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Steel Summit: Execs Debate Likelihood of Surcharge On Lower C02 Steel

Written by Ethan Bernard

A wide-ranging discussion on the Steel Summit’s ‘Domestic Steel Panel: Investing for the Future’ saw executives from leading steel companies debate the likelihood of passing on a surcharge to consumers for products with lower CO2 content.

SMU managing editor Michael Cowden sat down with Kenneth Jaycox, chief commercial officer of U.S. Steel; Conrad Winkler, president of North Star BlueScope; and Jeff Moskaluk, senior vice president and chief commercial officer of SSAB Americas, on Tuesday morning. Any look towards the future would inevitably touch on sustainability and decarbonization.

In July, Cleveland-Cliffs introduced a surcharge on steel made from hot-briquetted iron (HBI). This provided an opening to explore more generally if lower-carbon steel products — a definite part of the future — would be priced at a premium.

 “As the market transitions towards low-C02-emissions steel, you’re going to find different classes of products and different levels of C02 emissions,” Moskaluk said. “If the product is scarce, people are going to pay for access to the product.”

He said the current supply chain for lower-C02 emissions steel is immature, which makes it expensive. “The product is going to carry a premium,” Moskaluk noted.

“You can buy a standard piece of plate or a lower-C02 emission piece of plate and they are going to be priced differently,” he added, saying that the marketplace would decide what that premium was.

Jaycox agreed, saying it was the consumer “that would dictate this conversation,” continuing that there would be “varying products with varying prices.” Rather than thinking of costs and surcharges, Jaycox reframed the question: “How do we position our customers to serve their consumers in a way that they can make more money?”

Coming from a background in the food industry, he likened the situation to what occurred in the organic food market. “It wasn’t every product that was sold. It was a specific market geared towards what the consumer wanted and it came along with a premium price.”

Winkler said it was going to be “exciting” to see what this evolution would look like. “We’re trying to meet our customers where they are,” he said, adding that he doesn’t know how quickly it will happen, but “we do think it will happen.”

He said that the “relative cost” of the process would play a big part in determining how things would develop. He gave the example that, if the price was too high, automotive OEMs would perhaps restrict the lower-CO2-emissions products to a couple of models. “But if the price comes down low enough, it will be more ubiquitous.”

“It will be an interesting time to see how it all unfolds,” Winkler said.

Ethan Bernard

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