Green steel will be a premium product

Steel consumers may find that they must pay the price for greener products and materials in the near future

Steel consumers who want to help with the move toward production with lower carbon-dioxide emissions will find that they must pay a premium for greener material, Fastmarkets has heard.

Massive investment will be needed to improve the green credentials of the industry, which is responsible for roughly 7% of global energy emissions, and steelmakers will expect their customers to foot the bill.

The US industry is in the vanguard of the change because more than 70% of the country’s output now comes from electric-arc furnaces (EAFs), not blast furnaces, which are used for the bulk of production elsewhere in the world.

“We are seeing a modernization and electrification of the domestic steel industry,” Steel Manufacturers Association president Philip Bell told Fastmarkets. “I’ve actually had talks with companies that are required to buy American steel, and they say they are willing to pay a modest premium for more [of this material].”

CO2 emissions via EAF production are reduced by 75% in comparison with the blast furnace method, according to SMA. A further reduction in emissions from the US industry would require the closure of blast furnaces and a switch to cleaner power sources, such as hydrogen, by the country’s EAFs.

Cleveland-Cliffs, the biggest US steelmaker, set a target to slash its greenhouse gas emissions by 25% by 2030 in a statement on January 28 this year.

“This is a capital-intensive industry. We have facilities that are up and running and have many years left to their lifespan,” Pinakin Chaubal, ArcelorMittal’s vice president and chief technology officer, told Fastmarkets. “If you want to add technology, and retrofit them, that’s not cheap.”

ArcelorMittal, the world’s largest steelmaker, has set a target of reaching carbon neutrality by 2050, but it aims for a 30% reduction in CO2 emissions by its European operations by 2030. The company is counting on two technologies to meet this goal – Smart Carbon and direct-reduced iron.

The company’s $100-million-per-year “XCarb innovation fund” is part of ArcelorMittal’s sustainability initiative to achieve carbon-neutral steel. XCarb green steel certificates will enable the company to support customers who seek to reduce their Scope 3 emissions, and the company will also offer recycled and renewably produced pioneering products for customers under the XCarb brand name.

Scope 3 is the highest emissions standard measured under the international accounting tool, the Greenhouse Gas Protocol.

Find out how US steel companies are tackling Scope 3 emissions in our recent report, The steelmaker’s guide to tackling upstream Scope 3 emissions

“We are starting to get requests, asking about the carbon footprint of the steel,” Chaubal said. “We are starting to see customers willing to pay a premium for greener steel, starting in Europe, where we sell steel with an XCarb green steel certificate.”

Swedish steelmaker SSAB intends to be fossil-fuel-free by 2045, and will have fossil-fuel-free steel on the market in 2026, Mia Widell, the company’s manager of press relations and sustainability communications, told Fastmarkets. SSAB will close its blast furnaces and replace them with EAFs that will eventually run on clean energy, including hydrogen.

“Fossil-free steel made with electricity is coming, and it’s a prime product,” Widell said. “We expect that customers will pay more for a prime product [such as this, although] we believe in the beginning it will be more expensive than other steel.”

CO2-negative steel is possible but it will require further significant changes throughout the production chain, according to the authors of a study in the International Journal of Greenhouse Gas Control.

“We are starting to see more and more customers asking about the carbon footprint, but we’ve only just started to see whether there is an appetite from customers to pay more for a product – low-carbon steel – which will cost considerably more to make,” Chaubal said.

To keep up with the green steel discussion, visit our Green Steel Spotlight page.

What to read next
Turkey has announced a halt on exports to Israel of a range of steel, aluminium and copper products amid the continued conflict in Gaza, the Turkish Ministry of Commerce said on Tuesday, April 9.
China’s manufacturing sector is overtaking its construction sector in driving the country’s demand for steel, in a shift that is expected to benefit flat steel products more than long steel ones, an industry expert said at a recent industry conference.
This initiative marks a significant step towards reducing industrial greenhouse gas emissions and championing the US in the global decarbonization effort
Fastmarkets has corrected its MB-STE-0034 steel domestic plate 8-40mm, exw Northern Europe and MB-STE-0035 Steel domestic plate 8-40mm, exw Southern Europe assessments, which were published incorrectly on Wednesday March 27.
The green steel supply chain is gradually starting up in Malaysia, largely due to stricter decarbonization-related government policies, sources said in the week to Monday March 25. One of these policies is a two-year moratorium on all expansion and diversification of manufacturing activities in the iron and steel industry
Fastmarkets is inviting feedback from the industry on the pricing methodologies for its steel hot-rolled coil index domestic, exw Northern Europe, €/tonne (MB-STE-0028) and steel hot-rolled coil index, fob mill US Midwest, $/cwt (MB-STE-0184) as part of its annual methodology review process.