Materials On the Path to Green Steel

The steel industry is making good progress on the path to decarbonization. But are the billions invested paying off—and is there enough steel for the European automotive industry?

Many billions of euros of investment and many millions of tonnes of CO₂ are at stake: all steel manufacturers are pursuing their decarbonization roadmap. Kerstin Maria Rippel, Managing Director of the German Steel Federation: "With the ramp-up of DRI and EAF capacities, primary production in the EU is expected to reach 10 to 15 million tons by 2030. This will create the basis for gradually supplying the automotive industry with low-emission steel produced in the EU."

At the same time, secondary steel production will be strengthened, which will be increasingly low-emission, provided that the required quantities of green electricity are available.

Some steelmakers are sticking to their decarbonization timetable, while others have extended it in the meantime. Most are starting by replacing the traditional blast furnaces, which burn coke and coal, with electric arc furnaces (EAF). These process scrap steel into new steel using electrical energy. This is followed - in the previous process stage - by hydrogen-based direct reduction (DRI), which produces water instead of CO₂. As an intermediate step, the DRI plants can be operated with gas instead of hydrogen.

The Ambitions of Steel Manufacturers

How far have the most important European "steelmakers" in the automotive industry made concrete progress? In the first half of 2027, Salzgitter will commission a 1.9 million-tonne electric arc furnace for flat steel production and a two-million-tonne DRI plant supplied with hydrogen by a 100 MW electrolyzer.

Voestalpine will start operating one green electricity-powered electric arc furnace each at the Linz and Donawitz sites from 2027. This will enable the company to reduce CO₂ emissions by up to 30 percent by 2029, compared to 2019. This corresponds to almost five percent of Austria's annual CO₂ emissions. From 2027, 2.5 million tons of CO₂-reduced steel will be available annually. Thyssenkrupp is building a DRI plant in Duisburg, which will go into operation at the end of 2027 and will be supplied with green electricity and, initially, natural gas. It will then gradually be converted to hydrogen. The infrastructure for this is also already being created - starting with the caverns in Emsland.

SSAB already operates electric arc furnaces at two sites, and Tata Steel supplies its customers in the automotive industry with steels that have a mass-balanced CO₂ footprint reduced by up to 90 percent - with recyclate content on request. The DRI and ELB plants currently in planning are scheduled to start in 2030. At the same time, Tata Steel in IJmuiden is working on reducing the CO₂ footprint of conventional steel production via the blast furnace route.

GMH produces steel in ELB with almost 100 percent scrap content and thus achieves around 80 percent less CO₂ emissions than with blast furnace production. With 100 percent renewable energy, the company achieves a CO₂ reduction of up to 98 percent - in relation to Scope 1 and 2. Volkswagen, among others, will use this steel for the production of transmission parts.

High Investments Despite Weak Steel Market

SHS, Stahl-Holding-Saar, already offers CO₂-reduced steel from the electric arc furnace production, EAF, of the French Saarstahl subsidiary Saarstahl Ascoval. In Saarland, Germany, a new direct reduction plant and two EAFs are being built at the Dillingen and Völklingen production sites. They are scheduled to go into operation from 2028/29 and produce up to 3.5 million tons of CO₂-reduced steel per year. By the end of 2030, the proportion of green steel should be 70 percent. The central components were already ordered in 2024 and the projects are on schedule and on budget, according to SHS.

The path to green steel  is a real transformation and a financial tour de force. Decarbonization with the new furnaces requires investments totalling 4.6 billion euros (approx. USD 5.4 billion), which ultimately have to be earned—in a weak steel market, with intense European competition and in the face of competition from highly subsidized steel of Asian origin. The joint public funding from the federal and state governments for the transformation amounts to 2.6 billion euros (approx. USD 3.1 billion).

A "newcomer" in the green steel market

The situation for established European steel manufacturers is not made any easier by a new competitor. Stegra is building the world's first climate-neutral steelworks in Sweden - with an annual capacity of 2.5 million tons. The green steel will be produced using hydrogen from renewable energies and shipped from the port of Lulea to car manufacturers. Supply contracts have already been agreed with Porsche and Mercedes-Benz, and Mercedes-Benz also owns a stake in Stegra.

The use of green hydrogen as a medium for the direct reduction of iron ore to sponge iron will reduce CO₂ emissions by up to 95 percent compared to the conventional route. As Stegra produces more iron ore than it consumes in the first few years, steel manufacturers can also source "green" ore from there in the form of hot briquetted sponge iron, thus improving the CO₂ balance of the steel that is processed further.

Is It All a Question of Price?

In the cost-sensitive automotive industry, the acceptance of "green steel" will also depend to a large extent on the (additional) price resulting from the aforementioned investments, among other things. It is clear that this steel is more expensive today than "gray" steel.

In the case of vehicles, however, the steel intensity of the product must be taken into account, so that the additional costs for the end consumer are ultimately low and amount to around one percent of the car purchase price. This comparison is based on today's energy and CO₂ costs.

Konrad Wohlfarth, Head of Special Topics Decarbonization at SHS Stahl-Holding Saar: "Steel is becoming more expensive overall in Europe - both via the conventional and the CO₂-reduced route. Rising CO₂ costs are driving the price of conventional production, while the green route is mainly driven by investments in new technologies and the use of hydrogen."

With the rising CO₂ costs, its pricing or the inclusion of green steel in the overall CO₂ balance per vehicle is being addressed. The discussion here is still open. The position of the steel industry is clear: the inclusion of "green steel credits" would give OEMs a technology-neutral lever to reduce fleet emissions. This would also accelerate a very real reduction in CO₂ emissions and support the investment planning of steel manufacturers on the path to decarbonization.

Important: Planning Security

Kerstin Maria Rippel, Managing Director of the German Steel Federation, shares this view: "Additional costs are normal in the market, but will be accepted if there are regulatory incentives and planning certainty. We therefore expressly support the inclusion of 'green steel' components in the CO₂ accounting of vehicles - ideally from 2030 at the latest. This creates demand, accelerates the transformation and strengthens industrial value creation in the EU, provided the steel is also produced in the EU."

The overview shows: The steel industry is transforming itself and will offer the automotive industry a wide range of CO₂-reduced steels from various routes in the future. These materials, some of which are already available, enable substantial emission reductions in vehicle production - and will contribute to the future position of steel in the competition between materials.