LME WEEK: Steel imports to slow due to CBAM, green premiums fragmented
Steel import business into the EU is slowing down due to the incoming Carbon Border Adjustment Mechanism acting as a trade barrier, with CBAM costs expected to range from Eur10-250/mt, Gavin Steel, carbon specialist at European steel trading house Duferco, said Oct. 15.
“Our volumes that we’re importing or looking to import in the next quarter of next year are way down year-on-year, purely because Duferco is a risk-conservative company,” Steel said.
At a panel at the Triland Metals Sustainability in Metals Forum during LME Week, Steel said CBAM would be more of a trade barrier than an environmental policy by the way it is enacted.
“I’m not sure if it’s on purpose or due to the complexity that the EU faces,” he said.
The steel industry still needs crucial CBAM benchmark values, the CO2 intensity thresholds used to calculate the carbon border tax. The European Commission said earlier in October that the publication of those would be delayed.
Steel said when asked by Platts what the trading strategy looks like amid little visibility on CBAM costs that the import window to purchase from the Far East for arrival ahead of 2026, before the definitive phase of CBAM starts Jan. 1, has closed now.
“It’s difficult to keep going, keeping customers by delivering the material that we need to deliver when we’re not certain what price we can guarantee them,” he said, adding that Duferco is currently looking into CBAM cost sharing on the producer and customer side, as well as contract clauses that leave room to negotiate once the costs are known. He also said Duferco is hedging carbon cost as a form or risk mitigation.
Anna Gastmaier, climate specialist at Brazilian miner Vale, said during the panel that the EU’s CBAM has proven to be a driver for other countries to implement emission trading systems and said this would be “a win” for the European Commission.
“The national ETS in China is expanding for sectors that are impacted by CBAM or in Indonesia, Turkey, for example. And you really see in the documentation published by the different national authorities that they are often directly referring to CBAM as part of the reason why the scope is as it is,” she said. “So it is absolutely encouraging more global carbon pricing globally.”
Green premium development fragmented across metals
Explaining the Oct. 13 announcement by the London Metal Exchange to publish green premiums for nickel, zinc, copper and aluminum, Alice Lim, the London Metal Exchange’s head of CEO office and corporate sustainability, said on the panel that industry feedback was very different across the metals.
“I would say just off the kind of very, very high level on the aluminum front, we were looking at very positive feedback across,” Lim said. “And I think the sentiment is that they hope that there could be a premium — whereas if you move to copper, it slightly different sentiment, but they weren’t sure whether the end consumer would actually kind of pay for a premium,” Lim said.
Miles Prosser, secretary general of the International Aluminium Institute, said that even within a product, there would be fragmentation of a green premium. “I think it’s important that we remember that zero carbon, low carbon and sustainable are three different concepts, all important, and they’ve all got a role to play in how we drive change in the industry, but we shouldn’t just subscribe to one of those as being the sole purpose,” he said.
Guy Mercer, head of sustainability at European Metal Recycling, said that the investments steel scrap and precious metal recyclers have to undertake are costly amid decarbonization efforts and will struggle until they can recoup the cost from the current “elusive” green premium. “We still believe it [the green premium]is there,” he said. “It’s just not being felt yet.”
Platts assessed low-carbon aluminum billet at $500/mt DDP Germany Oct. 15, at a $10/mt upcharge over the conventional aluminum billet assessment. The Platts hot-rolled coil carbon-accounted steel assessment was assessed at Eur660/mt ex-works Ruhr Oct. 15, at a Eur70/mt premium over the conventional hot-rolled coil price.
