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Nov 05, 2024

Fastmarkets launches Chinese green ferro-alloys prices to cover whole clean steel supply chain - Fastmarkets

Having already laid solid foundations for economical production through previous decades of technological progress, green ferro-alloy producers and products are increasingly important in China due to

Having already laid solid foundations for economical production through previous decades of technological progress, green ferro-alloy producers and products are increasingly important in China due to a mix of market- and policy-driven incentives.

Ferro-alloys are essential ingredients for steelmaking and green ferro-alloys are now more in demand of downstream steelmakers aiming to realize policies to achieve a low carbon footprint for the steel supply chain. These moves are in line with China’s energy transition and targets for peak carbon emissions and carbon neutrality.

At least 10 ferro-alloy producers in China are now producing green products certified by the China Metallurgical Industry Planning and Research Institute (MPI), including ferro-chrome, ferro-manganese, ferro-silicon and silico-manganese. More producers are actively seeking official certifications, sources told Fastmarkets.

The green certification is awarded to ferro-alloy smelters in China that fulfil key criterion in energy intensity, electricity consumption, coke consumption, water recycling, water wastage, carbon emissions and allowable emissions concentrations.

This has also given rise to the question of green ferro-alloys pricing, where price differentials will encourage smelters to make more efforts in decarbonization and establish a healthy pricing mechanism for the market to recognize the contribution to sustainability.

It is amid this backdrop of the world’s largest ferro-alloys producer driving green ferro-alloy production that Fastmarkets launches four green ferro-alloy prices in China this week.

The assessments are as follows:

These price launches follow Fastmarkets’ recent launches for green steel prices for reduced-carbon hot-rolled coil in China and green rebar in Southeast Asia, reflecting Asia’s rise to compete in increasingly carbon-aware markets globally amid pressure from governments and state actors to reduce carbon emission levels, as well as to enter lucrative overseas markets.

Fastmarkets also publishing a green steel import differential to the CFR Vietnam HRC index, which focuses on Japan-, Korea-, Taiwan-origin HRC imports into Southeast Asia, as well as a weekly inferred green steel base price, hot-rolled coil assessment on a CFR Vietnam basis.

While there is presently no premium for green ferro-alloy products in China, ferro-alloy producers are heard to be looking actively into price differentials while still actively applying for green product certifications to remain competitive, sources said. This could give rise to a price premium for green ferro-alloys in the supply chain, they added.

Weak downstream markets and an oversupply of ferro-alloys are weighing on sellers’ ability to command a premium for even green ferro-alloys products.

“To my knowledge, the primary reason why the ferro-alloys producers did not widely accept the green ferro-alloys premium is because the weak downstream demand and the current ferro-alloys supply still slightly exceeds demand,” a China-based ferro-alloy trader source said.

“Currently, many ferro-alloys producers are thinking about how to digest their inventory since some ferro-alloys producers do not make that many profits,” a second China-based ferro-alloy trader source said.

Yet premiums for green ferro-alloys still have potential to grow alongside the increased introduction of them by alloy producers and acceptance among whole industry supply chain, participants said. This is especially so with major Chinese steelmakers already offering premiums of up to 800 yuan ($122) per tonne for reduced-carbon flat steel such as hot-rolled coil.

China’s State Council had stipulated previously in its Action Plan for Carbon Peak Before 2030, that by 2025, the share of non-fossil energy consumption should reach around 20% during the 14th Five-Year Plan period. By 2030, the share of non-fossil energy consumption should reach around 25% during the 15th Five-Year Plan period, sources said.

“Despite the fact that no premium is added to green ferro-alloy products now in China, the green and low-carbon development path is the right way to go and definitely the future trend in alignment with China’s overall action plan for carbon peak before 2030,” a third China-based ferro-alloy trader source said.

Especially, the premium will grow with the introduction of smelters on the high-quality development journey and the realization of increasing green steel premiums from end-user industries.

“The downstream steel industry is undergoing a green and low-carbon development, it is with great potential the upstream raw materials including ferro-alloys will go green and there will be a green premium added to ferro-alloys products. Otherwise, without green ferro-alloys, how will there be green steel?” the same third ferro-alloy trader said.

Follow the low carbon steel discussion and keep up to date with the developments influencing the decarbonization of the steel industry. Visit our dedicated green steel page here.