Green Steel is Turning Real as Fastmarkets Launches Asian Green Steel Premium Index


13 September 2023
  • A green steel market has taken another big step after Fastmarkets launched its first Asian green steel premium on Friday
    Fastmarkets regional editor Asia Paul Lim told Stockhead premiums paid for low carbon steel had been seen in excess of US$300/t
  • High grade iron ore and met coal producers could be among the winners as green steel output rises
  • Japanese and Korean steelmakers are seeing premiums as high as US$300/t selling low carbon steel in a sign the long-touted green steel industry is finally awakening.

For a long time a nebulous phrase centred on hopes and dreams for the future in an industry notoriously responsible for 8% of the world’s CO2 emissions, green steel is finally beginning to emerge as a genuine product.

It is traded in small volumes compared to the vast majority of the nearly 2Bt of crude steel churned out by mills worldwide, around 70% of which is produced in blast furnaces or basic oxygen furnaces.

Mills produces on average 1.85t of CO2 for every tonne of steel worldwide. From coal-reliant blast furnaces that can be well in excess of 2t.

On Friday, Fastmarkets launched an index for what it says is its first green steel premium, tracking premiums offered by customers for a swag of products with Scope 1, 2 and 3 emissions below 1.3tCO2/t from major steelmakers in Japan, Korea and Taiwan. It’s known as the (and this is a mouthful) Fastmarkets weekly green steel, flat-rolled, regional differential to cfr Vietnam HRC index, Japan/South Korea/Taiwan.

“You can’t escape green steel, basically,” Fastmarkets regional editor Asia Paul Lim told Stockhead.

“Green steel is something which will continue to grow in the future in terms of momentum.

“The key on the sentiment to use green steel especially is a lot of big OEMs, including automotive producers, are looking for certified green steel.

“You can say Asia was a little bit late in terms of coming to the market with green steel, and instead previously it was the European steelmakers, European carmakers, which actually had an earlier lead time on this.

“But now, the Japanese and South Koreans are the ones in Asia making a move on this first.”

Steelmakers are using a range of methods to produce steel that falls under this 1.3t limit, including electric arc furnaces with scrap steel feed, carbon capture, tweaked or enlarged blast furnaces to replace older infrastructure as well as carbon credits.

OEMs driving demand

Lim says Fastmarkets, one of two major iron ore and steel reporting agencies along with S&P Platts, has seen premiums of US$200-300/t for green steel made in Asia.

“We are seeing premiums as high as more than US$300 per ton over a normal carbon steel product, and there is a range of about US$200 to US$300 for now,” he said.

“As the market evolves, I feel that there’ll be more room for differentiation between the various grades of green steel whether it is really zero carbon or there’s 600kg of carbon or 1t of carbon.

“And perhaps we’ll have a clearer picture of what comes in the future.”

Among the products sold which fit into the premium index include Nippon Steel’s Carbolex, made using a new electric arc furnace at its Setouchi Works, JFE Steel’s JGreeX green steel, Hyundai Steel’s HyECOsteel and POSCO’s Greenate brand.

POSCO, which is aiming to have its HyRex hydrogen reduced steel technology tested from 2026, agreed on the sale of its first 200t under the Greenate brand to LG Electronics earlier this year which will be used in the manufacture of home appliances.
Lim said interest in products which attract a green steel premium is largely coming from the auto and electronics sectors at the moment, and open the potential for Asian steel producers to supply the European market where the implementation of the EU’s Carbon Border Adjustment Mechanism will begin from next month.

“I feel that once CBAM starts, there will be kind of a convergence between the green steel premiums, and the kind of carbon taxes that are being seen in Europe,” Lim said.

“I feel that way. And the green steel premiums also allow the Asian steelmakers to try to penetrate the European CBAM market.”

According to data provided by Fastmarkets, the Green Steel import premium relative to the hot rolled coil index CFR Vietnam came in at US$204-340/t, with base price of US$794-940/t on Friday.

In Europe the differential was tracking between 100-250 Euros, with a base price of 741.25-891.25 Euros.

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