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BIR Singapore 2024 - Stainless Steel & Special Alloys Committee: Carbon taxes coming in 2026 expected to make scrap shine

Questions around duties on EU imports impacted by the Carbon Border Adjustment Mechanism (CBAM) and their effect on the price and demand for stainless steel scrap were raised at the BIR Convention in Singapore. The Stainless Steel & Special Alloys Committee meeting on 28 October, hosted by Committee Chairman Joost van Kleef, Commercial Director of Oryx Stainless BV (NLD), heard about the importance of stainless scrap in reducing carbon dioxide emissions during the production process of stainless steel, while discussing the outlook for the sector in general.

Discussing the shift to “green steel”, Mr Van Kleef said there are lots of definitions of but in general “the higher the scrap ratio, the greener the steel”. It was not yet possible for steel to be produced with 100% scrap, he added, “because you always have to tweak it with other material”.

The chairman said it was difficult for stainless steel producers to pass green premiums on to consumers. But he suggested this could be expected in the future: “If we look at other markets, green alternatives successfully command a green premium. As one of the most energy intensive industries, green steel should also command a premium.”

CBAM – which aims to reduce emissions by putting a price on carbon emitted in the production of imported goods – comes into full force in 2026. As a result of this, Mr Van Kleef said: “Green stainless steel will be the only participant in the EU stainless steel market.”

NPI challenge

Going into detail about the CO2 footprint of the sector, he pointed out the majority of CO2 comes from nickel. He acknowledged the need to use Chinese and Indonesian nickel pig iron (NPI) to fulfil demand but warned that they have a very high CO2 footprint. “Unfortunately, what we see is that 70% of the stainless being produced comes from those regions, comes from Indonesia, comes from China, but that carries 95% of the CO2 emissions in nickel. So that is not good. On top of that, in order to produce NPI, you have to remove rainforests which take in CO2 from the air. So, we have scrap which we all promote, and NPI which is not so good.”

 Jayprakash Sahu, General Manager, BigMint (IND) considered the Indian market, one of the key demand countries for stainless steel. Due to India’s rapid growth and urbanisation, demand for the material is expected to grow to 6.5-6.7 million tonnes by 2030. “Historically the process industry and consumer goods were the segments supporting stainless steel consumption but now the architecture, building and construction and automobile, railway and transportation segments – they are increasing very rapidly.”

Currently, India’s total stainless steel melt capacity is around 7.7 million tonnes and new capacity for both flat and long products is being created by major mills. Mr Sahu highlighted that a lot of semi-finished material is being imported from Indonesia and this is impacting on stainless steel scrap consumption. For exports, which have increased 20%, Russia and South Korea are emerging destinations.

While stainless steel production in India has gone up 20%, scrap imports have only increased by 3%. There has been a preference for domestic scrap amidst global price volatility and logistical issues in the import market. Major Indian mills have also started investing in Indonesia to secure material. Mr Sahu added that increasing freight rates as well as long term CO2 taxes are making scrap more attractive.

Scrap discount

Offering a broader outlook for the stainless market across Asia, Vegas Yang, CEO of HSKU Raw Material Ltd (TWN) said it helped to analyse the nickel discount in stainless steel scrap. He said: “When stainless scrap or stainless is in demand the nickel scrap discount rates will get closer to 100%.”

 Mr Yang added: “It should be a period of steady scrap demand with steady scrap discount. Looking further, with the 2026 carbon tax being enforced, it is possible that the scrap discount will increase back to the long-term average of 80%. However, the nickel price may continue to be depressed due to oversupply of nickel units from Indonesia – just this one country produces 55% of the world’s nickel units.”

Figures from World Stainless put global production last year at 58 million tonnes. Mr Yang said: “Stainless mills always look for the raw material with the cheapest cost, so stainless steel scrap will continue to be the main preferred choice of raw material to be melted by stainless steel mills around the world.”

Asked if the introduction of CBAM would increase scrap prices, Mr Van Kleef thought prices had to increase as a result. He reiterated that, as is the case for other sectors, premiums should be expected for materials that offer greater carbon benefits.