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The early 2020s saw a wide range of decarbonization efforts announced by major European steelmakers, but many have hit roadblocks. High energy and hydrogen costs, uncertain regulatory developments and an oversupplied global steel market have weakened appetite for expensive decarbonization projects. Despite this, capacity is forecasted to ramp up as new regulations become implemented, supply chains adapt to new technologies and consistent demand emerges for low-emission steel.
Delayed investment decisions and project cancellations are increasingly evident across Europe’s green steel sector. ArcelorMittal’s cancellation of its planned DRI/EAF plants in Bremen and Eisenhüttenstadt was attributed to a “lack of certainty”, highlighting concerns over the economic and regulatory conditions needed to support capital‑intensive low‑emission steel production.
Similar uncertainty is affecting other projects. Salzgitter announced a three‑year delay to phases two and three of its SALCOS programme in 2025, citing deteriorating market conditions and insufficient regulatory support. Meanwhile, Czech long steel producer Třinecké Železárny has postponed its planned electric‑arc‑furnace investment by two years, pointing to uncertainty around the European Green Deal and unclear import regulations.
Despite this, there are emerging signs of renewed confidence. ArcelorMittal’s commitment to constructing a €1.3 billion electric-arc-furnace (EAF) in Dunkirk, starting production in 2029, highlights how recent regulatory developments have kickstarted investment. However, the confirmed investment is more “ modest” compared to initial plans to build two EAFs and one DRI module in Dunkirk.
The Tariff Rate Quota (TRQ) and CBAM especially were highlighted as key enablers and are expected to play an increasingly important role in supporting domestic European low-emission steel production. State aid was also crucial in unlocking investment, with 50% of the €1.3 billion supported by French Energy Efficiency Certificates (CEE) scheme.
The upcoming Industrial Accelerator Act (IAA) further serves to stimulate domestic low-carbon steel demand, with public procurement and carbon-intensity labelling core components of the legislation. By mandating 25% of steel used in public procurement to be low-carbon and “made in EU” steel, the Act would create a more consistent demand base.
However, in the recent leaked draft, “made in EU” rule was softened, allowing selected third countries to be treated as equivalent to EU producers in public purchasing for strategic industrial goods – including steel, Fastmarkets reported.
A complementary voluntary labelling scheme is also intended to bring greater transparency to what has often been an opaque market.
Many of the projects underway are opting for lower emissions – though not the lowest emissions -feedstocks for their EAF operations, as green hydrogen remains largely uncompetitive at scale in Europe. Thyssenkrupp’s indefinite postponement of a green hydrogen tender for its H2‑DRI project reflects this more cautious approach.
The increased flat steel EAF capacity is likely to be supplied by cheaper EAF feedstocks. Pig iron and natural gas-based DRI are expected to be significantly more competitive than hydrogen-based DRI and are therefore set to capture the bulk of the market by 2035.
European EAFs with integrated hydrogen-based DRI production are forecasted to account for only 20% of the European EAF-HRC market in 2035, as buyers prioritise a mix of decarbonization and affordability. In contrast, EAFs using a mix of natural gas-based DRI, pig iron and scrap are forecasted to grow rapidly, accounting for 43% of the entire EU HRC production by 2035
Note: Flexible feedstock facilities are also able to produce hydrogen-based DRI or import it, however given current market conditions it is unlikely that many will do so for the foreseeable future.
Most EAFs in Europe will be flexible in their feedstock choices, relying on a mix of imported DRI, scrap, and pig iron. Many producers, including Salzgitter and ArcelorMittal with SALCOS and Gijón respectively, have delayed and postponed integrated DRI projects to focus resources on EAF construction. This allows producers to quickly react to the market, using the lowest emission hydrogen-based DRI when green premiums are highest, and reverting to pig iron when the market is weakest.
This flexibility is further reinforced by emerging policy signals. A new leaked draft of the IAA includes carve-out provisions for some non-EU countries for iron and steel, enabling domestic producers using imported DRI to benefit from EU public procurement demand.
Specialist DRI producers are capitalising on this, with evidence already of firms planning exports of hydrogen-based DRI to Europe. HyIron in Namibia recently announced its first shipment of green DRI to Europe, with plans to ramp up capacity, with funding from the EU and the Netherlands.
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.