Green steel demand: which sectors will lead the transition in Europe?

Green steel demand in Europe remains concentrated in a limited number of end-use sectors, reflecting wide differences in the ability to pass through costs, regulatory pressure and willingness to pay. While the automotive sector has underpinned green steel demand to date through visible offtake agreements, a more diversified demand base is expected to emerge over the coming decade, as decarbonisation pressures extend across value chains. 

Sectors with the most ambitious scope 3 targets to drive low-emission steel demand 

Most corporate scope 3 targets span the full value chain, capturing both upstream and downstream activities. In steel-intensive sectors, these commitments can be translated into implied emissions-intensity targets for hot rolled coil (HRC), using the relative abatement cost and share of steel within overall scope 3 emissions. 

Construction 

Low margins and high steel intensity leave construction with the least ambitious implied emissions-reduction pathway. This limits demand for low emission steel, with partially reduced-emission products delivering sufficient abatement at a more commercially viable cost.  

Automotives 

Automotive manufacturers face stronger regulatory and consumer pressure to decarbonise and are generally better positioned to pass higher material costs through to end-users. More aggressive decarbonisation targets reflect both ambitious individual targets and greater participation in initiatives like the First Movers Coalition, with shared green steel procurement mandates. As a result, the sector shows a greater willingness – and ability – to pay for the lowest emission steel.

Others 

This category captures a smaller group of ambitious players across industrial manufacturing, engineering, and consumer goods. White-goods producers, in particular, face decarbonisation pressures similar to automakers and have a comparable steel cost share, resulting in a broadly similar target trajectory. 

Automotives to grow as a share of demand for green steel, whilst construction shrinks  

Reflecting these more ambitious scope 3 targets, automotive demand is expected to rise to around a third of European green steel demand by 2035. Over the same period, construction falls from 27% down to 22%. 

This shift is driven by faster growth in automotive demand relative to other sectors, as a greater emphasis on low-emission materials in electric vehicle supply chains, and stronger pricing power for luxury and premium brands, leads to strong demand for low-emission flat steel.  

Policy developments are reinforcing this trend. The European Commission’s Automotive Package regulation proposal, published on December 16^th, 2025, revises the EU’s CO2 emission standards for cars and vans under Regulation (EU) 2019/631. The 2035 zero-emissions target has been eased, allowing a small share of residual emissions to be offset with low-carbon materials and alternative fuels. This opens a potential compliance-driven demand stream for green steel in the automotive industry.  

Under a scenario where 10% of new cars and vans need these offsets, and green steel is used to reduce residual emissions, Fastmarkets estimates around 1 million tonnes per year of additional demand from this policy alone.  

Construction-led demand is still forecasted to grow over the decade, driven primarily by public procurement policy. In the recently published Industrial Accelerator Act (IAA), public procurement would require at least 25% of steel used in buildings, infrastructure and transport projects to be low-carbon. There is no EU-origin rule on steel, however, with imported steel also able to qualify.  

Less ambitious sectors to transition away from conventional steel towards partially reduced-emission buckets  

Much of the increased demand from construction and other lower-margin sectors is expected to flow into partially reduced-emission buckets, as demand for conventional steel declines and is reallocated into less emissions-intensive options. 

As premiums for reduced-emission steel compress towards 2035, the decarbonisation benefit relative to conventional steel becomes more attractive – particularly for sectors with limited ability to absorb higher input costs.  

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 (see link below), the series tracks how technological shifts, policy developments, and market dynamics are shaping the competitiveness and growth outlook for low-carbon steel across Europe. Access the market report