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.
