Jun 16, 2023
Europe plows ahead with new 'green steel' projects but spot buyers still resist to premium
2023-07-11
Carbon-accounted demand to rise faster than supply
Spot buyers reluctant to pay premium
Platts carbon-accounted premium at Eur85/mt
The European steel market saw another week of fresh "green steel" project and supply contract announcements, but European spot buyers have been largely reluctant to accept high offered carbon-accounted steel premium for hot-rolled coil in the week to June 16, while end-users have been settling deals with higher premiums.
As market participants expect that demand for carbon-accounted steel would rise faster then the mills would implement initiatives to reduce emission, end-users have been settling agreements to secure volumes.
Thyssenkrupp Steel and Mercedes-Benz signed a memorandum of understanding June 15 under which the automaker will receive CO2-reduced steel products from Thyssenkrupp from the second half of 2026 onward. The German car company also has an equity stake in Swedish steelmaker H2Green Steel for the supply of 50,000mt/y of lower CO2 emission steel. H2 Green Steel is expected to start production from 2025, it announced earlier this month.
ArcelorMittal and John Cockerill, a group developing steel-processing facilities and electrolyzers, announced June 14 they would build the world's first industrial-scale low temperature, iron electrolysis plant at a location yet to be chosen which would produce 40,000-80,000 mt/year iron plates in 2027.
And plant manufacturer Primetals Technologies and Hydnum Steel joined forces for new green steel production plant in Spain June 15.
Long-term vs spot carbon-accounted premium
The distinct difference in approach of spot and long-term buyers is a result of different needs of the buyers. Steel service centers and stockholders have just started to book first volumes of carbon-accounted coil, mainly booking smaller volumes in spot market. While end consumers, such as automotive and white goods industries, have relied on long-term agreements.
"Currently the market is fairly new and service centers that want to get into low-CO2 steel cannot really accept premiums the mills want, as they simply would not be able to transfer it to their customers," a service center source said. "But end users need the material, and they need to secure the volumes for the coming years. And although cost of steel is important [for end consumers], they would also achieve their emission targets and they have other costs, so it is easier for them."
European mills have been offering CASPs in a Eur50-350/mt range this week. Lower CASPs have been available from the mills utilizing carbon credits to reduce CO2 content. A mill asked for Eur50/mt premium for 25% emission reduction from average 2.1mt CO2 emissions from blast furnace producers in Europe. However, when the mills used a mass balance approach to cut CO2 below 1mt per 1mt of HRC, the premium jumped to Eur300/mt – similar to the offered extras from mills that have reduced their carbon footprint due to use of electric-arc furnaces.
The majority of buyers, however, continue to view material from mills using carbon credits as a temporarily solution until EUs mill implement new technologies. The majority also approach steel with lower CO2 emissions and the material from mills using carbon credits to reduce the CO2 content as separate products.
"I do not think that many buyers would rely on mills that use carbon credits, the material is usually not certified [by an external certifier]," a source from automotive industry said.
Mills that have achieved emission reductions below 1 mt of CO2 have been offering HRC with premiums of Eur200-350/mt.
Spot buyers, however, have been ready to accept CASPs of Eur50-100/mt and some deals have been reported with a premium of Eur100/mt earlier this week.
Platts assessed Northwest European hot-rolled coil carbon-accounted stable on day June 16 at Eur765/mt ex-works Ruhr.
The carbon-accounted steel assessment consists of Platts daily carbon-accounted steel premium assessment of Eur85/mt on June 16, stable on the day, and Platts daily hot-rolled coil price assessment in Northwest Europe of Eur680/mt ex-works Ruhr on June 16, stable on day.
Source: SP Global
