But there are feasible solutions to promote green ferro-alloys production and green premiums in China, including accelerating the replacement of older ferro-alloy production capacity and increasing green energy usage in newly installed facilities at major production hubs, multiple sources said at the conference.

The production of ferro-alloys consumes a lot of energy and usually relies on coal, which can be highly polluting. Also, power costs constitute a large proportion of overall output costs. The green ferro-alloys industry intends to produce the material competitively with less energy and lower coke consumption.

In 2024, the Inner Mongolia Autonomous Region started requiring all highly energy-consuming ferro-alloys production capacity in the region to be shut down to promote industrial structure optimization and adjustment, sources told Fastmarkets.

Inner Mongolia also issued a notice in August 2023 on “Policies and measures to promote the high-quality development of the ferro-alloy industry,” which states that ferro-alloys producers must gradually increase their percentage of green power consumption and that production facilities that use at least 60% of green energy are not required to undergo mandatory capacity replacement.

Inner Mongolia is the biggest ferro-alloys production hub in China, with a total of 140 million tonnes of ferro-alloys output in 2023, accounting for almost 30% of overall production in the country.

“The more that [older] ferro-alloy production capacity in production hubs is eliminated, the higher the proportion of green energy usage will be,” a ferro-alloys trader told Fastmarkets at the conference. “And many provinces also announced [rules] to increase green power usage in adding new ferro-alloys production capacity, which will increase the overall renewable power application in the next couple of years.”

Accelerating the adoption of green steel premiums in the whole industry would add some momentum to the proliferation and acceptance of green ferro-alloys premiums, Fastmarkets heard.

“By the time ferro-alloys producers in China, or even around the globe, widely adopt green power, the green ferro-alloys premium will be accepted and will also be very meaningful in the ferro-alloys industry,” the trader said.

Fastmarkets’ green ferro-alloy prices in China consist of:

Weekly green ferro-chrome differential, ddp China, yuan per tonne
Weekly inferred green ferro-chrome prices, ddp China, yuan per tonne
Weekly green ferro-manganese differential, in-whs China, yuan per tonne
Weekly inferred green ferro-manganese prices, in-whs China, yuan per tonne

But some obstacles remain in the way of a large-scale uptake of green ferro-alloys and their premiums.

These include:

Underdeveloped green power facilities, peak-regulation capabilities

Renewable energy facilities and their peak-regulation capabilities — that is, their process of balancing power supply with the load on the power grid during peak and off-peak hours — are not mature enough to meet the requirements of the fast-growing green ferro-alloys industry, sources said.

Green power supply is volatile, intermittent and random, which may pose a big challenge to ferro-alloys production in Northwestern China and to green ferro-alloys premiums, a ferro-alloys source told Fastmarkets at the conference.

“Green power supply may not be able to provide enough stable power for ferro-alloys producers in Northwest China in the winter or in extreme weather conditions because green [energy in the region] mainly comes from wind, solar and photovoltaic power,” the source said.

Green steel premiums yet to be widely accepted

Green steel premiums are not yet widely accepted in the market, which may limit green ferro-alloys premiums since downstream demand for ferro-alloys comes from the steelmaking industry, Fastmarkets heard at the conference.

“Even though many steel mills are embarking on the decarbonization journey, I have heard that not many steel mills accept the green steel premium since it would be an increase over the non-premium steel price, and the steel market has [performed] quite poorly this year,” a second ferro-alloys source said.

“If downstream steel mills still [resist] accepting the green steel premium, how can we expect ferro-alloys buyers to adopt the green ferro-alloys premium? I suppose it may take quite some time for the whole steelmaking industry supply chain to adopt the green premiums,” the source added.

Fewer ferro-alloys exports to Europe, US

Chinese exports of ferro-alloys to Europe or the US have decreased in recent years due to anti-dumping duties enforced in those regions, which makes it less compelling to advocate for green ferro-alloys premiums, sources said at the conference.

“Despite the fact that European buyers are more concerned about whether the ferro-alloys they buy are green or low-carbon, there is one thing that cannot be ignored — not so many Chinese ferro-alloys products are being exported overseas now. Most Chinese ferro-alloys are consumed by domestic steel mills in China,” the second ferro-alloys source said.

“There is only one country that China sells ferro-alloys to, which is India. It now has a fast-growing demand for steel and ferro-alloys, but there is still a very long way for India to go green,” a third ferro-alloys source said at the conference.

Different scale, production technologies among Chinese ferro-alloys producers

China’s ferro-alloys facilities are largely scattered across several locations and production hubs, with different scales of production and technical specifications, making it quite difficult for Chinese producers to achieve a unified technological progress in terms of increasing the proportion of renewable energy usage, Fastmarkets heard at the conference.

“In the ferro-alloys industry, the leading ferro-alloys producers only make up a relatively small proportion of overall production. As a result, the green transformation – the adoption of green power supply among leading producers – will not have a big effect on the ferro-alloys industry as a whole,” a fourth ferro-alloys source told Fastmarkets.

Green power still uncompetitive despite low-cost advantage

Issues in the renewable energy supply, such as its volatility and intermittency, have prevented it from being scaled up in China in the medium and long term, so green power’s low-cost advantage has not been enough to compete with traditional fossil power sources, such as coal, sources said.

“Admittedly, green power costs are not as high as traditional fossil power costs, which could reduce overall costs in the production of ferro-alloys,” a fifth ferro-alloys source said at the conference. “But if you do the math, the utilization rate of green power is rather lower than traditional power like coal, especially in cold weather in Northwest China.”

“So far, the low-cost advantage has not been that evident or cost-efficient enough to make me adopt green power and the green ferro-alloys premium. Maybe it will still take time to promote green power and the green ferro-alloys premium and for ferro-alloys producers to accept them in light of all the obstacles in the way,” the source added.

The post Five challenges in China’s journey toward sustainable ferro-alloys appeared first on Fastmarkets.

Missed the webinar and want to catch up? Fill in the form here and you can watch a recording of the discussion.

Green steel push will come from customers

Customers will lead the green steel push, rather than regulation. Dempsey expressed his belief that the incoming second administration of President-elect Donald Trump will likely treat regulations with a light touch, leaving more room for free market exploration of what green steel is — and what the premium for it should be.

Unified definition of green steel isn’t needed

Not everyone defines green steel the same way — and that is OK. Charles said that a unified definition of green steel is not necessary to push the industry forward. Building on Dempsey’s comments, Charles said that customers will ultimately decide what level of green steel works best for their needs. Some may find electric-arc furnace (EAF) production satisfactory. Others will need to meet European requirements to export to that market. And some may eventually require zero-carbon options. But one thing is for sure — tiered pricing will emerge depending on the level of investment and effort needed to create ever-greener steel.

US customers shouldn’t foot bill for global green steel push

Market players are still reluctant to accept premiums for the world’s greenest steel. Alkaff pointed out that there is still some pushback from steel mill customers on accepting a green steel premium. Much of that stems from the US already possessing one of the greenest steel industries in the world due to the 70:30 split between EAF and integrated production. There is also the sense that the rest of the world could be doing more to decarbonize, and it is unfair to ask US customers to foot the bill for a global push.

Green steel revolution still a long time coming

Do not expect the green steel revolution to end anytime soon. Dempsey said that the decades of time and billions in investment that the US steel industry put into developing its scrap and steel industries will continue long into the future. Expect future steel initiatives to reach ever-higher environmental bars.

Too early to predict the direction of the green steel market entirely

Change takes time. All three panelists agreed that the movement is in its earliest days, and it is still a bit early to predict where definitions, premiums and policies may ultimately end up. On a long enough timeline, however, all three also agreed that some form of green steel will emerge as a distinct — and likely distinctly priced — product in the US market.

Fastmarkets carries both a US green steel differential and a US green steel base price.

The topic will be explored further at Fastmarkets’ Circular Steel Summit, slated for January 14-16 in Houston, Texas.

Discover how our suite of green steel prices can support your ‘green’ investment decisions while bringing transparency to the industry. Find out more.

The post Five key points from Fastmarkets’ US green steel webinar appeared first on Fastmarkets.

Here are the highlights of what we learned at the event.

CBAM provides opportunity for MENA producers, but legislation not well understood

The only major global steel market with current plans to penalize carbon-intensive steel is the European Union, with the purchase of offsetting certificates required from 2026 for both domestic and imported material through the European Trading System and Carbon Border Adjustment Mechanism (CBAM).

CBAM will incur added costs to imported material directly correlating with its carbon footprint, thereby giving a competitive advantage to low carbon producers in the global market.

The Middle East, with its direct reduced iron (DRI)– and electric-arc furnace (EAF) – based industry, reserves of natural gas and potential for renewable energy production, is well placed to take advantage and become a key supply to the net-importing European market, Fastmarkets heard.

But awareness of the details of the CBAM and the potential advantage Middle Eastern producers hold over traditional suppliers to Europe was not ubiquitous among regional steelmaking executives, some of whom considered any pressures toward decarbonization a hurdle to be overcome instead of an opportunity.

Raw material availability possible bottleneck in decarbonization

The availability, or lack thereof, of the necessary raw materials for green steelmaking could hinder the decarbonization of the industry, according to the concerns of several participants.

High-grade iron ore, scrap and green hydrogen were all highlighted as materials with question marks over their availability.

High-grade iron ore is essential for DRI production, but attendees questioned where sufficient quantities would be sourced if the global steel industry was to eventually switch away from blast furnace (BF) production.

Scrap is another essential pillar of green steelmaking, but its supply is a mostly fixed product of economic activity that cannot be easily increased. Moreover, exporting regions such as Europe, the United Kingdom, the US and Japan are expected to restrict outflows in the coming years to secure material for domestic production, Fastmarkets heard.

Sources therefore expect the international supply of scrap to significantly tighten.

Green hydrogen — hydrogen that is produced with renewable energy — is another material required if the DRI-EAF route is to become net zero. While powering DRI production with natural gas results in lower emissions than those of coal-based BFs, it remains a fossil fuel.

But producing green hydrogen requires significant investment and massive increases in renewable energy. Steelmakers said they would require governmental support to ease the burden of the capital expenditure necessary for such projects.

Acceleration of steel decarbonization potentially at odds with steeply rising demand

Massive construction growth expansion is planned in the region, most notably with projects such as Neom and the 2034 World Cup in Saudi Arabia, which could account for as much as 20% of the global steel supply if fully realized. As a result, appetite for steel in the region is expected to accelerate over the next decade.

Some speakers suggested that the green steel transition and vast economic growth could work in parallel, but other market participants perceived these priorities to be in direct conflict, highlighting already-tight margins and a reluctance among many downstream companies to absorb the cost of decarbonization.

It was argued that the two ambitions could only work in tandem if there were commercial incentives in the regional markets and fast maturation of the very nascent green steel sector.

Mena’s oil and gas infrastructure makes region well positioned for carbon capture

In its decarbonization strategy, MENA countries can rely on carbon capture storages which can be at least partially based on existing oil and gas infrastructure.

“MENA is the best place in the world for carbon captures,” Rutger Gyllenram, founder and chief executive officer of Swedish metals sustainability firm Kobolde & Partners, said during the event. “The region has dried out wells for natural gas and oil that in some cases can be used for storage according to specialists in the area.”

To transport CO2, existing piping systems may be used or new ones can be built sharing some existing infrastructure, provided the CO2 is reasonably free from detrimental substances such as nitrogen oxides (NOx) and sulphur oxides, he added.

Carbon capture, utilization and storage (CCUS) potential was heard to be one of the region’s competitive advantages in the race to be a global provider of green or reduced-carbon steel, on top of its existing DRI-EAF technology and energy position.

Government-led efforts remain the key drivers of green steel push

Regulatory oversight and the structuring of incentives for private enterprises and consumers are likely to remain the main engines of growth behind the steelmaking industry’s push toward decarbonization, according to the chief executive officers’ keynote panel.

The importance of government intervention, especially in the transition period, when societies must grapple with the tensions between low-carbon steel and low-cost steel, should not be understated, Saeed Al Ghafri, CEO of Emirates Steel, said at the event.

“Consumer opinion and private industry have not developed to a point where [customers are] ready to embrace the added cost of steel products with a lower carbon footprint, [and are instead] making choices based on cost,” Sharjeel Azhar, CEO of Al-Ittefaq Steel Products, said.

Stronger consumer acceptance of green steel will require broader efforts in public education and further incentives on the part of domestic authorities, according to Rewant Ruia, a director of Essar Group.

Cross-sector collaborations between the state, private industry and academia a potential catalyst for decarbonization

Collaborative work across government and research bodies and private steelmakers were touted by conference attendees as a possible measure to spur innovative solutions in reducing the steelmaking industry’s carbon footprint.

Various speakers highlighted the potential synergies and benefits of cross-sector collaborations, creating viable projects with a wider impact on the market.

Raju Daswani, CEO of Fastmarkets and the moderator of the keynote panel, added that it was imperative for governments to structure incentives and regulatory models, as well as collaborative efforts, bearing in mind the long-term benefits for steel producers, and that steel producers must ultimately see value in decarbonizing their supply chains for a meaningful transition to take place.

Want to follow the low carbon steel discussion and keep up to date with the developments influencing the decarbonization of the steel industry? Visit our dedicated green steel spotlight to find out more today.

The post Six things we learned at Fastmarkets’ Middle East Iron and Steel Conference 2024 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.

Key takeaways:

• Trump’s proposed 60% tariff on US imports of Chinese-origin steel may have limited impact due to China’s small share in US steel imports
• US manufacturers face high costs from domestic steel but compete with cheaper imports
• Future tariffs may focus on finished or intermediate products, raising costs for manufacturers and consumers
• US manufacturers could gain market share but face supply risks if China shifts exports
• Steel capacity hasn’t consistently hit 80%, but margins improved post-Section 232 tariffs in 2018

Assessing Trump’s second term: Potential trade policies and their impact on global steel markets

With Donald Trump winning a second term as President of the USA, Fastmarkets is considering the policies that may be put in place that will affect the domestic and global steel markets. In this instalment, we consider the likelihood of heightened trade policies in the wake of Trump’s first term as well as his 2024 campaign rhetoric.

As the campaign intensified, the president-elect noted that he would support US manufacturers by putting tariffs on imported goods, going so far as suggesting a 60% tariff on Chinese imports. Upstream steel product imports, such as bars, coil, plate, sheet and tube and pipe, are not well represented by Chinese-origin supply. In fact, US steel product imports averaged just over 29Mt in the 2015 to 2023 period with the 2015 to 2018 period averaging over 33Mt. Of these imports, China accounted for 3.3% of all steel tonnage imported in the 2015-2023 period, falling to 2.45% in 2024 (January to September period). A further tariff on only Chinese steel will have little effect on the overall steel import tonnage.

Moreover, when the Section 232 actions were initiated in March 2018, US-based manufacturers criticized the move, stating that while they were required to purchase higher-cost steel only to then compete with imported goods made from foreign steel.

That point is illustrated in import data for steel-containing machinery, vehicles, appliances and railroad rolling stock. Imports of these goods, in US dollar values, reached over $850Bn in 2023. For the 2015 to 2023 period, China accounted for 22% of that total in that nine-year period. Fastmarkets suggests that tariffs on China will be targeted to downstream parts or finished products, rather than upstream steel. These measures are likely to affect the broader economy, however, raising costs to downstream manufacturers and consumers.

US manufacturers would benefit from reduced competition, allowing them to increase market share and potentially raise prices to either grow margins or recoup higher steel costs. Nevertheless, if Chinese producers put a stop on shipments of intermediate parts to the US, opting for established markets in Latin America, Southeast Asia or Middle East, US manufacturing could be paralyzed until higher cost alternatives as higher are sourced.

The result is that US prices of manufactured goods will likely rise, affecting domestic demand and adding inflationary pressure to the US economy.

Forecasting steel tariffs and market volatility

Fastmarkets believes more steel tariffs will be in the offing under the 47th Presidential administration. Domestic steelmakers did benefit from the Section 232 actions which resulted in higher steel prices and margins, as noted in the HR coil price with the vertical line indicating the initiation of the tariffs/quotas. We take the example of HR coil prices as a representative of a key US steel market indicator.

US HRC prices initially increased after the imposition of the Section 232, then declined steeply through 2019 on weak fundamentals, falling further in 2020 as the result of the effects of the Covid pandemic. Nevertheless, with the import supply of steel tightened in the US, Fastmarkets notes that price volatility is higher than before the 232.

The Section 232 actions had the intent of maintaining total US steel capacity utilization at or above 80%. This has not been achieved consistently since 2018 either. Indeed, weekly utilization rates for all US crude steel capacity have largely held below 80% since mid-2022. An important reason why utilization rates have remained under 80% is that capacity has increased to meet demand as tariffs have reduced imports.

Post-232 steelmaker margins: Boosted profits amid market challenges

Despite this, US steelmaker margins for HR coil production are higher post-232 than before as shown by the Fastmarkets calculated proxy based on raw materials, energy, inflation and operating costs. In the five years leading up the Section 232 actions, the average margin was slightly over $400 per tonne. In the 2018 to September 2024 period, the average margin was nearly $640 per tonne. Removing 2021 from the calculation, given inflationary effects of the immediate post-covid period, the average margin is still more than $100 per tonne over the pre-2018 margin.

Even under challenging demand conditions in 2024, margins are higher, albeit more volatile, than prior to 2018, suggesting that further measures would be welcomed by domestic steelmakers.

Want to know more?

Trump’s re-election has set the stage for potential shifts in trade policies and tariffs, with significant implications for both the US and global steel markets. With proposed tariffs targeting downstream products and the lingering effects of Section 232 actions, US steelmakers have seen increased margins, despite market volatility and capacity challenges. These policies may provide relief to domestic manufacturers but also carry the risk of heightened costs for consumers and broader economic impacts.

To stay informed on how these evolving policies will shape the future of global commodities markets, visit our US election 2024 content hub for more insights and coverage.

The post Trade in the crosshairs: Trump’s steel tariffs and the ripple effect on global trade appeared first on Fastmarkets.

China exported 11.18 million tonnes of finished steel in October 2024, up by 3.24 million tonnes, or 41%, from 7.94 million tonnes in October 2023 and closing in on the all-time high of 11.25 million tonnes exported in September 2015, according to preliminary data published by China’s General Administration of Customs on November 7.

“The lofty steel exports have sent Chinese steel products under the spotlight of the globe,” one steel exporter said. “Now, Chinese mills are not only supplying price-competitive products to overseas buyers, but also showing the world [its] advanced technologies and efforts in decarbonation.”

Rising demand for green ferro-manganese, ferro-chrome

The high export of flat steel and stainless steel are providing firm support for green ferro-manganese and green ferro-chrome demand, according to sources.

China’s flat steel exports amounted 55.03 million tonnes in January-September this year, up by 11.58 million tonnes, or 26.6%, from 43.45 million tonnes in the same period last year, according to China’s National Bureau of Statistics (NBS).

And China exported 3.72 million tonnes of stainless steel in January-September, up by 0.61 million tonnes, or 19.8%, from 3.11 million tonnes in the first nine months of 2023, according to Stainless Steel Council of the China Iron & Steel Association.

Ferro-manganese is used for desulfurization in the production of flat steel and ferro-chrome is added to stainless steel during production to provide corrosion resistance, market participants said.

Flat steel and stainless steel widely used by the automotive, shipbuilding sectors and by manufacturers of appliances and other kitchen goods.

Importers of Chinese flat steel or stainless steel increasingly care about the carbon emissions footprint of the whole production process, sources told Fastmarkets.

“If a seaborne importer, especially in a Western country, wants to use green or reduced-carbon steel from China, they will want to know the carbon-emissions data for the upstream raw materials,” the ferro-alloy producer said.

So steelmakers in China are buying green ferro-alloys to ensure carbon-emissions reductions are achieved throughout the supply chain to ensure they can service the level of demand from consumers of their green steel products, sources told Fastmarkets.

“We are considering building a raw materials purchasing system to select ferro-alloy suppliers,” a leading steelmaker source in China said, “and those producing green or reduced-carbon emissions alloys will be on the priority list.”

Green ferro-alloy differentials

Green ferro-manganese differentials in Chinese domestic market were a topic of discussion among smelters and steelmakers, sources said.

“It is difficult to settle on how much the green differential [for ferro-manganese] will be,” a manganese alloy sources said. “Smelters are calculating the cost in producing green ferro-manganese and steelmakers are evaluating how much [of that extra cost] they can shoulder or can pass on to their green steel [customers].”

And the steelmaker source said: “For sure, the differential [for green ferro-alloys] will be realized once end users in non-China markets or in local markets pay premiums for the green steel they purchase.” 

And recognizing the trend toward green ferro-alloys in China, Fastmarkets launched differentials and inferred prices for green ferro-manganese and green ferro-chrome at the end of October.

Fastmarkets’ weekly green ferroalloy domestic, ferro-manganese max 7% C, 65% Mn min, differential to FeMn assessment in-whs China, remained at zero yuan per tonne on Friday November 8.

Fastmarkets’ weekly green ferroalloy domestic, ferro-manganese max 7% C, 65% Mn min, weekly inferred price, in-whs China, was 5,700-5,850 yuan ($792-813) per tonne, compared to 5,600-5,800 yuan per tonne on the first pricing session on November 1.

Fastmarkets’ green ferroalloy domestic, ferro-chrome 6-8% C, 50% Cr, differential to FeCr assessment, ddp China, was zero yuan per tonne on November 12.

And Fastmarkets’ green ferroalloy domestic, ferro-chrome 6-8% C, 50% Cr, weekly inferred price, ddp China, was 8,150-8,450 yuan per tonne on Tuesday.

Smelters join wave to produce green products

Chinese ferro-alloy smelters are already able to or expect to soon be able to produce green products to meet the stricter demands for a global clean steel supply chain, driven by market dynamics and policy support, according to sources.

“In producing green ferro-chrome or green ferro-manganese, electricity consumption is [a key consideration, along with] recycling of the waste during smelting,” a ferro-chrome trader source told Fastmarkets. “Many smelters in China have already [embraced the] recycling economy [and are] re-using waste gas, waste water and heat recovery [systems].”

And China’s green ferro-alloy capacity is continuing to rise, with upgrades in technology and an increase in the availability of green power resources, according to market participants.

Chinese government departments are also pushing forward green steel and ferro-alloys developments by setting up related guides and standards along with  welcoming more green products.

On November 11, the Ministry of Information & Industry Technology (MIIT) released a guide to carbon footprint calculations and standards, in which the steel industry is included as one of the key industries.

MIIT said the guide aims to help with the management of the carbon footprint of industrial output to promote the “green decarbonization transformation” of a range of industries including steel, non-ferrous, chemical, building materials, new energy vehicles and electronics – all sectors that involve large-scale international trading and that have interrelated supply chains and systems.

So, with the appropriate carbon emissions calculations and standards, Chinese green ferro-alloy products are clearly ready to be exposed to a worldwide audience, the ferro-chrome trader source said.

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During his first stint as president he withdrew the US from the Paris Agreement on climate change – a move quickly reversed by the subsequent president, Joe Biden – and in campaigning he said he would do so again. 

Decarbonization was a prominent theme between 2020 and 2022, driven by Environmental, Social, and Governance (ESG) considerations, a trader based in the east China province of Zhejiang told Fastmarkets. But, since then, “many decarbonization projects have made no financial sense,” the trader said, adding that continuing with decarbonization would become an even more serious challenge when Trump takes office in January. 

During Biden’s administration, the US Department of Energy has announced up to $6 billion in decarbonisation investments and two steelmakers, Cleveland-Cliffs and SSAB were key beneficiaries – each receiving a $500 million grant to establish clean hydrogen-based steelmaking facilities in the US.

Shortly after that announcement, a rumor surfaced that Cleveland-Cliffs might abandon the grant for producing green steel due to difficulties in convincing downstream buyers to pay a green premium for the steel it would produce. And while the project appears to be progressing, doubts will now be growing and market participants around the world expect to see many challenges ahead for hydrogen projects.

“Trump is going to refocus on increasing oil and natural gas production and if he reduces grants for the renewable energy sector, green hydrogen will become even less financially viable,” a steelmaker in the southern China province of Hunan said.

“The lack of funding could slow the development of green hydrogen projects, making it even more difficult to compete economically with steel products that are produced [using] traditional fossil fuels,” the steelmaker added.

Some market participants remain optimistic, however, and said the US renewable energy sector might not be as severely impacted as some might expect.

That optimism stems from the close ties during the presidential election between Trump and Elon Musk – the chief executive of the Tesla electric vehicle (EV) business and a leading entrepreneur in the renewable energy sector, according to a steelmaker in Hebei province in northern China.

The steelmaker said that decarbonisation investments will continue in other regions, including in China, which is the world’s largest steel producer and which is pursuing decarbonisation initiatives and actively working in partnership with other countries.

Shanxi-based Jinnan Iron & Steel Group, for instance, recently announced that it will work with Brazil’s largest iron ore producer, Vale, to establish an iron ore concentration plant in the Middle East to support the production of the key raw materials for low-carbon steel production.

Likely impact of Trump’s import tariffs

During the election campaign, Trump also proposed imposing a 10-20% across-the-board tariff on all imports into the US, with an additional 60% tariff on all imports from China.

And the impact of Trump’s second administration on the steel industry will be determined by the extent to which he sticks to the promises he made during the presidential campaign, sources told Fastmarkets.

“Most steel imports are already subject to some form of tariff, so the immediate impact of additional tariffs might be minimal unless they are increased significantly,” a Singapore-based trader said.

“Even if the tariffs reach high double digits, the cost would ultimately be borne by US consumers,” the trader added, noting that the short-term impact will mainly result in higher inflation in the US.

For the time being, the specifics of Trump’s proposed tariffs on all imported products remain unclear. But if a blanket tariff is implemented on all imported goods, including raw materials, it could benefit domestic steelmaking raw material producers in the US, sources said.

And a London-based trader said that US scrap dealers and domestic producers of hot-briquetted iron (HBI), such as ArcelorMittal and Cleveland-Cliffs, would ultimately benefit because imports would become less competitive.

The trader pointed to the fact that the US currently imports large quantities of pig iron from Brazil, so a tariff increases on those imports would probably lead to a price spike in any domestic alternatives, including steel scrap and HBI.

But the Singapore trader said the long-term consequences will be more complex, because any onshoring initiatives – bringing production back to the US – would take a considerable time to implement and Trump is unlikely to still be in office by the time any such initiatives start to have an impact.

Discover how the 2024 US election is impacting and could impact US and global commodity markets with Fastmarkets. Head to our US election hub.

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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.

Want to follow the low carbon steel discussion and keep up to date with the developments influencing the decarbonization of the steel industry? Visit our dedicated green steel spotlight to find out more today.

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While many Chinese steel mills have jumped on the bandwagon in response to Beijing’s decarbonization drive, some companies still refrain given the high costs for upgrading and operation, according to Han.

Beijing’s green push

Han’s words were in line with top authorities’ latest guidelines for the “higher-quality” development of China’s steel industry.

On Friday November 1, the Ministry of Industry and Information Technology (MIIT) unveiled a draft of revised norms for the steel industry, which pushes for the transformation to be high-end, intelligent and green.

For the green transformation, the draft encourages the promotion of green and low-carbon development, the application and transformation of advanced green and low-carbon technologies, and construction of industrial green microgrids.

Chinese steelmakers are urged to achieve As in environmental protection and energy efficiency, build green factories and develop green products.

Mills are also encouraged to turn to low-carbon emission ironmaking and electric-arc furnace (EAF) steelmaking and phase out conventional equipment such as sintering machines, coke ovens and blast furnaces.

Additionally, the management of the carbon footprint of steel products such as environmental product declaration (EPD), life cycle assessment (LCA) and environmental, social and corporate governance (ESG), is also encouraged.

China is leading the world in the green development of the steel industry thanks to the great efforts over the past years, Tang Zujun, vice president of China Iron and Steel Association (CISA), said at the summit.

CISA data shows that over 620 million tonnes of crude steel capacities of more than 140 companies in China had completed ultra-low-emission upgrading by August.

Major companies such as Baosteel have had the basic capability of green steel industrialization and started the supply of green steel, adding to the competitiveness of these companies, according to Tang.

Following these developments in the green transformation of the steel industry, Fastmarkets has also introduced a slew of green steel prices.

Fastmarkets’ fortnightly price assessment of flat steel reduced carbon emissions differential, exw China, which calculates the premium for flat-rolled reduced carbon emissions steel over products produced from the traditional blast furnace (BF)-based route, was at 0-800 yuan ($0-112) per tonne on Friday November 8.

Joining the carbon trading market

Aside from the guidelines, the Chinese government is also pushing for the inclusion of the steel sector into the carbon trading market to accelerate the green development of the industry.

The Ministry of Ecology and Environment said on Wednesday November 6 that under the carbon emissions trading regulations, it will actively push for the engagement of steel, cement and aluminium into the national carbon trading market.

The inclusion into carbon trading market is likely to help constrain China’s steel output which is in oversupply and weighing on the market, a second CISA delegate said at the summit on November 1.

Mills are likely to control their production to get free carbon emission quotas, while carbon taxes will increase production costs, the second CISA delegate added.

EAF-based mills will likely have their advantages in the allocation of carbon quotas because they are cleaner than BFs and will have more weight in getting carbon quotas, according to the CISA delegate.

Interested in more green steel market coverage and prices? Visit our green steel hub.

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The CFO explained: “Manufacturing onshoring will lead to demand. Imports are currently unattractive. There’s potential for increased trade protection. You’re going to see a lot of demand from the CHIPS [and Science] Act and the IRA [Inflation Reduction Act], and the auto industry eventually will rebound.”

Clarity after the conclusion of the presidential election was another factor contributing to the bullishness for 2025, according to executives on the call.

“Customers will start placing orders [after the elections], and things will start to heat up fast. I am anticipating a very strong Q1, and I believe that we are going to have volumes back to normal by the first half of next year,” Lourenco Goncalves, chairman, president and chief executive officer of Cleveland-Cliffs, said on Tuesday.

The bullishness for 2025 comes despite a dismal third quarter, with the steelmaker reporting a net loss of $230 million, compared with a net income of $275 million in the same quarter in 2023.

The company reported steel shipments of 3.8 million net tons for the third quarter, down from 4.1 million tons shipped in the third quarter of 2023.

The weakness in automotive demand was driven by high interest rates, the CEO said on the call.

No6 BF expected to resume early 2025

Cleveland-Cliffs’ idled No6 blast furnace (BF) at its flat-rolled steel mill in Cleveland, Ohio, is expected to resume operations in early 2025, Lourenco said on the call.

The BF was temporarily idled due to ongoing demand weakness, and took an estimated 1.5 million tons of annual capacity off the market, Celso told investors.

Both Goncalves said on the earnings call that the BF will resume operations when demand improves.

“We will bring [BF6] back as soon…as demand comes back, which will come back when pricing recovers. I believe that the price recovery [will come back] early 2025, so I expect that we’re going to bring [BF6] back sometime early next year,” Lourenco said.

Middletown, Butler, Weirton updates

On the call, Cleveland-Cliffs provided updates on the company’s facilities in Middletown, Ohio; Butler, Pennsylvania; and Weirton, West Virginia.

“We have received phase one funding approvals through the Department of Energy for our efficient projects at Middletown and Butler, allowing us to proceed,” Lourenco said.

The Energy Department awarded an initial $9.5 million for the first phase of a project to demonstrate hydrogen-based ironmaking decarbonization technology at Cleveland-Cliffs’ Middletown Works in Middletown, Ohio, the Department announced on Wednesday September 25.

The project is expected to reduce greenhouse gas emissions by 1 million tonnes per year, the Department said.

The Middletown plant is expected to be operational by 2027, and the company’s Butler facility by late 2026 to early 2027, Lourenco said on the call.

The steelmaker’s transformer plant at Weirton, West Virginia, is on schedule to be operational by the fourth quarter of 2025.

“We have all of the necessary equipment ordered to begin making transformers in late 2025, early 2026,” Lourenco said.

The new transformer plant is expected to utilize carbon steel and stainless steel produced by Cleveland-Cliffs, which is the sole domestic producer of grain-oriented electrical steel (GOES).

GOES is a key component in electric vehicles (EVs) and is used in the motors and generators of EVs and hybrid cars.

Cleveland-Cliffs has previously said the investment in the production of electrical transformers will create more demand for US-made GOES, which is in very short supply.

The transition to EVs by the steelmaker’s automotive customers is not as fast as initially expected, Lourenco said on the call on Tuesday.

“Actually, some [clients] are really doing a completely [180-degree turn] on their strategies and going back to [internal combustion engine] and some [are] starting hybrid [vehicles],” the CEO said. “So, we are taking the automotive clients with a grain of salt going forward, and that makes us less eager to be spending money to change things here.”

Discover how the 2024 US election is impacting and could impact US and global commodity markets with Fastmarkets. Head to our US election hub.

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