Final thoughts

Having just attended the SMU Steel Summit last month in Atlanta, here is a cheat sheet of things that stood out to me at the Decarbonisation Summit.

First off, there was a heavy emphasis on DRI and hydrogen, as well as decoupling ironmaking and steelmaking. Less of an emphasis on EAFs and scrap. That’s understandable, given the European industry’s continuing reliance on BFs.

For energy, this current period was widely viewed as a transition, where natural gas may have to be used until renewables are able to ramp up and pick up the slack. Electricity is key, with wind and solar the main subjects of the conversation, while nuclear was largely excluded.

In Europe, there’s no way around it: energy costs a lot. Indeed, another “shore” was added to the mix at the conference: “Powershoring,” or having a mill near an electricity source. Green steel is going to use more energy. With geopolitical turmoil and, hence, cheap Russian energy off the table, something will have to power the push. Just as in the US, questions about strengthening the grid have taken on a sense of urgency. With the European Union’s multiple nations with different resources, transportation networks, and national industries, another layer of complexity is involved compared to the US.

Green premium?

If there is a premium for green steel, will customers be willing to pay it? At Steel Summit, Hybar CEO Dave Stickler said, “Environmental sustainability is a tiebreaker, not a game changer.” That is, in the US, the green premium largely remains an open question.

Initially, many panelists in Stockholm said their customers were demanding green still and willing to pay for it. The tone was much more bullish on it than in the US. However, an informal poll was conducted at the end of the conference by a show of hands.

“Would customers be willing to pay a green premium?”

By my estimation, fewer than half said yes.

There was a consensus that customers would be willing to pay if a tax was placed on “brown steel” to bridge the price gap.

That’s the thing: the journey to green steel is kicking into high gear, but, like in the US, there are still no agreed-upon definitions. Terms like “brown steel” (with no emphasis on carbon content), “green steel” (carbon neutral steel), and “grey steel” (somewhere in the middle) were tossed around. But definitions need to be determined, especially as regulations start to come into effect.

CBAM

From my US perspective, the discussion around the Carbon Border Adjustment Mechanism (CBAM) was eye-opening. It’s widely viewed as a non-starter in the US. (For a description of how CBAM works and the daylight between the US and EU positions, click here.) However, the transitional phase for CBAM lasts from 2023-25. In 2026, it goes into effect. That is, the non-starter is starting.

Regarding how it will work, a panel moderator quipped, “It’s complicated.” There are still a lot of things to work out. However, the general tenor was that it was going forward and is THE way things will proceed.

Of course, it’s a major stumbling block in The Global Arrangement on Sustainable Steel and Aluminum between the EU and the US. (Negotiations have been extended until March 31, 2025.) It was my impression that this issue will heat up next year when CBAM starts to get some teeth.

As to the complexity of determining the carbon footprint of end products, one panelist brought up the example of a washing machine. Simply put, there are a lot moving pieces to figure out.

What’s clear is that these kinks need to be worked out to keep trade open around the world. While there are many ways to decarbonize, two countries – or two trading blocs – need to agree on how to treat each other’s imports.

The China wild card

That brings me to the last issue that really stood out. As the largest steelmaker in the world, what happens if China decides to make a decarb push? If Chinese steelmakers made as little as 10% of their output “green,” how could European producers compete?

Also, it was noted that as China’s economy matures, a natural offshoot of that will be that it will start to generate more scrap, which means potential material for EAFs there.

Closing thought

All in all, it was very interesting to see an alternative perspective. The question is, after learning about that viewpoint, how do we create a dialogue to bridge the gaps? Personally, I am much more a fan of the “z” than the “s,” but I would be willing to make a concession if it would be a boon to global trade and international relations.