The incident has caused a major blockage for ships traveling the Moselle to reach the Rhine – a vital artery for the shipment of metals such as aluminium and steel in Germany and Europe. Around 70 ships have been stuck along the Moselle on the way to the Rhine, Fastmarkets understands.

Repair works could last until March 2025, seriously disrupting the trade flows of steel and metal raw materials in Germany and across Europe, according to market participants.

Sources expect the disruption to raise freight costs for alternative transport methods and therefore prices for some raw materials, such as ferrous scrap, in the affected areas.

“In addition to the technical challenges of restoring the lock’s functionality as quickly as possible, the ships [are] stuck above Müden on the Moselle and Saar…Long periods of downtime for freight and passenger shipping represent an enormous economic burden,” the German Waterways and Shipping Authority (WSA) federal agency said on Monday.

“The WSA is therefore urgently looking for a solution to lock the ‘trapped’ ships into the Müden downstream area so that they can leave the Moselle in the direction of the Rhine and carry out other transports there,” the WSA said.

Impact on prices

The Moselle is one of the most vital transport routes for shipping in Germany and Europe. So far in 2024, around 8.1 million tonnes of goods have been transported through the Müden lock, according to the WSA.

The majority of the transported goods are ores, steel raw materials, mineral products and fuels upstream, as well as agricultural and forestry products, and downstream iron and steel products.

Although most market participants said it was too early to define how the disruption could affect metals prices, steel market sources said they believed that freight prices will likely jump for alternative routes and transport solutions, and as a result prices for raw materials might move higher.

The main alternative methods to ship scrap metal would be via truck and rail, according to market sources. But if freight must be transferred to the road, around 80 truckloads of scrap would be needed to replace one barge of the steelmaking raw material, according to a German steel trader.

A Turkish scrap trader also said that the river accident was a reason why Turkish import scrap prices rebounded late on Tuesday on new deals from Europe and the US, after hitting their lowest levels since June 2022 earlier this week.

“The accident caused the downturn in the scrap markets to stop. This was also one of the factors that prevented [Turkish scrap import] prices from falling further. I believe it will affect the scrap industry throughout Europe,” a Turkish trading source said on Wednesday.

Fastmarkets calculated the index for steel scrap HMS 1&2 (80:20 mix) North Europe origin, cfr Turkey at $339.45 per tonne on Wednesday, up by $14.45 per tonne day on day.

Steel industry assesses the damage

Saarstahl and Dillinger, German steel companies based in Saarland, are both affected by the incident, Fastmarkets heard.

“Like other companies, the Saarland steel industry is also affected by the closure. We will quantify the extent over the next few days and use alternative transport solutions such as rail and lorries. Both incoming and outgoing goods are affected. We are working with all parties involved to find a quick solution,” the spokesperson of SHS Stahl-Holding Saar, a major shareholder in Dillinger and Saarstahl, told Fastmarkets on Wednesday.

Sources familiar with the matter also said that both raw materials supply and shipping of finished steel products might be affected, especially if repair works last for an extended period.

“For example, Dillinger also produces large steel heavy plates that can only be shipped by river – shipping those by truck or railway is not possible,” a buyer in Germany said.

Saarstahl runs three steel plants in Germany, in Voelklingen – where the company has a 2.6 million tpy basic oxygen furnace (BOF) and can produce sections and semi-finished products – in Neunkirchen, and in Burbach.

In Neunkirchen, the company produces 600,000 tpy of wire rod and 550,000 tpy of merchant bar, while in Burbach the company operates a 1.2-million tpy capacity wire rod mill, according to Fastmarkets data.

Dillinger has capacity to produce 2.7 million tpy of crude steel at its plant in Dillingen via BOF, while also running a plate mill with an annual capacity of 1.7 million tpy of hot-rolled plate.

ArcelorMittal

A source at major steelmaker ArcelorMittal based in Luxembourg downplayed the impact of the incident on the company’s raw material supply.

The company sources most of its scrap via road and rail, and the duration of the repairs would be less than many feared, the source said.

“There will be no impact [on ArcelorMittal]. The lock will be repaired in a few weeks; scrap suppliers are creating hype to put some life into a dead market,” the source said.

“Seventy vessels are stuck, it’s true, but the repair process will be much faster…I expect it to be complete by January 15,” the source added.

On the impact on the steelmaker’s scrap supply, the source was confident there would be no disruption.

“We have more than enough inventory. We get 0-10% of our scrap from this route, and that is the expensive flow so we are happy not to get anything via this route. We are landlocked; the port is far away, so it’s not really significant,” the source said.

This position was echoed by the official comment from an ArcelorMittal spokesperson.

“The incident that occurred at one of the locks on the Moselle river in Germany should have a limited impact on ArcelorMittal’s activities in Luxembourg,” the statement, received by Fastmarkets on December 11, reads. “To date, only 10% of scrap supplies to ArcelorMittal’s electric furnaces in Luxembourg and 10% of shipments pass through the port of Mertert [the port on Moselle river through which raw materials and finished products transit for the ArcelorMittal sites in Luxembourg].”

ArcelorMittal’s logistics teams are currently working on alternative solutions, both in the short and medium term, to offset this disruption to incoming and outgoing flows, the spokesperson said.

“These solutions could involve receiving scrap volumes via the port of Koblenz and then transporting them by road and/or rail to the Group’s Luxembourg sites. For shipments, one solution would be to send sections and sheet piling by rail to the port of Antwerp. These solutions will be explored in the coming hours and days to define the most efficient logistical circuit possible,” spokesperson added.

ArcelorMittal runs two electric-arc furnace (EAF)-based mills in Luxembourg.

ArcelorMittal Differdange has an EAF with projected capacity for 1.4 million tpy of crude steel and a 1.2 million tpy sections mill, according to Fastmarkets data.

ArcelorMittal Belval runs a 950,000 tpy EAF and a 1.4 million tpy sections mill.

Impact on supply routes and transport costs

A major European scrap processor agreed that the effect on ArcelorMittal would be minimal, but said the effect on other mills could potentially be more significant, well as on scrap sellers through increased transport costs.

The processor said it had heard of steelmakers already rerouting scrap supplies from Italian steelworks to operations in Germany that were affected.

A second major European scrap processor agreed that several trucks would be required to cover the volumes shipped in one barge, saying that each barge would typically take 1,500-2,000 tonnes of ferrous scrap, but said he didn’t believe there would be any problem in sourcing more trucks despite the consequent higher demand level.

Only a third of scrap is typically transported by water in the western European market, he said, while the other two thirds are fulfilled by rail and truck.

The major disruption comes at an already challenging time for European scrap processors with EU scrap supply already under severe pressure throughout 2024.

This is due to slower economic activity and higher inflation rates both hurting scrap generation from manufacturing output and reducing the volume of goods being scrapped, according to market participants, while higher energy and labor costs in recent years have also hampered economic health in Europe.

Cem Turken in Mugla contributed to this story.

The post European steel companies scramble for alternative transport after Moselle river accident appeared first on Fastmarkets.

There are quite a few new green steel projects announced in Europe with new green steel tonnages expected to arrive in the market starting 2025-2026. Volume-wise, how many tonnes of green/carbon reduced steel will be in the market in the next five years?

Alexander Fleischanderl (AF): It’s true that Europe is progressing at high pace with multiple transition projects. However, the first thing required is a definition of “green steel.” We see individual branding for steel producers in the market, where the carbon footprint is different. And we should stop the proportional green steel allocation system, where the reduced fossil usage is allocated to a specific amount of steel produced.

The real carbon footprint of the individual coil purchased by the end-customer is different to what is allocated. What we need is a coil- or sequence-based carbon footprint certificate.

The ongoing transition projects will still work with a high share of natural gas for their Direct Reduction Plants (DRPs). The steel produced will be low-carbon steel, but not net-zero yet.

But cost competitive real green steel cannot be expected soon. Hydrogen procurement deals are at a level of around €8 per kg instead of earlier reported forecasts of €2-3 per kg before 2030.

The chicken-egg problem is obvious, the hydrogen market must scale, but it hasn’t yet because the demand side is weak.

Despite these roadblocks, we recognize a growing interest for low-carbon footprint steel from the demand side especially for automotive and white goods, but also in terms of public procurement. The share of green steel in Europe in five years’ time could be around 10% of total production.

But its competitiveness compared with “gray steel” (regular steel) can only be achieved by combining three things: the benefits from the avoidance of emissions trading scheme (ETS) payments; a green steel premium; and support from the public for Capex [capital expenditure] and Opex [operational costs].

Jose Noldin (JN): I strongly believe the market will be tight and more than people might anticipate. But that will strongly depend on regulation, standards and definitions, rather than on self-imposed targets. It is carbon pricing developments and broader initiatives, such as the European Union’s “Green Deal Industrial Plan” and “Steel and Metals Action Plan,” that will move the needle in terms of business environment, demand aggregation, etc.

To give some numbers, I expect the demand for truly green, fossil-free steel (less than 400 kg of CO2 per 1 tonne of steel) to be at least 10 million tonnes a year in 2030. As the offer will not be there, people may end up with solutions such as CO2-reduced/mass-balance steels, which, in my opinion, is very borderline from a greenwashing perspective.

Paulo Carvalho (PC): It depends on what we are calling “green steel” here. In terms of hydrogen-based, near-zero-emissions steel (with a CO2 footprint well below 400 kg per tonne, including Scope 3 emissions), for flat products, the available tonnages are [almost non-existent right] now – other than tiny pilot volumes – and will be very limited in the next five years. But before 2030, [availability will be] in the low-single-digits in millions of tonnes in the best-case scenario.

Stegra [formerly H2 Green Steel] is likely to have ramped up the plant it is building in Boden, Sweden; Hybrit/SSAB will be scaling up its first demonstration plant; and GravitHy may have started up its H2-DRI [hydrogen-powered direct reduced iron (DRI)] plant in France enabling hydrogen-based green steel production elsewhere.

Various other projects could also be at or close to ramp-up, while some may face delays – so volumes will still be relatively small and that will remain the case even if we add volumes from European scrap-based EAF flat steel plants – because there are only a handful of those.

The bulk of low-carbon flat steel within this timeframe will still be of certificates-based products, or using mass balancing, with a higher carbon footprint. So the supply-demand balance will still be relatively tight. For long steel, a much bigger share of European production already meets lower CO2 emissions thresholds, so the supply-demand balance is much less tight.

Most of the EU flat steelmakers are opting to switch from the conventional, blast furnace-basic oxygen furnace (BF-BOF) route to using electric-arc furnaces (EAFs) or the EAF+DRI steelmaking route, but what other options does industry have?

AF: Well, there are not too many transition options out there, despite opting for EAF, with a flexible feedstock mix, but including DRI/HBI to dilute tramp elements coming along with scrap usage. The DRP can either be integrated or decoupled from steelmaking, allowing for an investment in regions that benefit from much lower energy costs.

A viable option, still not sufficiently supported by governments, is carbon capture utilization and storage (CCUS). We believe the net-zero timeline will be missed without a proper deployment of CCUS technologies.

Last, but not least, there is the option to optimize existing assets. This includes the electrification of burners and furnaces, endless casting & rolling, any energy efficiency measures, waste heat recovery from waste gas as well as improving circularity [through] yield improvement, recycling of by-products and more scrap usage.

JN: Options include 100% scrap (very limited due to scrap availability both in terms of quantity and quality), biomass (huge challenges in supply chain) and CCUS (huge issues with regulation, economics and TRL). Other options, such as Molten Oxide Electrolysis (MOE), still have a long development journey ahead of them.

I, therefore, firmly believe that pursuing the H2 based DRI+EAF route – especially with innovative business models where Iron is decoupled from steel – remains the right way to go and will allow for a very competitive scheme. In this way, iron is produced where low-carbon electricity is available and competitive; is then shipped globally as a commodity to steel producers that will play in their own backyards, in their comfort zone – i.e., steel production. In the transition, using hot-briquetted iron (HBI) to boost blast-furnace operations can also be a very interesting and competitive solution.

PC: Europe has a large fleet of existing BF-BOF plants, many of them running very efficiently and close to downstream processing plants and end markets – although most are suffering in current market conditions. Therefore, many players are opting for an intermediary solution, replacing the BFs only (with a DRI+smelter to leverage lower-grade ores) and keeping the steelmaking with their existing BOFs. The economic case for this solution is probably better than a full conversion to H2-DRI steelmaking, especially if the cost of hydrogen remains higher for longer.

Imported, or third-party, DRI/HBI could also play a major role, either from EU countries/sub-regions where green power prices are competitive, or from third countries/regions such as the Middle East & North Africa (MENA) region, which are well suited to renewable power and have competitive gas prices.

Policies and regulations in the EU are massive drivers for decarbonization, notably the EU emissions trading scheme (ETS) and its carbon border adjustment mechanism (CBAM). So, is CBAM a problem or a savior for the industry? What impact will there be on the market once CBAM is fully phased in from 2026 on and free-ETS certificates start being phased out (halved by 2030 and fully eliminated by 2034)?

AF: ETS is the main pillar supporting EU transition project investments. For example, assume that a 6 million tonnes per year steel mill emits 10 million tonnes of CO2… If the ETS price is at €150 per tonne in 2034, the steelmaker would have to pay €1.5 billion per year, adding €250 per tonne of steel produced.

CBAM is, indeed, controversial [because] it adds a lot of administrative burdens for all players in the steel value chain, including technology providers, such as Primetals. But it is the only instrument identified to avoid carbon-intensive steel from flooding into the EU from other markets. So it at least provides a level [playing field] for all players. But it can be expected that foreign markets will produce their share of low-carbon steel for export to the EU, so the CBAM weapon may not be as effective as hoped.

JN: CBAM cannot be reduced to a savior or a problem. It is a good (yet complex) starting point because without instruments like CBAM the market does not resolve the decarbonization puzzle by itself. CBAM is imperfect, I agree, but it is definitively needed, so I hope it stays and gets improved, optimised, fixed, reinforced, and so on… but not abandoned or significantly slowed down.

The impact is obvious! For example, with a carbon pricing of €100 per tonne of CO2 once allowances are phased-out, a fossil-based steel producer will have a “penalty” of roughly €200 per tonne of steel if it insists on sticking with the coke-based BF-BOF route. From a different perspective, this could be considered the so-called “green premium” which is needed during the transition while the CBAM/phase-out allowances are not fully in place.

But a workable and strong CBAM, along with a full phase-out of the allowances, will make the polluters pay and will, therefore, serve as a huge driver for investments in green steel.

PC: CBAM is a temporary but necessary evil – as I keep repeating. Necessary, because, in the absence of a global carbon price, European production is penalized vis-à-vis imports and that distorts capital allocation (and jobs, tax generation, etc); evil, because the sheer complexity of compliance – most usual exporters to the EU are not prepared yet – generates distortions itself and ends up being a de-facto non-tariff trade barrier.

So, in my view, CBAM has to be temporary. There will be pushback from other regions and, ultimately, industry and policy efforts have to be toward convergence of carbon policies and pricing globally, not on raising border tariffs. Until that happens, of course, it will affect the market, favoring imported steel with lower-emissions footprints – with MENA potentially emerging as a key source – and penalizing existing conventional steel importers.

Another major impact will be on the competitiveness of EU steelmakers in export markets: because there is no ETS rebate for exports or “inverted CBAM.” The European mills [that bear a carbon costs] will increasingly be at a competitive disadvantage in export markets without a similar carbon price and will lose market share.

Raw materials challenges arise from new ways of steelmaking. Can we expect potential shortages of pellets, scrap? And how will raw materials supply chains evolve?

AF: The trend for massive new DRI/HBI capacity is likely to continue and even accelerate. DR-grade iron ore will be in short supply and pelletizing capacity is likely to run short as well.

We see three ways forward: iron ore beneficiation efforts; using lower-grade iron ore in DRP; and ground-breaking fluidized bed based DRP that does not require pelletizing. In the case of lower grade ore usage, a smelter is required to maintain high metal yields and efficient gangue removal in he form of added-value slag to support circularity.

Fluidized bed DRPs are more energy efficient, improving yield and are lower in overall Capex. Utilization of more scrap is indeed the most effective way to decarbonize. However, even in 2050 more than 50% of steel production will be based on virgin iron ore. The EU is still exporting about 20 million tonnes per year of lower-quality scrap, mainly to Turkey. We should increase our efforts to process and clean EU scrap to produce a recycled feedstock with certified quality and chemical analysis. Digitalization, including artificial intelligence (AI) will support these efforts.

JN: I believe the market will react if the demand is there. Today, pellet makers, for example, face a chicken-and-egg dilemma. There is a potential shortage, but projects need to be more mature and reach final investment decision (FID) to allow pellet producers and scrap processors to invest in new capacity, new technologies and debottlenecking!

If nothing is done, yes, there will be a shortage. But I still believe that when DR projects reach FID, pellet producers will recognize the great opportunity to play in the high-value side of the business and then invest in new capacity.

Still, for some years the market may be tight and support good premium levels which, by the way, will incentivize new investments in capacity.

PC: DR-grade pellets and agglomerates are already relatively scarce and the raw materials industry has an immense challenge to ramp up capacity and production. That requires big investments in concentration/beneficiation plants and pelletizing plants as well. Other high-grade pellets will also be increasingly used, in combination with a melter/submerged-arc furnace to remove gangue after the DRI making process, which will help alleviate the relative scarcity.

Scrap is already fully recycled and we already broadly know now how much will be available to be recycled into new steel in, say, 2050 – only about half of the world’s steel needs by then. But given its direct contribution to lowering the carbon footprint of the steel produced, I currently see a scramble for scrap resources (and sorting/processing facilities) and that will only intensify in the coming years.

The supply chain will continue to further integrate vertically into scrap and the miners, steelmakers and end users will intensify the development of partnerships to ensure end-to-end availability of high-quality raw materials for the required low-carbon final products.

Renewable energy and green hydrogen are deemed to be the weak spots of decarbonization, notably due to high price of hydrogen. Are there alternatives to the use of green hydrogen in steelmaking?

AF: Renewable power availability and pricing is the most pressing roadblock. Power prices have a strong impact on hydrogen prices – the main reason why decoupling the energy-intensive ironmaking from steelmaking has become an omni-present discussion point.

Regions like the Middle East, North America and Australia have different energy prices. We are talking about up to 10-fold prices per MWh in Europe! The alternative to hydrogen is electrification of process steps (again electric power) and the intermediate use of natural gas while processes are designed to switch to hydrogen at a later stage.

JN: I believe people are looking from the wrong angle here. Instead of just saying that hydrogen is expensive, people should reconsider their business model. Make hydrogen where low-carbon electricity is available and competitive and then ship DRI/HBI as a commodity to steel-producing sites. It’s a big mistake is to insist on making iron close to steel just because “this is what we have been doing as an industry for decades.”

It’s very simple! Hydrogen-based DRI/HBI can be cost effective and a smart way to store and/or transport hydrogen! It’s just that it will be H2 in “metallic form.” In other words, decoupling iron from steel can catapult the H2 economy and decarbonize steel production with a very interesting and competitive value chain. In the future, Iron will be produced by ironmakers and steel by steelmakers. Looks logical, doesn’t it?

PC: Ironmaking has been dominated by coke (fossil coal) as the key reductant and, although hydrogen is the key solution to reducing the reliance on fossil reductants, natural gas is a tried-and-tested (and widely used) alternative.

To produce near-zero emissions steel, its CO2 emissions have to be captured and stored. The economics and geology for that to happen at scale are still to be proven and differ widely region by region, and it can involve controversial aspects such as enhanced oil recovery, but in my view carbon capture and storage (CCS) will play a key role in the steel sector’s transition to net zero.

Fastmarkets green and reduced carbon steel prices

In 2023 and 2024, Fastmarkets launched 12 green and reduced carbon steel prices to assess the price differential against traditional flat and long steel prices, establish benchmarks in emerging markets, bring more transparency for the industry and support the investment decisions needed to reduce emissions.

• MB-STE-0904 Green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe, €/tonne
• MB-STE-0905 Green steel base price, HRC exw Northern Europe, daily inferred, €/tonne
• MB-STE-0907 Green steel import, differential to HRC index, cfr Vietnam, $/tonne
• MB-STE-0908 Green steel base price, hot-rolled coil cfr Vietnam, weekly inferred, $/tonne
• MB-STE-0911 Flat steel reduced carbon emissions differential, exw Northern Europe, €/tonne
• MB-STE-0912 Flat steel reduced carbon emissions, daily inferred, exw Northern Europe, €/tonne
• MB-STE-0916 Green steel domestic, differential to US HRC, fob mill, $/short ton
• MB-STE-0917 Green steel base price, hot-rolled coil fob US mill, weekly inferred, $/short ton
• MB-STE-0921 Green steel import, differential to rebar assessment, cfr Singapore, $/tonne
• MB-STE-0924 Green steel base price, rebar cfr Singapore, weekly inferred, $/tonne
• MB-STE-0922 Flat steel reduced carbon emissions differential, exw China, yuan/tonne
• MB-STE-0923 Flat steel reduced carbon emissions, daily inferred, exw China, yuan/tonne

Get in touch with our team today to learn more about Fastmarkets’ steel prices.

The post Green steel in focus: five key questions answered by experts appeared first on Fastmarkets.

Each sectoral “Breakthrough” covered by the Agenda is represented by various nations and sector-specific stakeholders, who regularly meet throughout the year and work together to boost efforts to achieve sector-specific goals.

The steel segment of the Breakthrough Agenda – led by Germany and the UK – has an objective to make near-zero emission steel the preferred choice in global markets, with efficient use and near-zero emissions steel production established and growing in every region by 2030.

“We are concerned that the steel sector may not meet that target, because to do so requires the work of all steel producers, and we are disheartened that there are industry players that do not have the ambition or commitment to achieve the goal,” Adina Renee Adler, executive director of the Global Steel Climate Council (GSCC), told Fastmarkets.

According to the third and latest annual Breakthrough Agenda report, published in November 2024, the steel sector is not on track to meet net-zero by 2050.

Total emissions have continued to increase over the past decade and a high number of new high-emission blast furnaces is anticipated, with an estimated 65 million tonnes of steel production in planning or under construction by the end of 2026, the report said.

The report also said that while announcements for new near-zero emission capable primary steel projects are rising, there is a need for “firmer timelines for transitioning to fully near-zero emission, and stronger policy support and demand signals to be converted to investments.”

The Agenda outlined 5 key priority actions for the steel sector to focus on in order to accelerate the green transition: definitions and standards, demand creation, research and innovation, trade conditions and finance and investment.

Lack of common standards slows green steel uptake

One of the key things the report suggests to focus on is an acceleration of the adoption of common standards and definitions for low emission and near-zero emission steel.

The lack of common widely-recognized standards for low emission steel has already been brought up by steel market participants in both the US and Europe numerous times, Fastmarkets heard.

Europe

For example, Sweden-based steelmaker SSAB called on policymakers to introduce common emission measurement rules during COP29 in Baku, Azerbaijan.

“SSAB believes that ambition and speed in the climate transition must increase. We need to phase out fossil fuels and it must cost to emit. Global carbon pricing mechanisms and common emission standards are needed to set the foundation for faster industrial decarbonization,” Martin Pei, chief technology officer at SSAB, said on November 11.

Major flat steel suppliers in Europe are already offering their own green steel brands with lower-carbon footprints – including XCarb, Arvzero, SSAB Zero, Bluemint and Greentec – but there is currently no common standard for the industry, in Europe or globally.

“We need a coordinated approach from the entire sector – a simple approach that is applicable to all members,” a trading source in Switzerland told Fastmarkets.

Fastmarkets’ methodology defines European green steel as “steel produced with Scope 1,2 & 3 emissions at a maximum of 0.8 tonnes CO2 per tonne of steel.”

And Fastmarkets’ weekly assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe was €80-200 per tonne on November 21, widening downward from €100-200 per tonne on November 14.

North America

Producers in the US also offer a slew of low-carbon emissions products, with electric-arc furnace (EAF) producer Nucor offering Econiq, its line of certified low-embodied carbon steel, and integrated producer US Steel offering verdeX, which contains up to 90% recycled steel content, according to the company’s website.

Despite an existing market for low-carbon steel, there still lacks clarity around what constitutes as green steel in North America, a buyer told Fastmarkets.

Aligning emissions standards within the steel industry will take time to fully achieve, sources previously told Fastmarkets.

“There’s been a great deal of progress in terms of the amount of understanding globally on how to measure carbon emissions,” Kevin Dempsey, American Iron and Steel Institute (AISI) president and chief executive officer, said.

“There isn’t a complete consensus but the amount of attention being given to it is positive. It’s a process toward building a consensus, and that takes some time,” Dempsey said.

The Agenda offers a few steps to address the issue, including:

• Developing common principles for definitions that are net-zero compatible, with a view toward adopting low and near-zero emission thresholds within national policies by the end of 2025;
• Developing and working to implement guidelines for the harmonization of Product Category Rules (PCRs) and Environmental Product Declarations (EPDs);
• Progressing alignment and adoption of emissions labeling and certification; and
• Exploring options for developing interoperability tools and determining equivalency between different certification schemes.

Creating demand for green steel

To support steelmakers’ decarbonization efforts, governments have to commit to buying green steel and establish appropriate implementation frameworks.

Notably, increasing public and private procurement commitments, including the introduction of incentives to use green steel in key downstream sectors, such as automotive and construction, would be necessary to support the sector, Fastmarkets understands.

This echoes the key concerns of the European steel industry.

“The demand for low-CO2 steel should be stimulated through public procurement and in public auctions… A well-recognized labeling system for green steel should be developed by the industry and stakeholders, to be used as a benchmark and reference,” the EU Steel Action plan, published by European Steel Association Eurofer and European trade union IndustriAll in November 2024, reads.

In Europe, deteriorating macroeconomic conditions and slowing consumption across key steel-consuming sectors have been limiting buying interest for green steel, market participants said.

“The demand for green steel can only come from the top. We need to increase green steel uptake by stimulating green steel use in construction projects, maybe subsidizing green steel purchases,” a steel service center in Germany said.

But despite the limited buying interest of green steel in Europe, Adler said that there are good growth opportunities in the region “because of regulations that obligate steel consumers to incorporate low-carbon and circular-made materials into finished goods, and we hope this competitive landscape will also stimulate demand in other regions.”

Nexus between steel decarbonization, trade

Another important milestone would be having aligned trade conditions globally, which would help to establish a level playing field for low-emission steel trading.

Europe

One such trade instrument is Europe’s Carbon Border Adjustment Mechanism (CBAM) – a carbon leakage protection measure, designed to protect EU markets from import commodities, including steel and aluminium, that don’t comply with EU climate regulations.

CBAM implementation, however, still raises certain concerns, especially among European steel market participants, due to the several unaddressed issues.

One major unaddressed issue in particular was the lack of focus on exports, which was compromising European steelmaker competitiveness in global markets.

Notably, export-oriented European steel companies bear additional carbon costs, which undermine their competitiveness in global markets, Fastmarkets understands.

“It is necessary to ensure that EU steel exports do not become uncompetitive because of the costs and regulatory burdens associated with decarbonization,” a steel producer in northern Europe said.

European steel export volumes have been declining in past years: from 22.6 million tonnes in 2019 to 15.2 million tonnes in 2023, according to Eurofer data.

North America

The relationship between the EU and the US is significant, considering that both parties have previously negotiated future arrangements for trade in the steel and aluminium sectors, to combat both global non-market excess capacity and the carbon intensity of those industries.

Both parties announced the Global Arrangement on Sustainable Steel and Aluminium (GASSA) partnership in October 2021, but negotiations have been stalled since 2023 and are postponed until the end of March 2025.

The US has also cracked down on a flood of unfairly traded steel imports hurting the industry, with members of Congress introducing the Leveling the Playing Field 2.0 Act (LTPF 2.0).

“Congress must take action to update our trade laws to address these and other trade-distorting practices,” AISI said in a press release in July, urging members of Congress to cosponsor the LTPF 2.0, which currently has 82 cosponsors in both the Senate and the House.

The post Nations commit to accelerating steel decarbonization efforts, unveil new priority actions: COP29 appeared first on Fastmarkets.

Entitled A European Steel Action Plan, the demands cover seven topics: EU trade policy; the Carbon Border Adjustment Mechanism (CBAM); EU energy policy; green steel markets; investment in transformation; access to critical raw materials; and the EU social policy.

According to the plan: “Ever-increasing steel excess capacities in third countries and unfair trade practices threaten the viability of the European steel sector and hinder further investment in [European] green steel. [And] high energy costs and growing carbon costs have eroded Europe’s industrial competitiveness.”

With steel consumption steadily deteriorating so far in 2024 and with Eurofer downgrading its outlook for the sector several times already this year, in its latest outlook, published on October 29, Eurofer said it expects apparent demand to shrink by 1.8% year on year to 127 million tonnes in 2024 — a significant downward revision from its previous forecast at the end of July, which was for a slight recovery of 1.4%.

At the beginning of  2024, Eurofer predicted that apparent steel consumption in the EU would rise by 5.6%, to 137 million tonnes through the year. The downward revision is the third time Eurofer has downgraded its forecast, with steel prices under pressure for the most of the year.

In October, Fastmarkets’ steel hot-rolled coil index domestic, exw Northern Europe averaged €549.25 ($) per tonne ex-works, sharply down from the average of €616.63 per tonne in October 2023.

In January 2024, monthly average was €731.73 per tonne.

“All recent attempts [by] European mills to increase [HRC] prices [have] stumbled over a lack of demand,” a stockholder in Germany said.

Stronger trade policies 

The plan blames the EU steel sector’s woes on “worsening global steel excess capacity” becoming an “existential threat to the sustainability of the European steel industry,” citing figures from the Organization for Economic Co-operation & Development (OECD) which put the excess at “more than 550 million tonnes – four times more than annual EU steel production.”

Sources told Fastmarkets that Europe’s nominal crude steelmaking capacity was well above 200 million tonnes, but said that actual output volumes have been lagging far behind that total in recent years.

In 2023, steel output among the EU’s 27 members fell to 126.30 million tonnes, down from 136.30 million tonnes in 2022 and down from 152.60 million tonnes in 2021, according to data from the World Steel Association (worldsteel). 

“This overcapacity is undermining the viability of the EU steel sector in two ways. First, China is massively exporting steel worldwide at prices below the cost of production, which is severely depressing prices. Second, these exports are forcing other regions to divert steel to the EU market,” the Eurofer/IndustriAll plan says.

In the first two quarters of 2024, carbon steel imports to the EU amounted to 13.5 million tonnes. For the whole of 2023, steel imports were 24.8 million tonnes.

Sources said that imports account for up to 30% of EU steel consumption.

To address the issue of imports the Eurofer/IndustriAll plan suggests:

• Enforcing EU Trade Defense Instruments, such as anti-dumping, anti-subsidy and safeguards tools
• Replacing the current steel safeguards, which end in 2026, with a more robust tariffication regime
• Concluding an international agreement for sustainable steel, in line with CBAM and in full compliance with WTO rules

In October 2024, the Commission took the first steps in strengthening trade barriers by implementing registration for all imports of products under anti-dumping or anti-subsidy investigations, including ongoing investigations where provisional determinations have not yet been made.

CBAM in the spotlight

EU’s CBAM, a carbon leakage protection measure, is expected to fully come into force in 2026, but Eurofer and IndustriALL have warned against CBAM circumvention, resource shuffling and delocalization of downstream sectors.

“It is critical that the effectiveness of CBAM is properly monitored and secured within the entire-value-chain, including downstream sectors,” the plan says,

Market participants have brought up the fact that CBAM does not take into account steel exports, thereby compromising European steelmaker competitiveness in global markets.

“Export-oriented companies bear additional carbon costs, which undermines their competitiveness in global markets,” a trading source said.

European steel export volumes have been declining in the past years: from 22.6 million tonnes in 2019 to 15.2 million tonnes in 2023, according to Eurofer data.

The introduction of CBAM could also result in “lost added value” for the European manufacturing industry, sources said, and importers might start avoiding importing goods covered by CBAM and instead buy “items with higher customs classification” instead of semi-finished products.

The European Commission is investigating the potential extension of CBAM to products downstream of the goods subject to the current regulations, such as iron and steel, but a final decision has yet to be made.

Green transformation requires support

To comply with the European Union’s ambitious target to become a net zero-emitter by 2050, the steelmaking industry needs to transform quickly. but it will need support, according to the Eurofer/IndustriAll plan.

“The financial needs until 2030 are estimated today at around €30 billion for capital expenditure (Capex) and €55 billion for operating expenditures (Opex), totalling more than €85 billion,” the plan says.

In the report, Eurofer and IndustriAll stress the fact that stimulus packages at member state level and at EU level are essential to support developments in steelmaking, including creating and promoting the key markets that will drive demand for green steel made in Europe. 

“The demand for Low-CO2 steel should be stimulated through public procurement and in public auctions… A well-recognized labelling system for green steel should be developed by the industry and stakeholders, to be used as a benchmark and reference,” the plan says.

Notably, the plan calls for:

• An EU labelling system for green steel
• A review of relevant EU legislation to promote green steel made in the EU in public procurement and public auctions
• The introduction of incentives to use green steel in key downstream sectors, such as automotive and construction.

That echoes the key concerns of the industry regarding the green steel transition.

Market participants said there was a lack of projects across Europe requiring green steel and that demand from the key consumer – the automotive industry – has recently been slowing, in line with the general downturn in steel sales.

“Our customers say they love green steel, but they can’t pay more because they are fighting for their survival,” a distributor in Germany said.

“We can’t reverse the decarbonization and reduced-CO2 steel is coming – it’s just the matter of time. But in a recession, it just becomes a secondary [issue] for a buyer,” the distributor added.

And a buyer in Germany said: “For infrastructure projects – publicly funded [projects] in particular – it is possible for mills to sell green steel at higher premiums. But the spot market is just not there yet. There is no willingness [among buyers] to pay a premium.”

Major flat steel suppliers are already offering their own green steel brands with lower-carbon footprints – including XCarb, Arvzero, SSAB Zero, Bluemint, Greentec — but there is currently no common standard for the industry.

“We need a coordinated approach from the entire sector – a simple approach that is applicable to all members,” a trading source in Switzerland said.

Fastmarkets’ methodology defines European green steel as “steel produced with Scope 1,2 & 3 emissions at a maximum of 0.8 tonne CO2 per tonne of steel.” And Fastmarkets’ weekly assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe was €100-200 per tonne on November 7, stable week on week.

Clean, affordable energy to power the transition

“The EU steel industry is at a competitive disadvantage to other producing regions with regard to energy costs,” the Eurofer/IndustriAll plan says.

The energy-intensive nature of steel production leads to high electricity consumption, and these costs can represent as much as 180% of steel producers’ gross value added (GVA) in the UK. With the switch to electric-arc furnaces (EAFs), it would be expected that the sector’s electricity consumption would roughly double, industry body UK Steel said.

Currently, EU steelmaking is mainly blast furnace-basic oxygen furnace (BF-BOF) production, which is less energy-intensive than using the EAF-route, and electricity costs account for less than 4% of the costs in the BF-BOF production route. For EAF mills, electricity can be around 20% of the total.

According to worldsteel, about 89% of a BF-BOF’s energy input comes from coal, 7% from electricity, 3% from natural gas and 1% from other gases and sources. In EAF steelmaking, the energy input from coal accounts for 11%, electricity 50%, natural gas 38% and 1% from other sources.

New green steel capacities in Europe will be mostly represented by EAFs and direct-reduced iron (DRI) modules, with more than 50 million tonnes of new steelmaking capacity expected to come online in 2025-2027, according to Fastmarkets estimates.

And the issue of developing green hydrogen to power new DRI modules is already a key topic of conversation among European steelmakers.

Using hydrogen with existing DRI modules in Europe is currently quite expensive, Fastmarkets understands, with hydrogen prices currently around €5-8 per kg. And it needs to be closer to “€2.5-3.0 per kg to be commercially viable for steelmaking,” a steel producer in Northern Europe said.

To produce 1 tonne of liquid metal in a DRI module, around 60 kg of hydrogen is required, according to industry estimates.

“Europe needs to build out its production of fossil-free electricity. However, the volumes needed for large-scale electrolysis to produce the green hydrogen are significant. Therefore, it makes sense to place the most energy-intensive operations close to where the electricity is available [so it] can be built out,” a steel mill source in Europe said.

And the Eurofer/IndustriAll plan says: “Hydrogen has a key role to play, and we are concerned that the policy framework governing hydrogen adopted so far will not deliver affordable hydrogen at scale [the steel] industry needs. Urgent measures are needed to reduce energy costs [if] the green transition is to become a reality.” 

But, according to market participant estimates, around 140,000 tonnes of hydrogen per year would be required to fuel one 2 million tpy DRI module.

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Apparent demand is expected to recover by 1.4%, rising to 127 million tonnes in 2024, Eurofer said in the latest report in July – a downward revision from the previous, more optimistic, forecast from the end of April, when it predicted a 3.2% recovery to 130 million tonnes.

Notably, the automotive and construction sectors, the two key steel-consuming sectors, are both facing downturns.

Automotive is now expected to decline by 3% in 2024 (revised down from a 0.4% decline in a previous outlook) before recovering in 2025, with a predicted increase of 2.3% (up from a previous estimated growth of 0.8%).

“We have around 20% fewer orders from the automotive sector year on year,” a steel service center source in Germany told Fastmarkets.

One of Germany’s leading car producers, Volkswagen, is considering closing of some German factories, claiming that the transition to electric vehicles (EVs) has been “brutal” for the European car market.

The downturn in the automotive sector was reflected in Eurofer’s latest quarterly report.

“Uncertainties around the [introduction] of EVs and delays to launches of new models – many of them, hybrid or fully electric vehicles, preparing the ground for the ban on petrol cars in the EU by 2035 – have proven [to be] unsupportive factors [in terms] of consumer demand. Coupled with the lack of facilities such as recharging points, they have also delayed investment decisions by carmakers,” Eurofer said in the report.

Construction, which is the largest steel-using sector and represents 35% of total steel consumption in Europe, is widely expected to have declined for the second year in a row in 2024, although Eurofer predicts the decline in construction activity will slow to 1.4% rather than its previous prediction of a 1.9% decline.

Despite the looming challenges, however, European steelmakers remain committed to the green steel transition and expect the market for green steel to grow exponentially in the upcoming years.

Public investment in ‘Green Steel Hubs’

The EU is fully committed to the transition to green steel, with multi-billion investment projects announced and more than 50 million tonnes of new steelmaking capacity expected to come online in 2025-2027, according to Fastmarkets estimates.

And in 2023-2024 alone, more than €10 billion ($11.1 billion) in public investment has been granted by European governments to finance new green steel capacity among producers in Germany, France, Spain and Sweden, among others.

“The steel sector is a backbone of the European economy. To meet EU’s climate goals, it needs support, especially [at a] time like this,” a mill source told Fastmarkets.

Green steel premiums a challenge

In the past few years, European steel producers have accelerated their decarbonization efforts and the new market for steel with a reduced-carbon footprint has emerged. with all the major flat steel suppliers in Europe developing  their own green steel brands – XCarb, Arvzero, SSAB Zero, Bluemint, Greentec, among them.

But there is no common standard or official definition for “green steel” as yet.

Fastmarkets’ methodology, however, provides a the following definition for European green steel: “Steel produced with Scope 1,2 & 3 emissions of maximum 0.8 tonne CO2 per tonne of steel.”

Sources estimate that green steel volumes traded in Europe have amounted to about 100,000 tonnes so far in 2024.

Offers for green steel produced in European electric-arc furnaces and with emissions for Scope 1,2 and 3 of below 0.8 tonnes per 1 tonne of steel were reported at €200-350 per tonne in September.

However, 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 closer to €100-200 per tonne. 

“Premiums of €250-350 per tonne can be achieved for steel sold under long-term contracts. In the spot market, but it is possible to get lower prices,” a buyer source said.

Notably, recent trades for steel with Scope 1, 2 and upstream Scope 3 emissions of less than 0.8 tonnes of CO2 per tonne of steel were reported at €100-150 per tonne in September, with some transaction undercutting the mark of €100 per tonne, Fastmarkets reported.

“This year [2024] started on a positive note, but [overall] steel 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 that demand from the key consumer – the automotive industry – had also been slowing down lately, in line with the general downturn in the steel sector.

And Fastmarkets’ steel hot-rolled coil index, domestic, exw Northern Europe, fell to its lowest level since November 2020 when it dipped to €549.88 per tonne on September 25, down by €2.83 per tonne from €552.71 per tonne the previous day

And there have been no signs that the downtrend in the carbon market has stopped, sources said, with short-term expectations among market participants were quite bearish given the lack of end-user demand.

“This year [2024] is a lost cause; [There are] No signs of demand recovery until the year-end and European mills are selling [HRC] at prices below costs to fill order books,” a steel service center in the Benelux area told Fastmarkets.

As a result, European suppliers have also started to be more flexible with their green steel sales prices and have been offering discounts for bigger lots, sources said. 

Fastmarkets’ weekly price assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe was €100-200 per tonne on September 19, stable on-week.

Decarbonization remains the priority

Despite the limited demand for green steel and the difficulties with charging a premium for it, most market participants said they remain optimistic that green steel will take off 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 source at a large buyer in Northern Europe said.

One of the major drivers behind the decarbonization of steelmaking in the EU and globally remains the European Carbon Border Adjustment Mechanism (CBAM) – a tool intended by the EU to put a fair price on the carbon emitted during the production of carbon-intensive goods that enter the trading bloc.

The CBAM will be phased in, starting from January 1, 2026, alongside the phasing-out of the free carbon allowances applicable under the European Emissions Trading Scheme (ETS).

The price of CBAM certificates will be calculated by the European Commission on a weekly basis, based on the average price of the closing EU ETS carbon dioxide (CO2) allowances for each week.

The price of a carbon emissions permit in the EU was €66-70 per tonne in September 2024. And the EU envisages that the free allocation of such permits will be fully eliminated by 2034.

Market participants told Fastmarkets that CO2 allowance prices will jump to €200-250 per tonne when the free allocations are halved in 2030, and that there will be a surge above €400 per tonne by 2034, when free allocations are fully phased out.

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Restrictions to shuffle trade flows

Steel trade flows into the EU are likely to change significantly in the coming years amid a shift toward green steel and as trade restrictions and decarbonization policies reshape global markets and limit imports from traditional sources. 

Middle Eastern countries, including Saudi Arabia and Algeria, are expected to seize the opportunity to increase exports to the EU, while material from Turkey is already becoming a more popular option among European buyers.

The European Commission launched an anti-dumping (AD) investigation into hot-rolled coil (HRC) imports from Egypt, India, Vietnam and Japan on Thursday.

Combined, the four countries supplied 4.19 million tonnes of HRC to the EU in 2023 – about 45% of the total HRC import volumes.

And European buyers are now likely to book more domestic supplies and look for alternative sources of supply globally, market participants said.

Turkey has been increasing HRC deliveries to Europe again lately despite Turkish flat steel already being subject to an AD duty in the EU in relation to recently updated safeguard measures.

The EU considers Turkey the only “safe origin” for imported steel due to it having a sufficient individual quota that has never been fully utilized because of the availability of more competitive origins.

And if Asian HRC becomes a riskier proposition because of new safeguard measures, European buyers will be more interested in Turkish coil.

Turkey’s total allocation for the third quarter of 2024 is 475,173 tonnes, according to the European Commission. And, of that amount, 239,289 tonnes were still available as of August 8, with about 11,176 tonnes awaiting allocation.

In contrast, in the second quarter, Turkey’s allocation was 1.2 million tonnes – after unused volumes were transferred from the previous quarter. Of the total, 308,627 tonnes were not used.

Sources said, that price-wise, offers from Turkey were in line with, or only slightly higher than, those coming from Asia – even with the anti-dumping duty taken into consideration.

“Turkey has been become more active in the European market lately, with quicker shipments and a big quota, so for many European buyers it’s a safe import option,” a buyer in Italy said.

In January-May 2024, Turkish HRC imports to the EU amounted to 443,546 tonnes, compared with 652,921 tonnes for the entire year in 2023.

Turkey also has the advantage of lower freight costs because of its proximity to Europe and most of the HRC producers in Turkey are already EAF-based, which is beneficial in light of the EU’s CBAM regulations.

Both Saudi Arabia and Algeria now regularly export HRC to Europe – albeit mostly to Italy, Spain, and Portugal. And while the volumes up until now have not been particularly significant, sources said they now expect deliveries from these two countries to gradually increase.

“Saudi [Arabia] has no problems with quotas and we already see regular buying interest in [small volumes of] HRC from Saudi in the EU,” a buyer in Northern Europe said.

‘Green steel’ advantages of MENA suppliers 

The steelmakers in MENA region have the benefit of renewable energy and the “cleaner” EAF and DRI-EAF steelmaking routes, which will provide the area with a big advantage over other regions when Europe’s CBAM comes into force.

CBAM is a tool intended by the EU to put a fair price on the carbon emitted during the production of any carbon-intensive goods that enter the bloc and the CBAM transition period began on October 1, 2023. During this phase, which runs until the end of 2025, the EU authorities will test the mechanism without imposing any duties, with full implementation to be phased in between 2026 and 2034.

The phasing-in of CBAM will coincide with the phasing-out of the free carbon allowances currently applicable under Europe’s Emissions Trading Scheme (ETS).

The price of carbon certificates for imported goods will be calculated by the European Commission on a weekly basis, based on the average price of the closing EU ETS carbon dioxide (CO2) allowances for each week.

The price of a carbon emissions permit in the EU was €65-70 ($71-76) per tonne this July, but market participants estimate that CO2 allowance prices will jump to €200-250 ($219-273) per tonne when the free allocations are phased out.

And once CBAM is fully phased in, MENA-based steelmakers will have an opportunity to crowd out more-carbon intensive Asian steel producers in the EU steel import market, sources said.

Steelmakers in South Korea and Japan, meanwhile, are already planning to import hot-briquetted iron (HBI), including from the Middle East, while also planning projects that will initially operate using fossil fuel gas before switching to green hydrogen as it gets cheaper. 

But being relatively new to steelmaking, most MENA steelmakers are already several steps ahead because they do not need to make substantial investments to replace their base technologies.

Growing demand for green steel in Europe

Steel end users in Europe have already started signing contracts with green steel producers in the MENA region, in an apparent attempt to diversify their green steel supply sources, Fastmarkets understands.

Global carmaker Volkswagen, for instance, is planning to buy up to 300,000 tonnes per year of low-carbon steel from Oman’s Vulcan Green Steel (VGS) by 2027, with the two companies signing a Memorandum of Understanding (MoU) to that effect, the Germany headquartered car producer said in June.

In addition, members of the Gulf Cooperation Council are likely to have excess steel capacity and geographical advantages will allow for improved exports according to panelists speaking at Fastmarkets’ Middle East Iron & Steel Conference in November 2023.

Market participants continue to report mainly sporadic buying interest in green steel in Europe’s spot market, with transactions in most cases done directly between steelmakers and end users.

The automotive industry remains the primary buyer of green steel in Europe, but the construction sector in some regions has recently started showing an interest in purchasing greener steel, sources said, adding that wider interest in green steel will continue to rise in the coming years, supported by the EU regulations, with some steel mills having noticed “positive dynamics in green steel sales,” since 2023 – despite overall volumes still being limited.

“[One major European steelmaker] produced 200,000 tonnes of reduced-carbon [flat and long] steel in 2023 and aims to double that amount in 2024,” a second buyer source said.

Fastmarkets’ weekly assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe, was €170-250 per tonne on August 1, stable week on week.

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The strategy was intended to support the decarbonization of the German economy and to provide a reliable supply of green hydrogen and its derivatives.

According to the document, seen by Fastmarkets, the demand for hydrogen and hydrogen derivatives in Germany will amount to 95-130TWh in 2030.

“Around 50-70% (45-90TWh) of this will probably have to be imported from abroad,” the Federal Cabinet said. Its calculations also showed that the share provided by imports would continue to grow after 2030.

Initial estimates have also shown that “demand could increase to 360-500TWh of hydrogen and about 200TWh of hydrogen derivatives by 2045.”

“A large part of Germany’s hydrogen demand will have to be covered by imports from abroad in the medium to long term,” Robert Habeck, federal minister for Economic Affairs and Climate Protection, said after the adoption of the document.

He added that the strategy was intended to send a clear signal to Germany’s partners abroad that the country expected to have large and stable domestic demand for hydrogen and its derivatives.

Challenging path toward green transition

Demand for hydrogen in the steel sector was expected to grow exponentially in the coming years, not only in Germany but across Europe, industry sources have said.

Currently, 60% of the steel produced in Europe is produced using the integrated blast furnace/basic oxygen furnace route (BF-BOF).

But the transition toward more environmentally friendly production included the replacement of BF-BOF capacities with electric-arc furnaces (EAFs) and hydrogen-fuelled direct-reduced iron (DRI) modules.

EAF-DRI production creates much less pollution, with direct and indirect CO2 emissions estimated at 1.4 tonnes of CO2 per 1 tonne of steel. Those figures can be further reduced by using renewable energy and green hydrogen to power DRI modules.

More than 50 million tonnes of new green steelmaking capacities – via EAF or EAF-DRI production – were expected to come online in Europe in the years 2025-30, although a delay of about 15 million tonnes per year in capacity expansion should be expected until 2030, Fastmarkets has estimated.

To produce 1 tonne of liquid metal in a DRI module, around 80kg of hydrogen is needed, market sources have calculated.

Currently, obtaining the hydrogen for the few existing DRI modules in Europe is quite expensive, with hydrogen prices around €5-8 ($5-9) per kg. But this cost would need to be no more than “€2.50-3.00 per kg to be commercially viable for steelmaking,” a steel producer in Northern Europe said.

The entire shift to greener methods of production would require huge investment. According to European steel industry association Eurofer, the capital and operating costs of the green transition would be “extreme… in the multi-billion-euro range,” and that, per tonne of steel produced, costs could go up by 35% to 100%.

In 2023-24, Germany approved some impressive amounts of funding to finance green steel projects, with several more funding discussions imminent.

For example, ArcelorMittal Bremen and ArcelorMittal Eisenhüttenstadt have been granted €1.3 billion as part of the German Recovery and Resilience Plan.

Thyssenkrupp has obtained €2 billion in German state funding for its green steel transformation project.

Salzgitter, Germany’s second-largest steelmaker, has received nearly €1 billion in government funding for its hydrogen-based steelmaking project.

And SHS Stahl-Holding-Saar will get €2.6 billion from the German state to support decarbonization of its steel production processes in Saarland.

WV Stahl welcomes the strategy

German steel industry association WV Stahl welcomed the adoption of the new hydrogen import strategy but criticized the lack of clarity regarding the timeframe for the first deliveries and their affordability.

“It is good news that the hydrogen import strategy has finally been adopted by the federal government,” Kerstin Maria Rippel, managing director of the association, said. “We also welcome the fact that it has been designed to be technology-neutral as part of the National Hydrogen Strategy.”

She added, however, that key questions remained unanswered – for example, how quickly the hydrogen would arrive, and what it would cost. “For the steel industry, speed and affordability are essential,” she said.

Rippel added that the rapid development of sufficient network import infrastructures for hydrogen were necessary, as well as rapid development of the core network, suitable hedging instruments along the supply chain, and sufficient financing of import instruments.

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Demand for green steel to rise swiftly in 5-10 years, supply to remain tight

Demand for green flat steel is expected to increase to around 49 million tonnes in 2030, Guido Kerkhoff, chief executive officer at Klöckner & Co SE said during his presentation, quoting BCG data.

Over 45 million tonnes of new green steelmaking capacities – via electric-arc furnace (EAF) or EAF-DRI (direct-reduced iron) production — are expected to come online in Europe in 2025-2030, however, a delay of about 15 million tonnes in capacity expansion in expected until 2030.

“Customers’ willingness to pay makes the difference in tight markets,” Kerkhoff said.

Industry sources estimated that green steel volumes traded in Europe were below 100,000 tonnes in 2023, with most estimations coming at around 50,000-70,000 tonnes.

Very few suppliers were able to offer “physically-produced green steel, with emissions proved by Environmental Product Declarations [EDPs] below 1 tonne of CO2 per 1 tonne of steel [for Scope 1,2,3],” according to one distributor.

“One can reach net-zero [emissions] with [carbon] offsets, but some buyers refuse to deal with such steel, claiming it has been ‘green-washed’,” a second distributor said.

Premiums for EAF-produced green steel with emissions for Scope 1,2 and 3 carbon emissions below 0.8 tonnes per 1 tonne of steel were reported at €200-350 ($217-381) per tonne in the week to Friday May 17.

Buyer sources estimated tradeable values for such steel at €100-150 per tonne.

Fastmarkets’ weekly assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe was €150-250 per tonne on Thursday, stable week on week.

Transparency is a decisive criteria in green steel sourcing

In the past several year, European steel producers have accelerated their decarbonization efforts, and the new market for steel with a reduced carbon footprint has emerged.

Major suppliers are offering their own green steel brands with lower carbon footprint – XCarb, Arvzero, SSAB Zero, Bluemint, Greentec, etc. – however, there is no common standard for green steel in the industry yet.

“Product Carbon Footprint (PCF) is the only criterion for comparability in order to meet growing customer demand for transparency along the entire values chain,” Kerkhoff said.

“We need a coordinated approach from the entire sector, a simple approach that is applicable to all members,” Andreas Steffes, executive manger at Handel Schweiz, said during his presentation.

PCF Declaration is set to create transparency on emissions in the supply chain, tracking emission under Scope 1 and 2 (direct emissions generated by an entity or its subsidiaries and indirect emissions from energy used by an organization) and upstream Scope 3 (indirect emissions that occur from sources beyond a company’s control) as well.

“With a PCF declaration, no more emission estimates are required from customer side… [PCF declarations] include emissions from raw material extraction to [the material’s] arrival at the customer’s factory gate,” Kerkhoff added.

Customers become more demanding

Customers’ requirement for carbon footprint in steel products are “steadily increasing.”

For example, automaker BMW aims to be climate-neutral no later than 2050, with the share of recycled content in their products set at a minimum 95% and the approach “use EAF steel whenever possible,” Stefan Feichtinger, senior manager ESG corporate technology at Swiss Steel Group, said during the meeting.

For Volvo, the goal is to have 25% recycled and bio-based content in the new car models by 2025 and 35% by 2030.

Currently, 40% of European steel is produced from scrap (EAF-route), with a steel footprint of around 700 kg CO2 per tonne. Mainly long steel products are being produced via such route.

Around only about 1% comes from from DRI-EAF (1.3-1.4 tonnes of CO2 footprint) while the rest of steel is produced by conventional blast furnace-basic-oxygen furnaces (BF-BOF) (2-2.3 tonnes of CO2 content), and the majority of flat steel products are produced via BF-BOF.

Fastmarkets has recently launched consultations to lower the threshold for the carbon emissions content for its weekly green steel premium and daily inferred green steel price in Europe, to lower the upper threshold for both assessments, following feedback from the market.

Fastmarkets proposes to change the maximum carbon emission content to 800 kilograms per 1 tonne of steel, down from 1 tonne previously.

Raw material supply challenges

The gradual shift from conventional BF-BOF route to either EAF or EAF-DRI poses many challenges for the steel sector.

DRI-EAF route requires high-quality iron ore, with a high Fe percentage and low impurities, and less than 5% of global iron ore supply is suitable for production, Stefan Feichtinger said, quoting iron ore supplier BHP.

The solutions could be: 

• Development of mines
• Further processing of existing ores to improve the grade
• Technological solutions: DRI-ESF-(electric-smelting furnace)-BOF, fluidized bed reduction that allows for lower grade ores

Another big challenge could be increased demand for scrap to feed new EAF capacities. To feed new flat steelmaking capacities, companies would need to buy high-quality scrap grades with lower impurities that are suitable for flat steel production. 

EU is the largest net scrap exporter in the world. Scrap export volumes from the bloc were 18.5 million tonnes in 2023, a 7% increase vs 17.4 million tonnes a year before.

Starting in 2025, the export of ferrous and non-ferrous metal scrap to non-Organization for Economic Co-operation and Developed (OECD) countries will require consent by obtaining formal approval from non-OECD countries to export ferrous and non-ferrous scrap. These recipient countries must also demonstrate their ability to manage the scrap effectively, ensuring responsible handling and recycling.

This change could transform the EU from a net scrap exporter to an importer within five years.

Steel is not part of the problem, but part of the solution

Steelmaking generates approximately 8% of the worldwide carbon emissions, according to the World Steel Association.

However, the carbon footprint of steelmaking is still lower compared with other industries — such as carbon fiber with around 20 tonnes CO2 per 1 tonne of carbon fiber, and aluminium, with 5-8 tonnes of CO2 per 1 tonne.

In addition, steel is a recyclable product and remains in the material’s cycle.

With modern technologies, environmentally friendly “green” steel can be produced and used by different industries. The use of green steel only pushes up the price of the end-product marginally, Guido Kerkhoff said.

Notably, for the automotive industry, the use of green steel products would only push the car price up by 0.3-0.7%, and by 1.7-3.6% for home appliances. For onshore and offshore wind towers, the costs would rise by 1.6-3.4% and by 2.6-5.5% respectively.

“Steel is part of the solution [in decarbonization journey] and contributes significantly to the decarbonization of the value chain in many industries,” Guido Kerkhoff said.

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The proposed new specifications are shown below, with the changes in italics:
MB-STE-0904 Green Steel domestic, flat-rolled, differential to HRC index, exw northern Europe, € per tonne
Quality: Steel produced with scope 1,2 & 3 emissions of maximum 800 kilograms CO2 per tonne of steel
Quantity: minimum 10 tonnes
Location: Ex-works northern Europe
Timing: Open
Unit: EUR/tonne
Publication: Weekly

MB-STE-0905 Green steel base price, HRC exw Northern Europe, daily inferred, €/tonne
Quality: Steel produced with scope 1,2 & 3 emissions of maximum 800 kilograms CO2 per tonne of steel
Quantity: minimum 10 tonnes
Location: Ex-works northern Europe
Timing: Open
Unit: EUR/tonne
Publication: Daily
Notes: This price is calculated by adding the weekly Green Steel differential (MB-STE-0904) to the daily Northern Europe HRC index (MB-STE-0028).

In the fast-developing green steel markets in Europe, key consumers of green steel, including those in the automotive sector, have become more selective and no longer consider steel with emissions as high as 1 tonne of CO2 per tonne of steel to be green.

The majority of data reported for Fastmarkets’ green steel assessment since its launch in June 2023 were with emissions levels of up to 800 kilograms per tonne of steel.

It should be noted that definition of green steel is not yet documented in the European Union and there are no documents or regulations that would provide the exact definition of green steel.

The consultation period for this proposed amendment starts from Tuesday May 14, 2024 and will end on Friday June 14, 2024. The amendment will then take place, subject to market feedback, on Thursday June 20, 2024.

To provide feedback on these prices, or if you would like to provide price information by becoming a data submitter to these assessments, please contact Julia Bolotova by email at: pricing@fastmarkets.com. Please add the subject heading: “FAO: Julia Bolotova re: European green steel prices.”

Please indicate if the comments are confidential. Fastmarkets will consider all comments received and will make comments not marked as confidential available upon request.

To see all Fastmarkets pricing methodology and specification documents, go to https://www.fastmarkets.com/about-us/methodology

The post Proposal to amend carbon emission specifications for green steel assessments appeared first on Fastmarkets.

The proposed new specifications are shown below, with the changes in italics:
MB-STE-0911 Flat steel reduced carbon emissions differential, exw Northern Europe, € per tonne
Quality: Steel produced with scope 1,2,3 emissions of 1.4-1.8 tonnes of CO2 per tonne of steel
Quantity: minimum 10 tonnes
Location: Ex-works northern Europe
Timing: Open
Unit: EUR/tonne
Publication: Weekly

MB-STE-0912 Flat steel reduced carbon emissions, daily inferred, exw Northern Europe, € per tonne
Quality: Steel produced with scope 1,2,3 emissions of 1.4-1.8 tonnes of CO2 per tonne of steel
Quantity: minimum 10 tonnes
Location: Ex-works northern Europe
Timing: Open
Unit: EUR/tonne
Publication: Daily
Notes: This price is calculated by adding the weekly Reduced carbon emissions flat-rolled, differential to the daily Northern Europe HRC index (MB-STE-0028).

The proposed change is in response the rapid development in the European market for reduced carbon steel. It represents a notable shift since the reduced carbon steel prices were launched in January 2024, when the threshold was set at 1.40-1.95 tonnes of CO2 per tonne of steel.

Data reported to Fastmarkets for its reduced carbon steel assessment since the January launch shows that the majority of transactions related to material with emissions no higher than 1.8 tonnes of CO2 per tonne of steel.

The consultation period for this proposed amendment starts on May 14, 2024, and will end on June 14, 2024. The amendment will then take place, subject to market feedback, on June 20, 2024.

To provide feedback on these prices, or if you would like to provide price information by becoming a data submitter to these assessments, please contact Julia Bolotova by email at: pricing@fastmarkets.com. Please add the subject heading: “FAO: Julia Bolotova re: European reduced carbon steel prices.”

Please indicate if comments are confidential. Fastmarkets will consider all comments received and will make comments not marked as confidential available upon request.

To see all Fastmarkets’ pricing methodology and specification documents, go to https://www.fastmarkets.com/about-us/methodology.

The post Proposal to amend carbon emission specifications for reduced carbon steel assessments appeared first on Fastmarkets.