European green flat steel suppliers maintain premiums at high levels

European producers maintained premiums for green flat steel stable, saying that only minor discounts were possible despite limited demand. Buyers kept a low profile, sources told Fastmarkets Thursday December 19.

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.

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

kallanish.com

Green steel demand rising, premium remains challenge: UK Metals Expo

The steel sector is seeing rising customer demand for green steel but achieving a premium for the material remains challenging until market strength returns, Kallanish heard from panellists at the UK Metals Expo in Birmingham last week.

“[Demand] is coming from large end users, but in longs, they aren’t willing to pay the difference yet; it’s tough out there. For the time being, people are just looking to survive. It will come but it’s going to take some time and require a stronger market to fully accept green steel and the cost for it,” said Tom McDougall, commercial director at All Steels Trading.

Customers were keen to know emissions data, but this did not extend to a premium being achieved yet.

“Most people now ask what are the emissions levels of the various mills we are buying from,” said Godfrey Watt, president of the International Steel Trade Association (ISTA). “I don’t think anybody is prepared to pay more for anything at the moment in this market, but maybe it’ll happen – not yet.”

Meanwhile, Christiane Taylor, pricing manager at Tata Steel UK, did see a premium achievable, noting customers asking for the material was one reason the company is switching to an EAF, as part of its £1.25 billion transformation. This would give its customers access to green steel domestically, a move which could make the sector more competitive.

“I think there is definitely a green steel premium, definitely in the first few years until maybe it normalises, and then green steel becomes the norm,” she noted.

The company already offers a reduced CO2 product offering, under the names of Zeremis in the Netherlands and Optemis in the UK.

“Our customers want green steel, particularly in automotive, and construction. In construction, for many customers the low carbon targets are not just nice to have but essential, and a prerequisite for the future. I think there is also appetite in what we’ve seen elsewhere in Europe as well,” she added.

“We’ve definitely seen an increase in inquiries for green steel,” said Mike Nielsen, commercial manager at Salzgitter Mannesmann UK. He noted there was a variety of low-emission brands being offered in the market, with no single definition of green steel. “Many people want to see an environmental product declaration [EPD] when you deliver the order,” he added.

Nielsen also noted that regulation such as CBAM could be the catalyst to making a real step change in the market.

“Regulation is important but we do also see some of that demand coming from companies with corporate social responsibility aims to reduce carbon, also in the finance sector there’s an increase in the amount of ESG investment – some of that is tying people to have lower carbon content in projects,” he said.

“There’s going to be a gradual step over and there’s a tipping point somewhere, where no stockholder wants two piles of steel; one pile of green steel and one pile of non-green steel. At some point there has to be a choice to convert over towards green steel and hold that because that’s what customers demand. Regulation is important but I don’t think it’s the only thing in this mix,” he added.

“We’ve already got strong sustainability controls in construction which are already in place,” said Watt. He noted that when certification authority CARES was first introduced for rebar, there was still a market for non-CARES material which gradually faded away, and now expects to see a similar gradual transition to green steel.

Carrie Bone UK

kallanish.com

European green steel premiums slide amid general downturn in steel sector

Premiums for green steel in Europe fell again in the week to Thursday September 5, with only limited demand tracking the general downturn in European steel amid a slowdown in key end-user sectors, sources told Fastmarkets.

“This year started on a positive note, but demand is deteriorating, the steel market is weak in general and the willingness to pay a premium [for green steel] is not there,” a mill source told Fastmarkets.

Market participants said there was a lack of projects across Europe requiring green steel and demand from the key consumer – the automotive industry – had also been slow lately.

European suppliers have, therefore, started to be more flexible with their green steel sales and have started offering discounts on bigger lots.

Notably, recent trades for steel with Scope 1, 2 and upstream Scope 3 emissions below 0.8 tonnes of CO2 per tonne of steel, were reported at €100-150 ($111-166) per tonne.

And one transaction was said to have been completed with a premium below €100 per tonne – although that was for for steel with CO2 content below 0.3 tonnes per tonne of steel and could not be widely confirmed, sources told Fastmarkets.

Most buyers estimated the achievable premiums for green steel with Scope 1, 2 and upstream Scope 3 emissions below 0.8 tonnes of CO2 per tonne of steel at €100-200 per tonne.

In stark contrast, however, offers for the same material were reported at €200-300 per tonne during the assessment week.

Fastmarkets’ weekly assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe was €100-200 per tonne on Thursday, widening downward from €150-200 per tonne on August 29.

The corresponding green steel base price, HRC exw Northern Europe, daily inferred was €737.60 per tonne at the midpoint on September 5.

Despite the weak market and slow consumption, sources told Fastmarkets they remain optimistic regarding the take-off of green steel in Europe in the coming years.

“The transition to green steel is still on the cards – it’s coming; it’s inevitable. But considering the current economic situation [in Europe], it is going to be delayed,” a large buyer in Northern Europe said.

Published by: Julia Bolotova

European green steel premiums narrow downward; end-user demand slow

Green steel premiums were slightly lower in Europe in the week to Thursday August 15 following recent trades, while demand remained sporadic due to both seasonal factors and relatively low green steel uptake across supply chains, sources told Fastmarkets.

During the assessment week, offers for green steel with Scope 1, 2 and upstream Scope 3 carbon emissions below 0.8 tonnes per tonne of steel were reported at €200-350 ($219-329) per tonne from European suppliers, stable week on week.

Buyer sources, however, pointed out that for bigger volumes European mills could accept lower prices.

As a result, buyers’ estimations of tradeable values for such material were heard at €100-150 per tonne. The lower end, however, was deemed unworkable by sellers so far.

A distributor source reported a booking of flat steel with carbon emission content of around 0.6-0.8 tonne per tonne of steel at €170-200 per tonne in end-July-early August.

Fastmarkets’ weekly assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe was €170-200 per tonne on Thursday, narrowing from €170-250 per tonne seven days ago.

The corresponding green steel base price, HRC, exw Northern Europe, daily inferred was €780.38 per tonne on August 15.

Demand, however, remained limited. Transactions for steel with reduced carbon content in most cases were done directly between steelmakers and end users. The automotive industry remained the major buyer of green steel in Europe, market sources said.

“The market [for green steel] is sleepy, there is a seasonal slowdown, and automotive is not performing well, so overall demand [ for green steel] remains on the low side,” a buyer in Germany said.

“Green steel market is not big, but we see more interest from automakers, and the construction industry is starting to catch up in some regions,” a seller source said.

But even key consumers were seen booking mainly test batches, and green steel uptake in general has been quite low across the steel supply chain so far, Fastmarkets understands.

Per the Greenhouse Gas (GHG) Protocol Corporate Standard, Scope 1 refers to direct emissions generated by an entity or its subsidiaries. Scope 2 refers to indirect emissions from energy used by an organization. Scope 3 refers to indirect emissions – from activities of the entity – that occur from sources beyond their control.

Published by: Julia Bolotova

US green steel premium faces continued inertia

Resistance to paying a premium for green steel in the US is likely to continue in the near term, since domestically-produced steel is already relatively cleaner than steel produced elsewhere, sources told Fastmarkets.

US steel consumers are resisting paying a premium for green steel, Wade Wright, a steel consultant told participants at a green steel webinar held by Jefferies Equity Research on Monday August 12, highlighting the pushback from automakers.

“Auto companies are [not] willing to pay a premium for [material with] a little lower carbon footprint than what [they] had last year or the year before that,” Wright said.

Steel production via electric arc furnaces (EAFs) accounts for over 70% of production in the US, according to the American and Iron Institute, compared with a 26% global average.

EAFs have a lower carbon footprint due to its use of electricity, compared to blast furnaces (BFs), which rely on coal, leading to higher carbon dioxide and other pollutant emissions.

Since buyers in the US are already paying for relatively cleaner steel, they are simply not willing to pay more for the same steel.

“I wouldn’t pay extra for green steel. I think most of our mills have the best manufacturing processes to keep the carbon emissions at the lower levels. I have no interest in paying a premium for what a mill now claims as green steel,” a distributor, who typically purchases from an EAF mill, told Fastmarkets.

They added: “I think lot of companies are greenwashing their mill’s operations to add some kind of perceived value to the same products they’ve always produced.”

A second distributor said that no one is talking about green steel.

“I think what is hindering it is the same reason that I have for not promoting it — until the rest of the world matches our level of carbon reduction, what is the use? Does the world get to pollute and only the US has to conform?” the second distributor said.

Due to the large aversion to paying a premium for green steel, it’s probable that the US market is not going to see acceptance for “a while,” Wright said on Monday, with the only thing likely to spur any acceptance is “federal intervention.”

In March, the Department of Energy’s (DOE) invested $6 billion in decarbonization projects to reduce industrial greenhouse gas emissions, which was funded by President Biden’s Bipartisan Infrastructure Law (BIL) and Inflation Reduction Act (IRA).

Integrated steelmaker Cleveland-Cliffs was awarded $500 million to replace its blast furnace (BF) at its Middletown Works facility in Ohio with a hydrogen-ready direct reduced-iron (DRI) plant and two electric-melting furnaces.

SSAB Americas has also been selected for award negotiations for the potential construction of a HYBRIT manufacturing facility, which can produce fossil-free iron by using green hydrogen instead of fossil fuels.

Fastmarkets’ weekly green steel domestic, differential to US HRC, fob mill was flat at $0 per short ton on August 14.

Fastmarkets’ domestic green steel base price, hot-rolled coil fob US mill stands at $678.30 per ton. The price is the average of the most recent US Midwest and South HRC prices plus the US green steel differential.
 
Fastmarkets defines US green hot-rolled as having emitted carbon at or below 0.7 tonnes CO2e per 1 tonne of steel. This can be reached via native production, mass balancing, or renewable energy credits. Carbon offset credits are explicitly barred. The full methodology can be found here.

Fastmarkets’ domestic green steel, flat-rolled, differential to HRC index, exw Northern Europe was unchanged at €170-250 per tonne on August 8.

Meanwhile, Fastmarkets’ green steel import, differential to HRC index, cfr Vietnam was also unchanged at $150-200 per tonne on August 8.

Published by: Alesha Alkaff

Clean, lean US steel sector hunts for green steel premium

The US steel industry’s preponderance of electric-arc furnace (EAF) capacity may be a double-edged sword when it comes to collecting green steel premiums, market sources have told Fastmarkets.

By global standards, US steel is already pretty green — and pretty pricey.

The American Iron and Steel Institute credits EAFs in its most recent industry profile with about 71% of US domestic steel production, compared with a 26% global average.

A round-up of estimated greenhouse gas emissions from the top four US steelmakers — Cleveland-Cliffs, Nucor, Steel Dynamics Inc and US Steel —  from each company’s most recent sustainability report show a range of about 1.98 tonnes of carbon dioxide equivalent (CO2e) per 1 tonne of steel down to as low as 0.39 tonnes C02e per 1 tonne of steel, covering Scope 1 and 2 emissions, which are direct emissions generated by an entity or its subsidiaries and indirect emissions from energy used by an organization.

Scope 3 emissions are a little harder to pin down due varying definitions – most producers lump them in with raw material costs rather than assume the carbon emissions of heavy end-use emitters like automobiles.

Even there, however, at least one major producer – Steel Dynamics Inc – puts its Scope 1, 2 and 3 average emissions as low as 0.78 tonnes CO2e per 1 tonne of steel. The same sustainability report puts the global average around 1.91 tonnes CO2e per 1 tonne of steel, with the global blast furnace average at 2.33 C02e per 1 tonne of steel.

That cleanliness comes at a cost. Though environmental concerns are just one piece of the US price puzzle, they are partially reflected in the disparity between US, European and Asian prices.

Fastmarkets’ daily steel hot-rolled coil index, fob mill US Midwest was last calculated at $38.97 per cwt ($779.40 per short ton) on Wednesday May 15. This is against a backdrop of sideways-to-stagnant prices.

In contrast, Fastmarkets calculated its daily steel hot-rolled coil index, domestic, exw Northern Europe at €641.83 per tonne ($632.91 per short ton) on Thursday May 16.

Likewise, Fastmarkets’ weekly price assessment for steel HRC import, cfr Vietnam was $550-555 per tonne ($498.95-508.02 per short ton) on May 10.

Fastmarkets currently publishes green steel differentials for these European and Asian HRC assessments. The European green differential works out to $147.92-246.53 per short ton, while the Asian differential works out to $185.07-308.44 per short ton.

In a simplistic and possibly coincidental view, the European HRC price subtracted from the US HRC price is roughly the value of the European green steel differential.

When all steel is green, none is 
It’s tempting to say that buying US HRC in general is buying green steel, but the industry can’t be complacent if it wants to retain or grow that premium, according to Greenway Steel founder Randy Charles.

“US-produced steel does represent global leading low emissions — for now,” he told Fastmarkets. “That will change rapidly in the EU given the incentive behind the ETS [Emissions Trading System] and carbon liability, as well as investments being made in new H2 technology.”

Earlier this year, one steel mill executive told Fastmarkets that they wouldn’t be surprised if carbon emissions ultimately become another tool in the US’ protectionist toolbox, similar to the Carbon Border Adjustment Mechanism in place in the EU.

Such a move would have bipartisan appeal, regardless of the victor in the US presidential election in November, the executive said. It would echo the 232 national security restrictions originally put in place by President Donald Trump — and maintained by President Joe Biden — and it would mollify environmental advocates and industrial concerns alike, as the US already has a leg-up on the green steel front.

In that scenario, a prospective US green steel differential may actually go negative, as the carbon costs for higher-emission steel add up; it may be cheaper to buy green.

A second executive likened the push for green steel to the bounty some states place on mercury switches, a once-common and toxic component of older cars being sent to the scrapyard.

Some states paid a bounty per switch, incentivizing their removal. Some states still do. And some moved to a voluntary system that did away with bounties entirely, putting the cost of removal and reporting on the scrapyard.

A carbon tax on steel would harm incentives to go green in search of higher profit and make it just another cost of doing business — a boon to a burden in just a few years, he said.

Ultimately, green steel will come in two primary shades, worldwide, Charles said — relative and absolute.

“The absolute basis, and lowest footprint, will carry the highest premiums for end users wanting, or even needing, to decarbonize supply chains.” 

Published by: Dan Hilliard

fastmarkets.com