Topic: Steel Sector & Carbon Cost and Financial Risk

The steel sector is a significant contributor to global carbon emissions, accounting for roughly 7-9% of CO2 emissions worldwide due to its energy-intensive processes. As climate policies tighten, particularly carbon pricing mechanisms like carbon taxes and emissions trading systems, steel producers face increasing carbon costs. These costs directly impact operational expenses, potentially reducing profit margins or necessitating higher product prices. Financial risks also arise from regulatory uncertainty, potential asset stranding (e.g., investments in high-emission technologies becoming obsolete), and shifts in market demand toward low-carbon products. Additionally, investors are increasingly factoring in environmental, social, and governance (ESG) criteria, which can affect capital availability and valuation for steel companies lagging in decarbonization. To mitigate these risks, the industry is investing in low-carbon technologies such as hydrogen-based steelmaking and carbon capture, utilization, and storage (CCUS). Effective management of carbon costs and financial risks is critical for steel firms to remain competitive, comply with evolving regulations, and contribute to global climate goals.