The Biden-Harris Administration today announced that they would “prioritize the purchase of key low-carbon construction materials, covering 98% of materials purchased by the Federal government.” As steel plants shutter around the world, this is a boon to U.S. manufacturers concerned about dropping steel prices.
The announcement highlights the latest section of the “Buy Clean” initiative, which is backed by multiple domestic steel producers. Among the most notable supporters are Cleveland-Cliffs out of Toledo, Ohio, Nucor Corp., and Steel Dynamics.
According to Kevin Dempsey, President and CEO of American Iron and Steel Institute, the move heavily prioritizes American-made steel. “Of the major steel-producing countries, the U.S. has the lowest CO2 emissions per ton of steel produced,” Dempsey said. “We’re pleased the administration continues to recognize that the American steel industry is leading the way on decarbonization.”
Steel industry insiders largely reacted positively to the news. Mr. Dempsey noted that American steel producers are at the forefront of carbon-efficient steel-making. However, the potential to integrate low carbon steel into a much broader green infrastructure initiative opens up the door for decades of Federal contracts.
Automobile body components, structural shapes like I-beams, and construction components are common uses for low carbon steel. Compared to higher-carbon options, it is softer, but easier to weld and machine. And while it may not be as strong, low carbon steel prices are lower, and manufacturers feel it is the next logical step for the industry.
The energy issues facing Europe aren’t stopping Germany’s drive towards greener industry, at least in the long term. Last Wednesday, the country announced it would provide steelmaker Thyssenkrupp with hundreds of millions in funding to support lower carbon output.
Though the actual amount has yet to be determined, estimates put the funding in the hundreds of millions of euros. It’s estimated that the planned direct reduction plant will cost more than $2 billion. When completed, it will be the largest of its kind in Germany and will run on hydrogen rather than coal.
Experts currently estimate the finished plant will produce up to 2.5 million tons of direct-reduced iron. This should avoid some 3.5 million tons of carbon dioxide emissions.
Indeed a bold move considering the current energy climate in Europe. The country has already made plans to allow some 21 coal plants to restart or work past planned closing dates to get the population through the next two winters. So while green goals are on the horizon, Germany will do what’s needed until its energy supply stabilizes.
Global steel prices enjoyed a moderate reversal today after a particularly rocky September. Many hang the bounce on expert announcements that China’s steel sector profitability should not deteriorate further. In fact, according to Global Rating Agency Fitch, we can “expect production to recover from September as construction enters peak season.”
This, combined with the Biden Administration’s renewed focus on infrastructure, seems to have put steel investors in a more confident place. Though the index has a long way to go, experts were happy to see a brief reprieve from the downhill slide.
