Some European steelmakers have started to propose green steel premiums in long-term contract talks with automakers and their general supply chain.
An Austrian steelmaker has tabled a €55/t green steel premium in its first talks with automotive customers, although the value appears to be negotiable. A German producer has requested "compensation" for strip produced through its electric arc furnace, as it is costlier than traditional blast furnace-based production.
While understanding the need to decarbonise, and needing to in their own supply chains, some automakers think mills are trying to profit in the short term by passing off the costs of carbon offsets, and are pushing back as a result. Some carmakers are also in no rush to enter contractual talks, given the fading momentum in the coil spot market.
Tata Steel has already introduced a carbon surcharge, which was initially €12/t and subsequently moved to €16/t. It implemented it close to the top of the market, meaning customers had little choice but to accept. It is now trying to bake in the €16/t into its longer-term contracts, having already achieved it in the spot market. The surcharge is designed to help it pay for the increasing cost of carbon going forward.
China Steel Taiwan, which supplies companies in the European automotive supply chain, has also announced it will charge a carbon surcharge from next year. The company, as with other overseas producers, will have to pay a carbon border tax once the European Union's carbon border adjustment mechanism (CBAM) begins. The transitional phase of CBAM starts in 2023 and will be fully operational by 2026.
Under CBAM, importers will pay an equivalent carbon cost to the EU's emissions trading system to acquire certificates that allow them to sell into the region.