While many steel consumers in the United
States are puzzled by cap and trade and are waiting to see the
final legislation before taking any official position, others
are already expressing concern that they'll be forced to
shoulder the financial burden as steel companies pass along
higher energy prices.
With most steel products already at all-time
highs, the thought of steel prices going even higher is
Steel plate producers, for example, slated
cumulative increases of $470 a ton in the first six months of
this year, putting June's spot market prices at $1,220 to
$1,230 a ton, up nearly 63 percent since the start of the year.
It's been much the same in the carbon flat-rolled market. In
early April, spot market hot-rolled sheet prices hit a record
$1,000 a ton, cold-rolled nearly $1,100 a ton and hot-dip
galvanized sheet in excess of $1,200 a ton.
Representatives from the automotive industry
say they have no choice but to pass higher steel prices on to
their customers. "We acknowledge that there are concerns about
CO2 emissions and we want to be part of the solution," said
Charlie Territo, a spokesman for the Alliance of Automobile
Manufacturers. "But if the price of steel increases, the cost
of a vehicle will also increase."
Territo points out that the automotive
industry is the only sector whose CO2 emissions are regulated
due to a law passed this year that mandates that vehicles
improve their miles-per-gallon efficiency. "The auto industry
currently is the only carbon-constrained industry in the U.S.,"
he said. "We have to cut carbon emissions from our products by
The White House estimates that doing so will
cost the automotive companies $114 billion through 2020. "It's
not fair to ask an industry that is responsible for 20 percent
of the total emissions to be 100 percent of the solution,"
Territo said, adding that auto plants are overwhelmingly
powered by natural gas, a cleaner source of energy than
The wind industry, which uses steel to build
its massive turbines that in turn produce electricity, shares
the auto industry's concerns about commodity prices. Still, it
is hopeful that since wind energy is considered a clean and
renewable energy resource it will flourish under a
cap-and-trade system. "Yes, there's concern about rising
commodity costs in general," an American Wind Energy
Association spokesman said. "However, those costs also impact
our competitors, such as coal and nuclear." Like the steel
industry, the wind energy lobby is actively trying to influence
the wording of the Lieberman-Warner bill.
Suppliers to the steel industry also are
nervous. "We are the poster child for carbon emissions," said
Larry Wolf, technical marketing manager of steel at Carmeuse
North America BV, Pittsburgh. His company produces lime, which
is used as a flux in purifying steel in the electric-arc
furnace and the basic oxygen furnace. It also has important
uses in the secondary refining of steel and in the manufacture
of steel products.
Carmeuse North America is working to become
more fuel efficient and is hoping the legislation will include
some type of exemption for his company since, as with
integratede steelmaking, carbon emissions are an inevitable
part of lime production, he said.
Others are staying on the sidelines of the
debate for now. The Precision Metalforming Association hasn't
articulated a position on cap and trade yet, and several
company chief executive officers declined to comment on the