Leading steelmaker ArcelorMittal has revised its long-term decarbonisation strategy to be “flexible and adaptive,” as outlined in the group’s 2025 Sustainability Report, with future electric-arc furnace (EAF) investments only to be reviewed upon completion of its existing transformation projects.
According to the report, the steelmaking group “intends to sequence capital-intensive decarbonisation projects to maintain financial discipline,” and so will not initiate next EAF investments until “Dunkirk is closer to completion.”
Dunkirk EAF project
In February, ArcelorMittal announced a EUR1.3 billion investment in a new 2 mt/y EAF at its Dunkirk steel plant, now positioned to serve as a reference point for the group’s future EAF decarbonisation projects. As described in the report, the new EAF will replace the smaller of the site’s two blast furnaces (BF3) once operating at scale, expected to ramp to full production by 2030-2031 with first productions in 2029.
The new EAF will be capable of producing flat steel with emissions of 0.6t CO2e/t, fed with 60% recycled steel scrap, 20% direct-reduced iron (DRI), and 20% hot metal from the surviving blast furnace.
ArcelorMittal is also progressing European EAF upgrades or expansions in Luxembourg, Spain, and the US, and expects to add 3.4 mt of EAF steelmaking to its global operations by the end of 2026.
A new sustainability strategy?
McCloskey’s Global Green Steel Profiles and associated commentary illustrate how the scope and ambition of ArcelorMIttal’s decarbonisation commitments have reduced over time, with its Dunkirk transformation project originally to include green DRI production capacities, and projects at its German operations suspended entirely.
While the steelmaking group claims a 47% reduction in its carbon footprint since 2018, it clarifies that this reduction comes in large part from assets divested and decommissioned over the period, with said assets averaging a carbon intensity of around 2.5 t CO2e/t against the group’s post-divestment footprint of 1.79 t CO2e/t.
As outlined in the report, ArcelorMittal is “reframing” its decarbonisation strategy, “to reduce the risks and capture economic opportunities from the new value pools the energy transition brings.” The strategy is broken into three themes:
- Renewable energy investments
- Materials and solutions
- Transformation of operations
Reinforced by its new “sequencing” strategy for its EAF replacements, the steelmaking group appears to be prioritising revenue generation in new low-carbon markets over its own transformation: via direct investments in renewable energy capacities in the Americas, or the development of product portfolios targeting low-carbon energy infrastructure demand (such as electrical steels).
ArcelorMittal has also relaxed its decarbonisation target across its operations to a 10% reduction by 2030, reducing ambitions from its prior 25% target, stating the new figure represents “a realistic pathway rather than an aspirational or policy-dependent target.” The group maintains its 2050 net-zero target, arguing that once “tipping points” (citing “ultra-low round-the-clock electricity prices”) are reached “the footprint of the steel industry can change quite rapidly.”
New policy pursuits?
Indeed, while ArcelorMittal has previously conditioned further decarbonisation investments in Europe on policy remedies to competitiveness burdens on the continent – namely import pressures – the steelmaker appears to have moved the goalposts again, now formally stating that no further EAF projects would be engaged until the Dunkirk project nears completion in 2029, currently limited by energy cost fundamentals.
In fact, the steelmaker explicitly celebrates recent policy efforts from the European Commission in facilitating the Dunkirk EAF investment case – “very appreciative of the time that European leaders have dedicated to developing policy that supports the industry” – and cites the EU’s incoming steel trade quota intensification and CBAM as having direct influence on the decision. Contrastingly, however, ArcelorMittal argues that the laggard pace of necessary infrastructure for the green steel transition: at-scale green hydrogen and carbon capture technologies; combined with European electricity prices well-above the $30/MWh considered viable for green H2-DRI production, mean that the “deep decarbonisation” of ironmaking in Europe remains structurally unworkable, and is “likely to remain challenging in the next decade.”
Naturally, the steelmaker does reserve the possibility of expediting any new EAF investments “should the policy environment demonstrate further positive momentum,” and expresses its support for a revision of the phase-out trajectories of both ETS free allowances, and the ETS cap itself (currently phasing out entirely by 2034, and 2039, respectively). Whilst ArcelorMittal celebrates the implementation of CBAM and supports its expansion, it qualifies this backing in stating that actual impacts from the carbon leakage instrument will remain unclear until declarations come due in 2027.
In sketching out its ‘vision’ of ideal decarbonisation progress and climate leadership – allegedly unrealised – ArcelorMittal outlines how first-moving regions (like the EU) would adopt ambitious climate policies to “set regulatory norms and stimulate innovation,” bearing higher costs, but rewarded with advantages in “technology leadership, green industry development and regulatory influence globally.”
These advantages would then compound in scaling “from policy experimentation to global deployment” before reaching “system normalization,” facilitating the passing on of decarbonisation’s higher costs to consumers, at which point decarbonisation becomes “structurally embedded in markets, rather than driven primarily by policy mandates.”
However, ArcelorMittal argues that this ideal “has not translated into reality,” seeing the EU as increasingly solitary in its policy ambitions, citing member state divisions as evidencing the fault in the EU’s positioning as “the stalwart of ambitious climate policy.” One could question whether the steelmaker’s emphasis on the need to wait for evidence of CBAM’s actual impact on markets should also apply to patience for the instrument’s stimulation of global decarbonisation and carbon pricing – especially given ETS operators have had comparatively had decades of warning on carbon cap and price trajectories.
As such, directly or indirectly, ArcelorMittal’s report appears to centralise the EU ETS as domestic steelmaking’s next favourite burden – be it on the carbon price’s role in inflating electricity costs, or in reducing the competitiveness of traditional steelmaking such to undermine decarbonisation investment capacities.
The political will to adjust the ETS appears to be there, as demonstrated by the EU’s summer review and signals from Commission and Member State leaders, but movements to relax ETS phase-out trajectories are likely to face resistance from other members of the European steelmaking lobby, further ahead in their decarbonisation timelines. These steel producers, managing either transformational or greenfield low-carbon projects, have in many cases already committed to a low-carbon investment case on the basis of existing fundamentals, including existing carbon price, EUA cap, and free allocation trajectories.
A source with knowledge of the debate tells McCloskey that domestic steelmakers are already at odds on how to position their influence as related to the upcoming ETS review, suggesting that dividing lines between the two camps fall where companies have already initiated their decarbonisation investments and projects, versus those further behind in their low-carbon transition.
Author: Benjamin Steven
