INTERVIEW: Meranti Green Steel on track to build low-carbon steel plant in Thailand

Singapore-headquartered Meranti Green Steel's new plant in Thailand is on track for groundbreaking in 2026 after it finalizes its investment decisions next year, even as steel prices are in a downturn amid oversupply, and environmental, social and governance criteria are facing a pushback in some jurisdictions.

In an interview with Platts, Sebastian Langendorf, the company's chief executive officer, said it has secured the site of the plant in the IRPC Eco-Industrial Zone in Rayong province, on Thailand's eastern coast, which is set to be commissioned mid-2028.

The plant will have a capacity of up to 2.5 million mt/year of low-carbon hot-rolled coil.

So far, it has already identified potential hubs for low-carbon ironmaking where natural gas and renewable energy supply work in its favor, such as Western Australia and the Middle East, and signed offtake agreements, Langendorf said.

"For the ironmaking process, Meranti aims to achieve around 600-700 kg of CO2 per [metric] ton of steel," he said. "This will be achieved by using a combination of natural gas — around 80%-90% — and green hydrogen in the iron reduction process."

Eventually, the aim is to transition to below 200 kg of CO2/mt of steel by increasing the proportion of "green hydrogen" in the iron reduction process to above 80%, he added.

Meranti Green Steel's project was announced at a time when producers are grappling with the idea of investing in low-carbon projects because the steel market has been sluggish, with prices falling to multi-year lows and profits being either thin or negative.

Market participants have also been concerned by the overcapacity that beleaguers the Asian market, which is expected to be exacerbated by planned capacity expansions by major mills in the region.

One other challenge is the lack of a guarantee that pricing mechanisms for such steel would be in place to ensure the model would pay off. Regulatory support is falling into place at a snail's pace for the use of low-carbon steel in Asia, although in Europe, the impending arrival of the Carbon Border Adjustment Mechanism is giving rise to a premium for such steel.

In responding to those changes, Platts launched European HRC carbon-accounted steel premium in May 2023, with it being assessed at Eur55/mt Dec. 2, S&P Global Commodity Insights data showed.

Noting these challenges, Langendorf is optimistic about the adoption of low-carbon steel within the next five to 10 years, considering a growing regulatory push toward decarbonization in Asia, amid discussions around carbon taxes and the European Union's CBAM.

In fact, this is where Meranti seems to have an advantage -- it is a new player that is focused on building a low-carbon steel operation from scratch without having any legacy carbon emissions, Langendorf said.

"The long-term trajectory towards green steel is irreversible, with Europe's CBAM and the decommissioning of blast furnaces setting the stage for green steel's growth," he said, adding that it would be key for Meranti to capitalize on the regulatory and market shifts toward decarbonization in the region.

Ironmaking hubs

Meranti is looking to regions such as Western Australia and the Middle East as potential hubs for ironmaking and is in discussions to potentially secure a supply of high-grade iron ore concentrates that can support the production of high-quality low-carbon products.

"Firstly, we believe that we can reach higher quality by using high-grade iron ore versus scrap because scrap, depending on the composition, can limit the quality and the product specifications produced in the EAF (electric arc furnace)," he explained.

"Secondly, we are focusing on high-grade iron ore concentrates that will allow us to produce DRI (direct-reduced iron) or HBI (hot-briquetted iron) at quality levels that can support our high-grade steel products," Langendorf said.

"So, if we have higher grade concentrates, we will have much higher production yield and therefore a lower carbon footprint per [metric] ton of steel," he said.

Asked if he sees low-carbon ironmaking opportunities in Asia, Langendorf said Meranti was initially pursuing the idea of integrating ironmaking and steelmaking in Thailand, but the natural gas supply in the country was not sufficiently competitive.

He also identified China as a place where competitive green hydrogen supply could be successful due to renewable energy developments in the country in the long-term, adding that for now, natural gas is a challenge in the country.

Low-carbon premiums

When coming up with the specifications for its low-carbon products, Meranti looks mainly at the electric vehicle (EV) and manufacturing industries.

Thailand is emerging as a major player in the EV industry, attracting global automakers with government incentives, including tax breaks and subsidies. Thai policymakers have also set a target of making 30% of its car output electric by 2030.

Meranti said its low-carbon HRC could be used for the non-exposed parts of the EVs, as well as in home appliances.

"So [we're targeting] every segment that has exposure to a retail model or end-user, where green steel can be marketed and premiums can be passed on to," Langendorf said.

He added that there is also an opportunity to pass on the low-carbon steel value proposition to end-users in the building and construction sector, which is leading Meranti to looking to offer commercial quality coil.

On premiums, Langendorf said that current market premiums in Europe range over $150-$200/mt of low-carbon steel, though in one case, a premium of up to $300/mt was heard.

"Ultimately it will be driven by the cost of carbon ... and the cost of carbon at the moment varies in different jurisdictions," he said.

Referring to the EU's Emissions Trading System, Langendorf said a reduction in carbon for Meranti should work out to around $150/mt if the carbon price is at around $100/mt.

That is after calculating the reduction from roughly 2.2 mtCO2e for every metric ton of steel emitted during the traditional steelmaking process, to its target emissions of 600-700kg of CO2/mt of steel.

Platts assessed the EU Emission Allowance Nearest-December at Eur 68.47/mt ($72.00/mt) Nov. 29, retreating by 31.7% from the peak level seen in February 2023, Commodity Insights data showed.

Langendorf said in terms of pricing, a two-tier steel supply system would exist in that the traditional steel products are expected to cater to more price-sensitive and less regulated market segments, whereas low carbon emission products would fit in more regulated markets.

"Meanwhile, low-carbon steel will likely command a premium and be targeted towards more environmentally conscious customers, particularly in markets like Europe that have stricter decarbonization requirements," he added.