Demand signals begin to take shape in the European green steel market

Green steel demand in Europe remains limited and regionalized today, but the sources of future growth are already becoming clear. Over the next decade, demand is expected to rise materially, driven primarily by voluntary decarbonization commitments, with additional support from industry coalitions and emerging green public procurement policies. While high costs and limited supply continue to constrain near-term volumes, early demand signals are beginning to shape the European green steel market structure through to 2035.

Demand currently driven by offtakes

In the European green steel market, low-emission production routes remain significantly more expensive, with hydrogen-DRI based EAF costs currently nearly twice those of blast furnace production. At the same time, supply remains limited, with only a small number of projects expected to reach full commercial scale by 2030, contributing to uncertainty around volumes, delivery timelines and prices.

Current demand volumes have therefore been concentrated in a limited number of visible offtake agreements, securing valuable volumes in advance. These occur predominantly in sectors where emissions are the most visible and where costs are easiest to pass onto end consumers, such as automotive, manufacturing and data center construction.

Green steel demand expected to rise over the next decade from three distinct sources

Despite low current volumes, several demand-side factors are expected to support green steel demand growth over the next decade.

Voluntary Scope 3 targets

Voluntary corporate targets are expected to be the primary driver of future green steel demand growth, accounting for half of Fastmarkets’ projected increase in green steel demand for products below 0.8 tCO2e/t steel between 2025 and 2035. These commitments are largely linked to Scope 3 targets, which cover embedded upstream and downstream emissions, with low-carbon steel therefore representing a significant decarbonization tool in steel-intensive sectors like automotive and construction.

Across a dataset of companies collectively representing more than 60% of sector revenue, spanning industrial manufacturing, automotive, construction and other sectors, a quarter have explicit Scope 3 targets, indicating a willingness to engage in the green steel market.

Policies and green public procurement

Public procurement policies are expected to support green steel demand through national directives such as the CO2 performance ladder in the Netherlands and the naBe action plan in Austria.

At the EU level, potential mandates, including the Industrial Accelerator Act (IAA) and revision of the Automotive Package to include green steel in emission reductions, could further underpin demand. These will likely serve as baseline volume levels, establishing some stability in early markets, with voluntary demand driving most of the later growth.

However, while the IAA mandates that at least 25% of steel used in public procurement projects must be low carbon, the absence of standardized labeling undermines the measure’s effectiveness. Unlike aluminum and cement, the requirement does not include an EU-origin clause for steel, allowing imported material to qualify — a factor seen as further diluting the potential demand boost for domestic low-carbon steel producers.

Coalition-led pledges

Industry coalitions such as the First Movers Coalition (FMC) and SteelZero reinforce demand signals by aggregating commitments from multiple steel buyers. FMC members have committed to sourcing at least 10% of crude steel volumes as near-zero (<0.4 tCO2e/t steel) emission steel by 2030, whereas SteelZero members target 50% lower-emission crude steel by volume by 2030, progressing toward full net-zero steel procurement by mid-century.

Membership across both initiatives is concentrated in steel-intensive sectors such as automotive, construction and industrial manufacturing, including participants like Volvo, Scania and Maersk.

Together these commitments provide a growing and increasingly visible demand base that is helping to structure the European green steel market through to 2035. Coalition-led pledges are expected to account for approximately 42% of green steel demand growth for products below 0.8 tCO2e/t steel between 2025 and 2030, supporting early market formation alongside voluntary demand and green public procurement. Beyond 2030, as a larger share of commitments are met, incremental growth slows, with an additional 1.7 Mt a year of demand projected between 2030 and 2035.

Partially decarbonized steel demand to increase, though only from voluntary sources

Partially decarbonized steel such as the Fastmarkets Flat steel reduced carbon emissions (1.4 to 1.8 tCO2e/t steel) will benefit less from coalition and public procurement demand, as stricter emissions thresholds limit eligibility for more carbon-intensive products. For example, the First Movers Coalition requires steel with emissions below 0.4 tCO₂e/t steel, while SteelZero, although less stringent in the near term, ultimately commits to sourcing net-zero steel by 2050.

However, the sliding scale mechanism introduced under the IAA could partially offset this disadvantage for primary steelmakers. By tailoring emissions benchmarks to product categories that rely on BF-BOF production — where scrap input is structurally limited — the framework may offer more flexible thresholds for primary steel, potentially giving BF-BOF producers a relative advantage compared with stricter, one-size-fits-all emissions criteria.

There are expectations of some voluntary demand, as companies try to partially reduce their Scope 3 emissions without paying full green steel premiums. As green steel demand matures, partially decarbonized products may serve as a transitional volume layer. Demand is forecasted to reach nearly 5 Mt a year by 2035 under Fastmarkets’ base scenario, with some appetite for a balance of decarbonization and cost pressures.