Leading steelmaker ArcelorMittal has clarified the status of its decarbonisation projects in communications surrounding its third quarter earnings, released on 6 November, aligning the conditions for progress with those capitalised upon greenfield low-carbon steelmaking initiatives.
In its earnings release, ArcelorMittal lauded the European Commission’s proposal to strengthen the EU’s steel trade defences once – or potentially before – the existing safeguards lapse at the end of June 2026, seeing the measures as key to giving its European operations “the foundation […] to earn its cost of capital.”
Despite perceiving an improved outlook for steel market conditions to support its European operations, ArcelorMittal representatives were careful to limit expectations of continuations to its suspended decarbonisation plans across Europe, most prominently in Germany, Belgium, and France. The steelmaker suggested in its earnings call that said projects would be assessed on their own merits and progressed gradually, even if Q1 2026 brought strong market recovery on the continent.
ArcelorMittal’s earnings release said that while regulatory progress to restrict import accessibility was encouraging, further developments were needed to support specific decarbonisation investment cases across its operations.
“Of critical importance is visibility of industry access to competitive energy,” the steelmaker said. “At that point, the company will be able to review its investment priorities in its Europe segment.”
The company’s currently active decarbonisation renovations at its Spanish operations were described as “on track”. ArcelorMittal is constructing a new 1.1 mt electric-arc furnace (EAF) in Gijon, and is expanding its EAF capacity in Sestao to 1.6 mt, as described by McCloskey’s recently updated Green Steel Projects Database.
Conditionality on affordable energy aligns with greenfield low-carbon steelmaking projects in Europe such as Hydnum, Blastr, and Stegra, all of which are based in locations with access to competitive renewable energy sources in Spain and the Nordics.
Access to affordable renewables is particularly important for low-carbon EAF projects due to their relatively high electricity consumption, especially considering the removal of the ‘fuel/electricity exchangeability principle’ (FEP) from the calculation of ETS free allowances benchmarking from 2026 for EAF production processes. This will potentially improve EAF production competitiveness by eliminating current free allowance reductions for indirect emissions from electricity consumption within the ETS framework.
While some of McCloskey’s sources have questioned the fundamental necessity of cheap electricity for blast furnace (BF) producers’ decarbonisation investments given their relatively low exposure to energy prices on incumbent process routes, and benefits from the sale of electricity produced from captured off-gases, the issue has some nuance.
Blast furnace producers do currently recycle off-gases, but this is not only purposed for electricity generation and sale, but also recycled to heat rolling lines in optimising energy requirements downstream. Renovating to production via EAF would remove this optimisation route and impose additional energy requirements when heating rolling lines, as well as expose steelmakers to additional downstream ETS costs from ‘fall-back’ heat benchmarking.
When asked whether lower production during ETS reference periods could raise costs due to fewer free allowances, ArcelorMittal said it did not expect additional ETS exposure beyond the roughly 20% of emissions EU steelmakers already pay for, or the planned phase-out of free allocations from 2026.
European steelmakers – largely following the direct-reduced iron (DRI) to EAF decarbonisation route – must also convince financiers of the potential realisation of their investments on future, rather than present dynamics, making further relevant the “visibility of industry access to competitive energy,” as described by ArcelorMittal.
