• 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.

 

And what will it mean for iron ore?

Premiums for high grade iron ore which hit high levels in 2021 came back to Earth last year as Chinese steelmakers moved into lossmaking territory, driving demand for mid and lower grade products.

Recently they have been rising again thanks to weak Chinese supply for higher grade concentrates and pellets.

“This one is more of a spot market thing, so when China starts to undergo sintering and if Chinese domestic concentrates and domestic pellet supply is tighter, then you’ll start to see the premiums for high grade iron ore start to increase again,” Lim said.

“So recently the demand for pellets has increased. So the premium for iron ore pellets, for premium pellets, as well as Middle Eastern pellets have also increased.”

Going forward, Lim sees the green steel premium forming a strong basis for higher grade iron ore to extract stronger revenue.

“A green steel premium forms the basis for higher grade iron ore pricing, as well as it unlocks the potential revenue which iron ore miners may be able to extract from their product, especially if it’s high grade iron ore, high grade iron ore pellet feed or DRI and HBI or even agglomerated metallics which the iron ore miners are producing,” Lim said.

A number of Pilbara iron ore miners, whose products are not suited to low carbon steelmaking because they can only be processed in conventional blast furnaces, are studying ways to use mid-grade fines in low-emissions steel tech.

Until then that end of the market will largely be supplied by scrap steel or high grade, low impurity pellets and concentrates.

Rio (ASX:RIO) and BHP (ASX:BHP) produce small quantities of those products overseas at their Iron Ore Company of Canada and Samarco operations respectively.

While a number of explorers are keen to develop operations that can feed into the high grade market, only two miners on the ASX are primarily focused on the high grade magnetite segment — Champion Iron (ASX:CIA) at Bloom Lake in Canada and Grange Resources (ASX:GRR) at its smaller Savage River mine in Tasmania.

Fortescue (ASX:FMG) recently opened its Iron Bridge magnetite mine in the Pilbara, producing a 67% Fe plus concentrate, though it will only produce around 7Mt in 2023-24 with a two year ramp up expected to hit its planned 22Mtpa runrate.

Iron ore remains on a hot run amid expectations Chinese stimulus measures will improve downstream steel demand, with benchmark 62% Fe iron ore futures hitting a nearly six month high of US$119/t in Singapore yesterday.

 

ASX iron ore stocks

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CODE COMPANY PRICE WEEK RETURN % MONTH RETURN % 6 MONTH RETURN % YEAR RETURN % MARKET CAP
ACS Accent Resources NL 0.008 0% 0% -68% -81% $ 3,785,018.26
ADY Admiralty Resources. 0.006 0% -14% -14% -45% $ 7,821,474.92
AKO Akora Resources 0.18 -3% -3% 20% -12% $ 17,096,906.52
BCK Brockman Mining Ltd 0.023 -13% -21% -12% -18% $ 213,445,339.01
BHP BHP Group Limited 44.19 -4% -3% -2% 16% $ 221,301,179,100.42
CIA Champion Iron Ltd 6.08 -4% 8% -19% 13% $ 3,072,736,665.90
CZR CZR Resources Ltd 0.14 -7% -22% -22% -53% $ 33,002,850.44
DRE Dreadnought Resources Ltd 0.053 -4% 6% -22% -56% $ 181,403,723.72
EFE Eastern Resources 0.008 -11% -20% -43% -71% $ 10,556,544.92
CUF Cufe Ltd 0.013 0% 0% -28% -35% $ 16,045,573.11
FEX Fenix Resources Ltd 0.24 2% -19% 0% -2% $ 152,715,622.40
FMG Fortescue Metals Grp 19.96 -1% -5% -7% 12% $ 60,440,081,340.34
RHK Red Hawk Mining Ltd 0.785 -1% 39% 73% 21% $ 123,259,461.21
GEN Genmin 0.18 0% 0% -5% -18% $ 81,275,982.12
GRR Grange Resources. 0.46 -1% -11% -47% -46% $ 526,589,107.59
GWR GWR Group Ltd 0.089 2% 3% 17% 1% $ 30,194,365.57
HAV Havilah Resources 0.24 -8% -19% -28% -30% $ 75,993,410.40
HAW Hawthorn Resources 0.12 4% 9% 26% 22% $ 41,876,951.63
HIO Hawsons Iron Ltd 0.036 9% -8% -45% -93% $ 30,329,344.95
IRD Iron Road Ltd 0.08 -5% -9% -33% -43% $ 64,551,317.76
JNO Juno 0.06 -17% -28% -33% -45% $ 8,817,770.07
LCY Legacy Iron Ore 0.015 -6% -6% -17% -25% $ 108,916,045.38
MAG Magmatic Resrce Ltd 0.059 -2% -18% -38% -68% $ 18,647,260.68
MDX Mindax Limited 0.05 0% -7% -49% -15% $ 102,277,939.00
MGT Magnetite Mines 0.34 -11% -16% -44% -73% $ 26,483,941.91
MGU Magnum Mining & Exp 0.039 -5% -33% 70% 15% $ 27,495,218.17
MGX Mount Gibson Iron 0.445 1% 7% -14% 2% $ 516,128,216.53
MIN Mineral Resources. 69.27 -6% 2% -17% -3% $ 13,394,112,732.00
MIO Macarthur Minerals 0.21 -2% 0% 50% 31% $ 31,550,162.72
PFE Panteraminerals 0.059 -13% -21% -44% -52% $ 6,077,629.86
PLG Pearlgullironlimited 0.025 9% -4% -38% -8% $ 3,910,405.95
RHI Red Hill Minerals 4.1 -2% -6% -9% 8% $ 262,333,692.39
RIO Rio Tinto Limited 114.11 -3% 5% -3% 21% $ 41,724,702,453.60
RLC Reedy Lagoon Corp. 0.006 0% -25% -12% -61% $ 3,700,101.53
CTN Catalina Resources 0.005 25% 0% -29% -38% $ 6,192,434.46
SRK Strike Resources 0.057 6% 0% -21% -39% $ 15,890,000.00
SRN Surefire Rescs NL 0.016 7% -3% -11% 0% $ 24,770,452.16
TI1 Tombador Iron 0.019 -10% -17% -17% -27% $ 43,144,647.46
TLM Talisman Mining 0.145 -3% 0% 7% -9% $ 27,306,450.61
VMS Venture Minerals 0.013 8% -7% -41% -50% $ 25,350,169.46
EQN Equinoxresources 0.15 7% -6% -21% -3% $ 6,750,000.15
AMD Arrow Minerals 0.003 20% 0% -50% -25% $ 9,071,295.29
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Could green steel premiums help coal miners too?

There is a general acceptance that coals days are numbered as the world attempts to run towards net zero by 2050, though the reality is demand for the commodity (which hit an all time high last year) remains stickier than most green energy advocates hope.

Lim says there will be some benefits for coal miners to extract good prices selling to companies whose products meet the green steel premium criteria.

That is, if they produce a high quality hard premium coking coal with low sulphur and low ash content, which can generally be used in lower quantities furnace without the need to remove excessive gangue materials.

“Green steel premiums basically needs to be made from premium hard coals and also low ash, low sulphur coals, which does not produce as much gangue content or impurities, as you call it, in the blast furnace,” Lim said.

“And generally I view that coking coal producers will find a way to work their premium into their pricing for a low ash or premium hard coals.”

With interest in the steel sector on the up in China, Dalian coking coal futures for January rose 5.06% yesterday to 1784RMB, equivalent to around US$245/t.

Premium Hard Coking Coal Futures were yesterday around 0.7% to US$282.3/t, up almost US$60 since mid-July.

Front month thermal coal futures (Newcastle 6000kcal) meanwhile were sitting at US$160/t yesterday.

 

ASX coal stocks

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CODE COMPANY PRICE WEEK RETURN % MONTH RETURN % 6 MONTH RETURN % YEAR RETURN % MARKET CAP
NAE New Age Exploration 0.007 40% 17% 40% 17% $ 11,487,191.28
CKA Cokal Ltd 0.096 -17% -13% -42% -61% $ 107,894,898.00
BCB Bowen Coal Limited 0.12 0% 4% -59% -70% $ 234,958,446.58
SVG Savannah Goldfields 0.07 0% -17% -59% -71% $ 14,231,256.12
GRX Greenx Metals Ltd 0.965 3% -4% 33% 349% $ 263,328,176.14
AKM Aspire Mining Ltd 0.105 5% 14% 102% 12% $ 49,240,787.55
AVM Advance Metals Ltd 0.006 0% 0% -33% -50% $ 3,531,352.36
YAL Yancoal Aust Ltd 4.82 -13% -6% -27% -30% $ 6,443,744,452.56
NHC New Hope Corporation 5.98 2% 6% 7% 8% $ 5,046,652,720.08
TIG Tigers Realm Coal 0.006 0% 0% -50% -68% $ 78,400,214.21
SMR Stanmore Resources 3.15 3% 11% -12% 37% $ 2,749,244,483.70
WHC Whitehaven Coal 6.13 -4% -15% -14% -30% $ 5,111,630,790.24
BRL Bathurst Res Ltd. 0.97 -4% -1% -3% 7% $ 184,662,187.70
CRN Coronado Global Res 1.625 -2% 0% -10% 10% $ 2,707,472,773.95
JAL Jameson Resources 0.051 0% 0% -29% -36% $ 19,967,066.10
TER Terracom Ltd 0.445 -17% 1% -26% -54% $ 376,454,130.45
ATU Atrum Coal Ltd 0.005 0% 0% 0% -33% $ 6,958,495.86
MCM Mc Mining Ltd 0.135 -10% -18% -29% -65% $ 53,954,802.27
DBI Dalrymple Bay 2.77 1% 1% 10% 29% $ 1,383,175,050.93
AQC Auspaccoal Ltd 0.12 4% -12% -26% -82% $ 50,351,752.49
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