Green steel CEO: “CBAM positive for Brazilian steel”

As the definitive phase of the EU’s Carbon Border Adjustment Mechanism (CBAM) approaches, steelmakers around the world are working to adapt to the limits imposed by the new system — but that doesn’t seem to be a challenge for Brazilian mills, according to Silvia Nascimento, chief executive officer of the green steel producer Aço Verde do Brasil (AVB).

With annual production below 500,000 tonnes, AVB describes itself as fundamentally different, both in scale and in its operating model, from its larger Brazilian competitors — which produce up to 15 million tonnes per year and are also considered “clean” steel producers.

“AVB has no distribution arm, doesn’t sell to individual customers, and doesn’t sell fractional loads. Our operations are completely different from retail, because small clients often don’t value green steel and focus only on price,” Nascimento told Fastmarkets in an exclusive interview.

The CEO compares AVB to a “vegetarian,” while Brazil’s other steelmakers are merely “healthy.”

“They eat ‘meat’ from time to time. In our case, we use only charcoal, our own electricity or certified hydropower, [our own] oxygen and we are 100% free of fossil fuels in the steelmaking process. Other Brazilian mills are green in some parts of the process, but not throughout,” Nascimento said.

For that reason, Nascimento believes the company could start supplying steel to the EU in the short term.

The CEO’s answers to Fastmarkets’ questions are below:

There is a perception that Brazil has all the natural conditions to become a global powerhouse in green steel, but that the main risk lies in how slowly the country adapts. Where is Brazil moving quickly, and where is it still lagging?

Nascimento: Brazil has a unique opportunity to become a world leader in green steelmaking, because our energy matrix is naturally cleaner. We have advanced wind power, advanced solar power, a strong presence of hydropower and about 30% of our steel industry uses charcoal. Also, large Brazilian mills have their own forests.

Just that alone gives us a huge advantage compared with China, Russia, Turkey and Southeast Asia.

But we aren’t moving faster because interest rates in Brazil are prohibitive. No one can borrow at less than 17-18% a year, even when the benchmark rate is at 15%. We see weak corporate results due to competition from imports, slow environmental licensing, the absence of dedicated financing lines for the sector and regulatory inconsistency: the government demands a “gold standard” from Brazilian companies while allowing 6 million tonnes of the world’s dirtiest steel to enter the country.

With the EU’s CBAM coming into force, how do you assess the impact of this regulation on the Brazilian steel industry?

Nascimento: I believe Europe is absolutely right. It needs to differentiate itself — and the correct way is exactly this: not allowing steel that is dirtier than its own to enter its borders. And if [that steel] wants to enter, it must pay for that. I think it is completely fair and legitimate. It is exactly what Brazil should be doing.

When the CBAM takes full effect, prices in Europe will indeed rise. But I believe Brazilian products will not face major difficulties. With rare exceptions, Brazilian steel products are well below the CBAM emissions threshold.

Is the Brazilian steel industry prepared to operate in an environment where emissions carry a price, regulatory weight and direct impact on trade?

Nascimento: Let me give you a simple example: pig iron. We have another company, CBF Indústria de Gusa, one of Brazil’s major producers. We produce 260,000-300,000 tonnes per year, and 50% goes to Europe — Sweden, Germany, Italy, Spain and so on.

The CBAM benchmark for pig iron is 1.7 tonnes of CO2 equivalent (tCO2e) per tonne produced. Above that, you pay a fee. CBF emits 0.02 tCO2e per tonne. In other words, we’ll pay nothing. On the contrary — we’ll likely be preferred.

Rebar follows the same logic. The CBAM threshold for many steel products in Europe is 1.89 tCO2e per tonne. AVB emits 0.2 tCO2e per tonne. Producers using scrap emit around 0.8 tCO2e per tonne. That means everyone is below the threshold.

So for us, CBAM is positive. The problem is something else: as Europe tightens its rules, dirty steel from Southeast Asia and China ends up with no destination — and it gets redirected here.

It’s important to note that the CBAM steel benchmark values and default values have not yet been published in the EU Official Journal, but sources told Fastmarkets that the European Commission voted on Wednesday December 10 to accept benchmarks and default emissions values.

Benchmarks for different steel products vary depending on production route — blast furnace-basic oxygen furnace (BF/BOF), direct-reduced iron/electric-arc furnace (DRI/EAF), and scrap-based EAF.

Considering that Brazilian steel exports to Europe are still not very large, does AVB have any goals to increase its export mix or volume to that market?

Nascimento: Not at the moment. AVB does not export finished steel. What we export is a small amount of pig iron, when there is surplus in the process, and a small amount of billet. Finished steel — wire rod, rebar — we do not export yet.

But I think that, with CBAM, these conversations will move forward. In fact, in the second half of November, we completed our international EPD [Environmental Product Declaration] for wire rod. Now we’ll prepare one for rebar and for pig iron.

We are assembling all the documentation required for exports to the EU and the UK, which have their own specific certifications. It’s like getting a passport: the trip comes later. We are making sure everything is ready.

Fastmarkets’ monthly price assessment for steel reinforcing bar (rebar) domestic monthly, delivered Brazil was 3,200-3,600 Reais ($604-680) per tonne on November 14, narrowing downward from 3,200-3,630 Reais per tonne a month earlier.

And if that does materialize, do you intend to increase production volume?

Nascimento: Absolutely. AVB has an installed capacity of 728,000 tonnes, and our highest production year — 2024 — reached 477,000 tonnes. In other words, yes, we do have room to grow.

Regarding the low-emissions advantage: does it already translate into a price premium or special commercial conditions? Or is the Brazilian market still very price-driven?

Nascimento: Unfortunately, it is still entirely price-driven. With high interest rates, construction companies under pressure and businesses struggling, no one values quality — only price.

Brazilian green steel still carries no premium at all. But do you know what does have value? Opportunity. When comparing price to price, people give me a chance. And for me, that is already a huge advantage.

And finally, you list “air gases” as one of your products. Could you explain that?

Nascimento: When AVB’s project was conceived in 2008, its emissions would have been higher than they are today because it was originally designed to use natural gas in the reheating stage. But the gas supplier failed, and the solution for this stage was to adopt oxygen instead. Nevertheless, we didn’t want to be dependent on any other supplier, so we built our own oxygen plant, and that was the game changer.

In our oxygen plant, there is always surplus — especially nitrogen and argon. And in the region, there is a huge shortage of these gases, which come from elsewhere, and it’s extremely expensive. So we sell it.

Compared with AVB’s total revenue, it’s small: AVB has revenues of about 200 million Reais ($36.68 million) per month; gases generate about 2 million Reais per month. But it generates revenue, meets local needs and has very high margins — because it’s a by-product.

In 2026, we’ll complete the expansion of our oxygen plant, which comes online in the first quarter. We invested almost 200 million Reais in the new plant, which will have 2.5 times the current capacity, and combined with the existing one we’ll have roughly 3.5 times today’s volume.

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