The initiative is novel for the European steel market, as more market-leading mills strive toward efficient and greener means of steel production, with Tata Steel pledging to reduce its own carbon emissions by 40% by 2030, and to zero by 2050.
Tata Steel Europe's emissions per tonne of crude steel tallied 1.98 in 2019-20, data from the company's annual report showed, with the current cost of emission credits nearing the new Eur12/mt surcharge.
The fee will essentially pass on the cost of carbon emissions allowances to the buyer at a time when European HRC prices have reached record highs, exceeding Eur900/mt ex-works Ruhr, an increase of Eur450/mt since the previous year.
The decision comes at a time when sellers' have had the upper hand, and buyers having little choice but to accept the additional charge due to the limited opportunities for buying material.
"The money [from the surcharge] will flow back into the steel industry to create a less polluted environment," a European mill source said, adding, "the pushback is always there from customers, but they have a choice – you buy steel or you don't buy steel. We are in a sellers' market, because of limited availability, people are willing to buy it."
The spokesman said the increasing shortages and rising prices of emission rights suggests there is a need for steel producers to adjust to the growing costs in production.
"In order to ensure a sustainable EU and UK-based steel industry for the future, we need to pass these costs on," he told Platts.
