COP28: Steel industry to combat fragmented low-carbon production

The newly adopted "Steel Standard Principles" by the World Trade Association are a first step to establish a unified approach for lower-carbon emission steel production which still lacks a definition, the World Steel Association told S&P Global Commodity Insights Dec. 4.

"It's not an agreement on a definition of 'green' steel; it's rather an agreement that the industry needs to put a stop to at the very least the proliferation of methodologies for measuring CO2 emissions from steel production that is causing the fragmentation [in the industry]," a worldsteel spokesperson said, adding that the principles are aimed to avoid stakeholders working unilaterally.

The WTO launched the Steel Standard Principles Dec. 1 at the UN Climate Change Conference in Dubai streamline the steel industry's road to low carbon emission steel production. The principles, backed by several steel producers and associations, are a step towards a more unified approach in a mostly fragmented landscape of green steel.

The principles are also backed by German steel federation WV Stahl. Martin Theuringer, managing director of WV Stahl, welcomed the launch of the principles in a note over the weekend saying the group would support the study, which would complement Germany's own efforts in trying to regulate the definition of lower carbon emission steel.

"It is good that this has now been published, which makes an important contribution to the debate on Green Steel Standards, which is now gaining momentum in the wake of COP28 and the Climate Club," Theuringer said Dec 3.

WV Stahl had been working with the German Ministry of Economy and Climate Protection to adopt a framework for lower carbon emission steel.

Fragmented approaches lead to confusion

The agreed-upon collaborative approach includes that standards should be consistent with the International Energy Agency's Net Zero Principles for emissions measurement and data collection, the WTO Technical Barriers to Trade Agreement Code of Good Practice and the TBT Committee's Six Principles for the Development of International Standards, Guides and Recommendations.

The principles also aim to combine and acknowledge that different routes to steel decarbonization exist and acknowledge that "divergent, fragmented, and incompatible standards and methodologies for measuring GHG emissions can lead to trade and supply chain disruptions, market uncertainty and consumer confusion, increasing the costs of decarbonizing steel production."

There is currently no widely accepted and adopted guideline on the definition of lower carbon emission steel, which can pose hurdles for those mills seeking certifications, or buyers trying to choose a green steel product.

Formal definition lacking

Almost all European mills are currently producing first volumes of carbon emission reduced steel, using either electric arc furnaces, changing the feedstock in blast furnaces or using other methods to reduce emissions resulting in widely varying CO2 levels in steel marketed as carbon reduced.

There are currently several industry groups working on definitions such as Responsible Steel or trade bodies such as WV Stahl on more unilateral level but a formal definition is still missing.

Platts, part of S&P Global, has been tracking carbon-accounted hot rolled coil premium prices since May 2 and recorded premium offers levels of up to Eur300/mt for near zero/mt of CO2, though little of these offers result in transactions.

The Platts HRC premium for carbon-accounted steel with CO2 emissions of up to 2/mt per metric ton of steel produced under scopes 1, 2 and 3 has been largely stable at Eur100/mt over the past months while the underlying market of conventional steel has been difficult.