the H2 based DRI+EAF route – especially with innovative business models where Iron is decoupled from steel – remains the right way to go and will allow for a very competitive scheme. In this way, iron is produced where low-carbon electricity is available and competitive; is then shipped globally as a commodity to steel producers that will play in their own backyards, in their comfort zone – ie, steel production. And in the transition, using hot-briquetted iron (HBI) to boost blast-furnace operations can also be a very interesting and competitive solution.
PC: Europe has a large fleet of existing BF-BOF plants, many of them running very efficiently and close to downstream processing plants and end markets – although most are suffering in current market conditions. Therefore, many players are opting for an intermediary solution, replacing the BFs only (with a DRI+smelter to leverage lower-grade ores) and keeping the steelmaking with their existing BOFs. The economic case for this solution is probably better than a full conversion to H2-DRI steelmaking, especially if the cost of hydrogen remains higher for longer.
Imported, or third-party, DRI/HBI could also play a major role, either from EU countries/sub-regions where green power prices are competitive, or from third countries/regions such as the Middle East & North Africa (MENA) region, which are well suited to renewable power and have competitive gas prices.
Policies and regulations in the EU are massive drivers for decarbonization, notably the EU emissions trading scheme (ETS) and its carbon border adjustment mechanism (CBAM). So, is CBAM a problem or a saviour for the industry? What impact will there be on the market once CBAM is fully phased in from 2026 on and free-ETS certificates start being phased out (halved by 2030 and fully eliminated by 2034)?
AF: ETS is the main pillar supporting EU transition project investments. For example, assume that a 6 million tonnes per year steel mill emits 10 million tonnes of CO2… If the ETS price is at €150 per tonne in 2034, the steelmaker would have to pay €1.5 billion per year, adding €250 per tonne of steel produced.
CBAM is, indeed, controversial [because] it adds a lot of administrative burdens for all players in the steel value chain, including technology providers, such as Primetals. But it is the only instrument identified to avoid carbon-intensive steel from flooding into the EU from other markets. So it at least provides a level [playing field] for all players. But it can be expected that foreign markets will produce their own share of low-carbon steel for export to the EU, so the CBAM weapon may not be as effective as hoped.
JN: CBAM cannot be reduced to a saviour or a problem. It is a good (yet complex) starting point because without instruments like CBAM the market does not resolve the decarbonization puzzle by itself. CBAM is imperfect, I agree, but it is definitively needed, so I hope it stays and gets improved, optimised, fixed, reinforced, and so on… but not abandoned or significantly slowed down.
The impact is obvious! For example, with a carbon pricing of €100 per tonne of CO2 once allowances are phased-out, a fossil-based steel producer will have a “penalty” of roughly €200 per tonne of steel if it insists on sticking with the coke-based BF-BOF route. From a different perspective, this could be considered the so-called “green premium” which is needed during the transition while the CBAM/phase-out allowances are not fully in place.
But a workable and strong CBAM, along with a full phase-out of the allowances, will make the polluters pay and will, therefore, serve as a huge driver for investments in green steel.
PC: CBAM is a temporary but necessary evil – as I keep repeating. Necessary, because, in the absence of a global carbon price, European production is penalised vis-à-vis imports and that distorts capital allocation (and jobs, tax generation etc); evil, because the sheer complexity of compliance – most usual exporters to the EU are not prepared yet – generates distortions itself and ends up being a de-facto non-tariff trade barrier.
So, in my view, CBAM has to be temporary. There will be pushback from other regions and, ultimately, industry and policy efforts have to be toward convergence of carbon policies and pricing globally, not on raising border tariffs. Until that happens, of course, it will affect the market, favouring imported steel with lower-emissions footprints – with MENA potentially emerging as a key source – and penalizing existing conventional steel importers.
Another major impact will be on the competitiveness of EU steelmakers in export markets: because there is no ETS rebate for exports or “inverted CBAM.” The European mills [that bear a carbon costs] will increasingly be at a competitive disadvantage in export markets without a similar carbon price and will lose market share.
Raw materials challenges arise from new ways of steelmaking. Can we expect potential shortages of pellets, scrap? And how will raw materials supply chains evolve?
AF: The trend for massive new DRI/HBI capacity is likely to continue and even accelerate. DR-grade iron ore will be in short supply and pelletizing capacity is likely to run short as well.
We see three ways forward: iron ore beneficiation efforts; using lower-grade iron ore in DRP; and ground-breaking fluidized bed based DRP that does not require pelletizing. In the case of lower grade ore usage, a smelter is required to maintain high metal yields and efficient gangue removal in he form of added-value slag to support circularity.
Fluidized bed DRPs are more energy efficient, improving yield and are lower in overall Capex. Utilization of more scrap is indeed the most effective way to decarbonize. However, even in 2050 more than 50% of steel production will be based on virgin iron ore. The EU is still exporting about 20 million tonnes per year of lower-quality scrap, mainly to Turkey. We should increase our efforts to process and clean EU scrap to produce a recycled feedstock with certified quality and chemical analysis. Digitalization, including artificial intelligence (AI) will support these efforts.
JN: I believe the market will react if the demand is there. Today, pellet makers, for example, face a chicken-and-egg dilemma. There is a potential shortage, but projects need to be more mature and reach final investment decision (FID) to allow pellet producers and scrap processors to invest in new capacity, new technologies and debottlenecking!
If nothing is done, yes, there will be a shortage. But I still believe that when DR projects reach FID, pellet producers will recognize the great opportunity to play in the high-value side of the business and then invest in new capacity.
Still, for some years the market may be tight and support good premium levels which, by the way, will incentivize new investments in capacity.
PC: DR-grade pellets and agglomerates are already relatively scarce and the raw materials industry has an immense challenge to ramp up capacity and production. That requires big investments in concentration/beneficiation plants and pelletizing plants as well. Other high-grade pellets will also be increasingly used, in combination with a melter/submerged-arc furnace to remove gangue after the DRI making process, which will help alleviate the relative scarcity.
Scrap is already fully recycled and we already broadly know now how much will be available to be recycled into new steel in, say, 2050 – only about half of the world’s steel needs by then. But given it’s direct contribution to lowering the carbon footprint of the steel produced, I currently see a scramble for scrap resources (and sorting/processing facilities) and that will only intensify in the coming years.
The supply chain will continue to further integrate vertically into scrap and the miners, steelmakers and end users will intensify the development of partnerships to ensure end-to-end availability of high-quality raw materials for the required low-carbon final products.
Renewable energy and green hydrogen are deemed to be the weak spots of decarbonization, notably due to high price of hydrogen. Are there alternatives to the use of green hydrogen in steelmaking?
AF: Renewable power availability and pricing is the most pressing roadblock. Power prices have a strong impact on hydrogen prices – the main reason why decoupling the energy-intensive ironmaking from steelmaking has become an omni-present discussion point.
Regions like the Middle East, North America and Australia have different energy prices. We are talking about up to 10-fold prices per MWh in Europe! The alternative to hydrogen is electrification of process steps (again electric power) and the intermediate use of natural gas while processes are designed to switch to hydrogen at a later stage.
JN: I believe people are looking from the wrong angle here. Instead of just saying that hydrogen is expensive, people should reconsider their business model. Make hydrogen where low-carbon electricity is available and competitive and then ship DRI/HBI as a commodity to steel-producing sites. It’s a big mistake is to insist on making iron close to steel just because “this is what we have been doing as an industry for decades.”
It’s very simple! Hydrogen-based DRI/HBI can be cost effective and a smart way to store and/or transport hydrogen! It’s just that it will be H2 in “metallic form.” In other words, decoupling iron from steel can catapult the H2 economy and decarbonize steel production with a very interesting and competitive value chain. In the future, Iron will be produced by ironmakers and steel by steelmakers. Looks logical, doesn’t it?
PC: Ironmaking has been dominated by coke (fossil coal) as the key reductant and, although hydrogen is the key solution to reducing the reliance on fossil reductants, natural gas is a tried-and-tested (and widely used) alternative.
To produce near-zero emissions steel, its CO2 emissions have to be captured and stored. The economics and geology for that to happen at scale are still to be proven and differ widely region by region, and it can involve controversial aspects such as enhanced oil recovery, but in my view carbon capture and storage (CCS) will play a key role in the steel sector’s transition to net zero.
Green premium uptake needs regulation, clarity: Kallanish Green Steel Strategies
Green steel premiums are being achieved for some contracts, but regulation and clarity over definitions are needed to advance their uptake, panellists said during the Kallanish Green Steel Strategies event in Brussels this week.
Christoph Zinsser, head of project finance at Stegra, noted: “We have been able to secure long-term offtake agreements with a euro per tonne premium over seven years take or pay contract. So there certainly is the demand.”
He added that customers’ willingness to pay a premium has evolved over the years.
“The business case was developed on the back of the demand from the automotive industry for green steel. There has been a lot of interest, and it has evolved quite significantly over the last three years,” he asserted.
He noted this was not “widespread across different industries as we would all hope,” but he does see growing interest from the white goods and construction industry.
“There are players who certainly are interested in understanding what the possibility is. Maybe not so much for this year, today, but thinking ahead into 2027 and 2028, and leading to 2030, where can we secure supply for the future. Those discussions are very active,” he observed.
Zinsser also flagged that the offtake agreements were part of the financing requirements for the project, which is currently under construction.
“We had to demonstrate that there is a market to make the project bankable for 50% of our future production. We have been able to secure green premiums, we have not signed one contract that would not have a green premium,” he said.
Josu Piña Bilbao, director of business development at SSAB Europe, sees the premium developing differently amid challenges including a lack of regulatory clarity over the definition of “green steel”. He does however see this coming imminently.
“And also, clear set targets from regulation. If you look at the automotive [sector], they have clear tailpipe emission targets … Most OEMs have been focusing on electrifying their fleet,” he noted. “Some of them are stepping up and having targets for scope 3 upstream, which is the raw materials, but it is voluntary. FMC, Steelzero, and other initiatives, those are voluntary”.
“We are working to develop a low emission steel portfolio together with our customers’ needs and we need to go through that process. Customers need to test the material, make sure the characteristics and properties are okay and it’s working; all of that takes time,” Bilbao said.
He added SSAB is not focusing so much on the premium, as this is something the market would decide in the future.
Meanwhile, Alexander Julius, managing partner of distributor macroMETAL and EUROMETAL Presidency member, noted that some customers were unwilling to pay more than the material they are receiving from other suppliers, and that the premium was of limited importance amid the small volumes in customer portfolios.
Limited available supply of the material is also an obstacle to creating a market where a premium is achievable.
“The market for low carbon emission steel is not there yet,” Bilbao said. “For different reasons, [such as] lack of availability and supply. How many producers are actually offering low emission in Europe, what products, what grades, etc?”
“There are also worries [about] 2026, with CBAM, how much carbon reduced steel will be available then. Will it be sufficient to cover market demands in different industries? There are so many question marks at the moment,” Julius pointed out.
Zinsser also commented on the issue in regard to negotiating a premium.
“The lack of supply is part of the reason why it’s so challenging to enter into the discussion on the right price because there’s no comparison,” he said.
“[An automotive producer] is careful to commit to a premium, because they don’t have a comparison. They don’t know what the market is [to be able] to commit to pay a premium [for] 2027 in 2024; it’s a big ask for any company,” he concluded.
Carrie Bone UK
Buying interest for green flat steel in Europe muted amid poor market fundamentals
European steel market participants have been digesting the recent news about several new investments in green steel projects put on hold due to challenging market fundamentals.
The economic slowdown in Europe — notably the downturn across key steel-using sectors, such as automotive and construction — weighed on the green steel market as well, slowing down the uptake of decarbonized products.
“Not the best time to pay premiums for green steel, when mills cannot even push €40 increases for gray steel due to lack of consumption,” a buyer in Germany said.
Green steel produced in European electric-arc furnaces, with Scope 1, Scope 2 (direct) and Scope 3 (indirect) greenhouse gas emissions below 0.8 tonnes of CO2 per 1 tonne of steel, has been on offer at premiums of €200-350 ($211-369) per tonne in November.
These offers have been broadly stable during the course of the year, but tradable values for the spot market were lower, sources said.
“Higher premiums of €200-350 per tonne was something mills were getting under long contracts with [original equipment manufacturers],” a buyer said.
Buyer sources estimated the achievable premiums for green steel with that level of emissions would be closer to €50-150 per tonne. Bids were reported at €50-80 per tonne during the week.
One mill source estimated achievable values at €100-200 per tonne.
As a result, the green steel premium for flat steel in Europe was stable, with Fastmarkets’ weekly assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe set at €80-200 per tonne on Thursday, stable week on week.
For steel produced in blast furnaces, with reduced carbon emissions of 1.4-1.8 tonnes of CO2 per 1 tonne of steel, premiums were reported at €40-60 per tonne.
A buyer source suggested a premium level of €0-50 per tonne for steel with emissions of 1.4-1.8 tonnes of CO2 per 1 tonne of steel.
One mill offered at a premium of €60 per tonne for steel with emissions of 1.95 tonnes of CO2 per 1 tonne of steel, but this was deemed “too high” by most buyer sources.
Another steelmaker in Northern Europe was offering a premium of €40 per tonne for steel with emissions of 1.8 tonnes of CO2 per 1 tonne of steel.
Fastmarkets’ assessment of the flat steel reduced carbon emissions differential, exw Northern Europe was €0-50 per tonne on Thursday, widening from €30-40 per tonne a week earlier.