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As Europe accelerates industrial decarbonization, the balance between emerging low-emissions supply and buyers’ willingness to pay is becoming the key determinant of green steel pricing. Recent market developments highlight how both macro-driven demand pressures and structural policy support are shaping premium formation in the region.
Despite the presence of an established green steel market, adverse market conditions and wider macroeconomic softness contributed to a weak 2025 in the European flat-rolled green steel market. Overall market activity remained subdued, with traded volumes below 200,000 tonnes and continued downward pressure on premiums. Fastmarkets’ green flat steel premiums (<0.8 tCO₂ per tonne of steel) fell to €125 per tonne in the latest assessment, down from €160 per tonne a year earlier. Moreover, three-digit premiums have largely been achieved through offtake agreements, as spot market activity has been virtually non-existent since the start of 2026.
Pressure was evident even among lower-cost alternatives. Fastmarkets’ flat steel reduced carbon emissions (1.4-1.8 tCO2/tonne steel) premium fell by 50% within the past three months and now commands just €25 per tonne premium indicating buyers’ prioritisation of cost over incremental emissions reduction.
Strong long-term policy tailwinds will reshape the competitive landscape for both domestic and imported steel over the coming decade.
The phase out of free allowances under the EU ETS and the introduction of the Carbon Border Adjustment Mechanism (CBAM) will structurally change cost bases, improving the relative competitiveness of low-emission steel. While this creates strong long-term foundations for the market, it is likely to lead to near-term friction as buyers adjust to new compliance requirements and take a more cautious approach to procurement.
At the same time, momentum on the demand side is gradually building. Alongside industry coalitions and growing corporate Scope 3 commitments, the EU’s forthcoming Industrial Accelerator Act marks a decisive shift toward demand creation. By embedding green public procurement, clearer carbon standards and streamlined permitting, the Act aims to unlock delayed investments and strengthen long-term demand for low-carbon steel.
On February 10, Leading European steelmaker ArcelorMittal has confirmed plans to build an electric-arc furnace (EAF) in Dunkirk, France; the €1.3 billion ($1.5 billion) project is expected to benefit from state support through the Energy Efficiency Certificates (CEE) mechanism. The company said recent EU policy developments have given the company confidence to confirm the investment in an EAF. However, the producer only confirmed one 2 million tpy EAF, as opposed to initially planned two EAFs with combined capacity of 4 million tpy of crude steel and 2.5 million tpy DRI module.
However, cost remains a key barrier to the steel transition in Europe. Electrification is expected to be the primary pathway to low-emissions steel, yet power prices across the region remain elevated, while key inputs for DRI production — particularly natural gas and hydrogen — continue to face similar cost pressures. Persistently high input and compliance costs could delay final investment decisions, slowing the rollout of new low-carbon steel capacity until clearer cost visibility and stronger demand support emerge.
As a result, the pace and scale of the transition will be shaped by these competing forces. Companies’ willingness and ability to pay green premiums will ultimately determine the strength of demand signals. At current levels, these premiums remain challenging for large segments of the market, though they are expected to become more manageable as the cost gap gradually narrows over time.
Our forecasts point to rising HRC prices across all production routes, driven by higher input and compliance costs. The impact is most severe for blast furnace production, where CBAM and EU ETS costs are set to bite the hardest.
Low-emission steel is still forecasted to command a premium in a supply constrained market, with wide sources of voluntary and mandated demand competing for electric-arc-furnace produced flat steel. However, this premium is expected to narrow over time, as expanding EAF capacity eases supply constraints and conventional steel faces higher compliance costs, with a 23% green steel premium in 2025 falling to just 8% in 2035.
This short article series provides regular insights into the evolving European green steel market, focusing on supply developments, price premiums, project pipelines, and demand trends. Drawing on our latest report, the series tracks how technological shifts, policy developments, and market dynamics are shaping the competitiveness and growth outlook for low-carbon steel across Europe. For more information reach out to carbonsupport@fastmarkets.com.