Lower carbon a ‘tie-breaker’ in US rebar market: Stickler

Steelmakers offering lower-carbon steel reinforcing bar (rebar) have a competitive advantage over traditional rebar producers, even if customers are unwilling to pay a premium for it in a price-sensitive market, according to David Stickler, senior managing partner of Global Principal Partners

A “green” rebar product is a “tie-breaker” that customers will prefer when “the price remains the same,” Stickler told Fastmarkets in a phone interview last week.

Stickler’s newly formed Highbar LLC is building a new rebar micro mill at a greenfield site near Osceola, Arkansas – the first of two planned electric-arc furnace (EAF) rebar mills, each with a 600,000-ton-per-year annual capacity, that Global Principal Partners, the former Big River Steel chief executive officer’s private equity firm, announced in June this year.

“We do not expect the market to pay a green premium. We want our rebar to be the most environmentally sustainable,” Stickler said. “If it is, we will receive orders over our competition, everything else being equal. We view being ‘green’ as the tie-breaker.”

“We expect the environmental footprint [of the two planned rebar micro-mills] to be the lowest in the North American rebar industry and possibly the world,” Stickler told Fastmarkets in June, a sentiment he reiterated last week.

“We saw it firsthand with Big River Steel, which was the first LEED-certified steel production facility in the United States,” Stickler said last week. “Automakers came to us who wanted our steel, but they did not pay a premium.”

LEED is the US Green Building Council’s Leadership in Energy and Environmental Design certification, a global standard that provides third-party verification of “green” buildings.

Domestic rebar market participants were divided on whether they would pay a premium price for “green” products.

A trader source said some states, such as California, would be more accepting of a “green” premium for a lower-carbon rebar product.

“The California market might be the main state to start on this, since they are the ones that are pushing more on this,” the trader said. “Since this is a commodity, it might be a big challenge, and price is what is what drives the market mainly.”

“I think it’s early for ‘green’ rebar,” a distributor said.

A second distributor likened “green” rebar to the “new organic.”

“Every piece of ugly fruit is labeled ‘organic,’ and they get an extra buck for it, so [charging a higher premium for lower-carbon rebar product] will most definitely happen, allowing customers to meet carbon requirements on their jobs,” he said. “Win for the supplier, win for the customers, win for Earth and a loss to the end-user who has to pay more for the same thing.”

Another steelmaker, Commercial Metals Co, launched a line of net-zero greenhouse gas emissions rebar products in August, achieved through renewable energy and carbon offset credits.

Highbar Osceola micro mill update

Stickler is investing in US rebar partly because current domestic rebar capacity cannot meet demand, he told Fastmarkets.

“We have pre-sold 25% of our production for 10 years to a customer in the Pacific Northwest, who is also moving into the Chicago and Nashville areas,” Stickler said.

The Osceola rebar project – spread across 600 acres – remains on track to break ground in the second quarter of 2023 and begin a 22-month construction schedule, Stickler confirmed.

“The cost of the mill and related installation costs is slightly in excess of the $500 million,” he said. “When we add in construction contingencies, working capital and startup costs, the project costs total almost $600 million.”

The Osceola mill will produce a “large percentage of coiled rebar, which is easier to handle and ship, and also stick rebar, which can go up to 70-80 feet at no incremental cost to us,” Stickler said. “We can produce all lengths and gauges of rebar, up to Size 8 rebar.”

The second rebar micro mill is “targeted for a different region,” Stickler said. “We expect the second mill to follow the first by 24 months or so.”

Highbar aims to set industry standard

Highbar is working with trade associations and other parties to set an industry-standard in sustainable rebar products, Stickler said.

“Some Southeast Asian rebar producers claim that they are sustainable, but anyone can claim they are sustainable,” he said. “There is not yet an industry-standard in low carbon rebar, and we want to lead the way.”

Highbar’s Osceola rebar mill will feed its operations directly from its solar installation, without first feeding the power into the grid, “unlike others that simply invest in solar projects that are geographically remote from their steelmaking operations or draw electrical power from a grid that is partially fed with renewable generation,” Stickler said.

“We also will be the first mill in North America and possibly the world that will not be tied into a gas pipeline,” he said. “Our consumption of natural gas will be minimal and the small amount of gas we use will be bottled gas.”

“We prefer to not have to rely on [renewable energy and carbon offset] credits to achieve our goals,” Stickler added. “Our mill will be directly connected to a solar installation during the day, and at nighttime, the electrical energy will be majority nuclear powered.”

Highbar “aggressively” looked for low-carbon energy sources, and a strong understanding of its Scope 1 and Scope 2 emissions, he said. The challenge is tracking Scope 3 emissions to control the inbound and outbound material, transportation and scrap operations, according to Stickler.

“If I cannot do better than the current model – of taking scrap from the US, ship it all the way to Turkey, melt it into rebar there, then ship it back to the US – then I should not invest,” Stickler said.

The US Department of Commerce has levied preliminary duties against rebar from Turkey and Mexico, after finding that some Turkish and Mexican companies sold rebar into the US at prices below normal value.

Fastmarkets’ weekly price assessment for steel reinforcing bar (rebar), import, loaded truck Port of Houston for immediate delivery narrowed upward to $860-900 per short ton ($43-45 per hundredweight) on December 7, down by 1.15% from $840-900 per ton the previous week and 11.11% lower than $980-1,000 per ton in the same week last year.

Fastmarkets’ assessment for steel reinforcing bar (rebar), fob mill US was $47.50 per cwt ($950 per ton) on December 7, unchanged from the prior week but 7.77% lower than $51.50 per cwt in the same week last year.

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