“Domestic interest is there… and hasn’t changed much domestically over the past two years. Inquiries continue to come in, but nobody domestically is willing to pay a premium for green steel,” a buyer said.
A US West Coast distributor told Fastmarkets that they were “all for” green steel but said that end users “definitely” would not pay a premium for the material, adding that the price of green steel cannot be more expensive than regular steel.
Globally, steel made in the US is already comparatively greener.
The American Iron and Steel Institute credits electric-arc furnaces (EAFs) in its most recent industry profile with about 71% of US domestic steel production, compared with a global average of 26%.
EAFs have a lower carbon footprint due to their use of electricity, compared with blast furnaces (BFs), which rely on coal and generate higher emissions of carbon dioxide and other pollutants.
The domestic steel industry also has a carbon advantage because US steel producers are 75-320% more carbon efficient than global markets, Brandon Farris, vice president of government affairs at the Steel Manufacturers Association (SMA), said in July.
“The US also has a carbon advantage because we let market forces determine the production route. EAFs are inherently more efficient. Virtually every new mill built in the last 50 years in the US has been an electric furnace,” Farris added. “In contrast, when you look at the rest of the world, only around 5% of steel production in China uses the most efficient process. In Brazil, it’s around 15%.”
A second buyer told Fastmarkets that they were keeping tabs on negotiations between automotive firms and domestic mills.
“You have the mills wanting to get paid for ‘green’ steel and the automakers not wanting to be charged for it,” the second buyer said.
While customers are willing to pay a premium for better materials, steel producers must consider the economics of technological advancements for producing green steel, a mill source told Fastmarkets.
“Incentives are another word for taxes, and someone has to pay the bill,” the mill source added.
On top of buyers resisting to pay a green steel premium, some people are simply not attuned to the latest market trends, sources said.
“Most people aren’t talking about [green steel] because, right now, it doesn’t affect the average manufacturer. Buyers just don’t care about it. I don’t think anyone wants to accelerate it because it means higher costs to the end user,” a second distributor said.
But some mills are optimistic about the development and evolution of the green steel market in the US.
“We are talking to customers every day, and this topic is top of mind with many. Most [people] don’t know what they need yet but are open to discussing the direction. The more that occurs, the more the market will naturally develop,” the mill source said.
Fastmarkets’ weekly assessment of the green steel domestic, differential to US HRC, fob mill was $0 per short ton on Wednesday August 7.
Fastmarkets’ domestic green steel base price, hot-rolled coil fob US mill, weekly inferred was calculated at $679.40 per short ton. The price is the average of the most recent US Midwest and South HRC indices 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.com/methodology.
“Globally, the only movement [toward green steel] is coming from European automotive [original equipment manufacturers]. They are not only ready but are consistently paying a premium on green steel,” the first buyer said.
Fastmarkets’ latest assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe was €170-250 per tonne on August 1.
Meanwhile, Fastmarkets’ latest assessment of the green steel import, differential to HRC index, cfr Vietnam was $150-200 per tonne on August 2.