SMU Spotlight: CRU's Paul Butterworth talks EAFs, CBAM, and decarbonization

With over 30 years of experience in the steel industry, Butterworth has been on CRU’s newly formed Sustainability team since August 2021. He joined CRU in 2012 and was later responsible for CRU’s analysis across the whole steel value chain. He holds an MBA from Warwick University and a PhD in theoretical chemistry from Manchester University.

I sat down with Butterworth recently to discuss his presentation and issues such as the Carbon Border Adjustment Mechanism (CBAM) and whether the European market was willing to pay a premium for green steel. These are familiar topics, but they are viewed through a different lens here.

Scrap/EAF as a long-term viable option for decarb?

Butterworth and I discussed his presentation at the conference. It included a portion on EAFs and decarbonization on a global level, which might prove a bit controversial to a US audience.

“If you melt scrap, it is much lower emissions. That’s a fact,” Butterworth said. “But the thing is, the availability of scrap is a function of past development.”

He noted the US has been developing for “many, many years; many decades,” and it has consumed a lot of steel in that development.

Butterworth pointed out that much of that steel was made through the integrated route and is now available as scrap.

“So the scrap is available simply as a function of the US’ history,” he said.

He added that places like India or Southeast Asia don’t have that same past development: “They don’t have the scrap. It just doesn’t exist.”

Butterworth remarked that there is only so much scrap in the world and that scrap will always be recycled because it is easy and economical to do so.

“That is, effectively, a known quantity. Whether we are going to decarbonize or not, whether decarbonization is an issue to the world or not, that scrap would be there,” Butterworth said.

“So decarbonization and wanting to decarbonize makes no difference to that. It’s irrelevant,” he stated.

He declared that defining decarbonizing performance by how much scrap you use is not helpful, as “It’s not going to push us forward on decarbonization.”

So the US can make low-emissions steel through EAFs, “But someone, somewhere else, is going to have to produce hot metal because the world wants a certain amount of steel.”

“So you take the scrap away from someone else, and they will have to make hot metal,” Butterworth said. “The path forward for decarbonization has to be low-emissions iron-making. That has to be the focus. The scrap will sort itself out.”

Hydrogen, carbon capture

He said hydrogen appears to be one of the significant elements of that future. Meanwhile, carbon capture at traditional steel plants might form part of the transition as well, he commented.

“But carbon capture is never going to be a zero-emissions technology…. That doesn’t mean to say it can’t have a role to reduce emissions today,” Butterworth said.

“So you’ve got plants today, if you could put carbon capture on them today and reduce emissions by 60%, that’s really beneficial…. But carbon capture is not an end solution because it’s never going to be zero,” he added. “It’s a bridge.”

CBAM

Our conversation touched on another controversial topic. What could a possible solution to the stalemate between the EU and the US on the Global Arrangement for Sustainable Steel and Aluminum look like? (Negotiations have been extended until March 31, 2025.) Recall that the Carbon Border Adjustment Mechanism (CBAM) adopted by the EU is a major sticking point. While it’s often viewed as a non-starter in the US, it’s officially starting in Europe on Jan. 1, 2026.

“Well, does there have to be a solution?” Butterworth asked.

He pointed out that it’s unlikely the US would start exporting steel to Europe. “Do they see it as a potential outlet for their steel? I can’t, particularly if the US starts charging for carbon at its border.”

However, he said Europe exports some steel to the US, and it would be around this material where it might be useful to have some negotiation.

“I presume the sort of steel that moves from Europe to the US is very particular grades and qualities,” Butterworth said. “And I would have thought it might even be in the US’ interest to say, ‘Well, OK, those steels we need. So why not have a system that doesn’t cause too much friction.'”

Green premium/looking ahead

Regarding whether customers in Europe are willing to pay a premium for green steel, Butterworth said it depends on the market.

It’s already happening in Europe in automotive, he said, but less so in construction.

In construction they might look and say, “Well, we’ve always bought rebar from these scrap-based EAFs.”

Then the EAFs say, “Oh, look, we’re low carbon.”

But the customers will respond: “Well, what’s different today from what it was before, you were always scrap-based?”

Essentially, why should they pay a premium for what is basically the same thing?

What he sees happening is that as time goes on, more of the steel market in Europe will be prepared to pay a premium. That will expand from automotive to domestic appliance manufacturers to construction because there will be European Union building codes and regulations that will drive it.

While Europe and the US may be pushing forward, Butterworth notes for the rest of the world, “We’re on different tracks, different speeds. There’s different start points, different political requirements.”

Additionally, climate change is not static. As the situation develops, new needs could arise.

“So, I think the decisions that are going to get taken in five years’ time or 10 years’ time could be very different from the sort of decisions that have been taken today,” Butterworth said.

“That might force more closer alignment, more cooperation, because governments of the world might begin to realize that the more we can coordinate on this, the faster we can move,” he added.