London, 22 August (Argus) — Depending on market conditions, some European customers may pay a premium over and above the carbon savings provided by green steel when there is a supply and demand imbalance between 2030-2035, Dr Sebastian Langendorf, Meranti Green Steel CEO, told Argus.
Meranti is targeting 2029 for the first electric arc furnace-based production in Rayong, Thailand, with the start of hot-briquetted iron production at its Omani project at a similar time. The Omani DRI plant, which will be fed mainly with natural gas but an increasing amount of hydrogen over time, will produce 2.5mn t/yr of HBI, 50pc of which will be used in the Thai furnace, with the balance sold to EU offtake partners. Scrap for the Thai furnace will be mainly sourced domestically, Langendorf added.
The company has had expressions of interest from European steelmakers and traders for its Omani HBI and hopes to finalise offtakes in the next three to six months. Langendorf said it is even harder to define a HBI premium than it is for green steel, but the company envisages offtake being priced off scrap plus a premium.
Langendorf said the decarbonisation narrative in Europe had developed somewhat since its inception, from mills looking at hydrogen-fed DRI to a mix between domestic ironmaking and scrap usage and imports of metallics, such as HBI. Producing DRI solely within parts of the EU is challenging in terms of competitiveness, based on high energy costs, and the higher-grade scrap used to make flat products will be scarcer and more expensive, meaning some imported virgin iron will be necessary.
Meranti already has eight offtake partners, mainly in Europe, including Interfer, Belmont & Knott, Salzgitter Mannesman and Steelforce. The company forecast its HRC cost for natural gas and hydrogen-fed /EAF to be competitive.
For HRC offtakes, Meranti has looked at HRC benchmarks plus a premium. “By and large our concept is trying to price in the cost of carbon we’re saving, or the value of carbon saving,” he added, suggesting the nascent market was making it difficult to know exactly how to price green steel. Traders with offtake deals from Meranti suggest they have discussed premiums around $/t.
Meranti plans to target Europe as an export market while green steel demand outstrips supply in the region, before pivoting more to its domestic southeast Asian market and surrounding geographies from 2035. Meranti intends to sell commodity grade material into the EU, targeting higher value-added sales in Thailand, partly to the growing electric vehicle sector.
The cost difference between green and grey steel could become part of green steel pricing, Langendorf added. The premium for producing genuinely green, hydrogen-fed steel in the EU is extremely high, according to cost models developed by Argus; zero emission DRI-EAF crude steel produced in Europe today would cost around €/t, compared to €/t for the conventional blast furnace-basic oxygen furnace, according to the model
By Colin Richardson
