Green steel production in Germany can be internationally competitive only if policymakers cap industrial electricity and hydrogen prices, support investment, introduce “buy European” procurement rules and shield domestic producers from unfair competition, according to a study by economists at the University of Mannheim.
The study, funded by the Hans Böckler Foundation, examined the conditions under which green steel production could become economically viable in Germany and Europe while maintaining the region’s industrial competitiveness.
The authors, Tom Krebs and Patrick Kaczmarczyk, concluded that Europe’s steel industry would require extensive public support and market protection measures to deliver the investment needed for the transition to low-carbon steelmaking.
The researchers argued that significant domestic steel production is crucial for Germany’s industrial resilience, noting that a global “steel shock” could cost the German economy up to €50 billion ($57.3 bln) annually in lost value creation, calculated in a preliminary study in 2025.
Existing measures, including anti-dumping duties on steel imports, have been fragmented and insufficient, according to the study, while the industry has continued to cut production, reduce employment and delay key investments.
As of July 1, however, new safeguard measures came into force, which, together with the Carbon Border Adjustment Mechanism (CBAM) that came into force on January 1, 2026 are expected to significantly trim steel imports into the block.
An Italian source said that he believes that, due to the CBAM, even current, modest quotas will not be completely fulfilled, which, in his opinion, will result in a 60% drop in hot-rolled coil imports and 80% in cold-rolled coil imports.
The study, however, recommends the following measures:
Industrial electricity price: A guaranteed electricity price of €60 ($69) per megawatt-hour (MWh), including grid fees and all levies, until 2035 for all energy-intensive companies. For companies covered by collective bargaining agreements, the researchers propose an additional €10/MWh reduction.
Industrial hydrogen price: A guaranteed purchase price of €140/MWh for green hydrogen until 2035 for all energy-intensive companies. An additional reduction of the hydrogen price by €20/MWh for companies with fixed-rate tariffs.
Targeted investment support: Direct grants or low-interest loans amounting to 50 percent of the investment sum for companies in the steel industry that invest in future-proof production facilities and provide a site and job guarantee. Payment of an additional investment premium for companies with collectively bargained wage agreements.
Public participation: if necessary, the state (federal and state governments) should participate in strategically important companies in the steel industry to reduce capital costs and secure the long-term transformation perspective.
Measures to stimulate demand: Government contracts should be preferentially awarded to domestic producers (Buy-European or Local Content rule), emissions-intensive imports will be subject to a CO2 price (CBAM), and imports from countries with low labor and environmental standards will be subject to protective tariffs.
The study estimates that Germany would need to produce 40 million tonnes of climate-friendly steel annually to help meet projected EU demand of 160-180 million tonnes per year by 2050.
This would be split equally between primary steel, produced via low-CO2 direct reduction, and secondary steel produced from recycled scrap in electric-arc furnaces.
Current investment plans fall short of that target, with only 8 million tons of primary steel capacity planned and about 15 million tonnes of secondary steel capacity available.
The researchers estimated production costs for primary steel made via direct-reduced iron technology at about €590 per tonne of crude steel under the proposed policy framework, compared with an average flat steel market price of roughly €640 per tonne over the past three years.
Climate-friendly secondary steel production would also be competitive under the proposed framework, with estimated costs of €464 per tonne, according to the study.
The researchers highlighted industrial electricity and hydrogen prices as the key factors of competitiveness, describing them as “the central instrument of a strategic industrial policy for the steel industry, while investment promotion represents a necessary complementary instrument.”
The study also argued that lower production costs alone would not be sufficient to ensure the success of climate-neutral steelmaking. Measures such as “buy European” procurement rules, protective tariffs and public participation in strategically important steelmakers would be needed to secure demand, support investment and maintain industrial capacity.
The study comes as several European steelmakers have delayed, postponed or canceled decarbonization projects amid challenging market conditions.
In June 2025, Europe’s largest steel producer, ArcelorMittal, scrapped plans to invest in an electric-arc furnace and direct-reduced iron facility in Germany and put final investment decisions on decarbonization projects across Europe on hold due to what it described as a challenging economic environment, Fastmarkets reported.
At the time, ArcelorMittal said that the European steel industry was facing unprecedented competitive pressure and warned that imports were already a major concern even before the additional costs associated with decarbonization.
As of now the demand for green steel remains modest in Europe.
According to a representative of the automotive industry, purchases of green steel represent a single-digit percentage in their structure of steel purchases. The company counts the total carbon footprint of the car and is balancing between procurements of green steel, green plastic, aluminum and batteries.
Currently producers capable of producing green flat steel are asking for a €170-200-per-tonne premium and up to €300-per-tonne in some cases.
However, a future green steel producer said this week that he does not see automakers paying these levels.
As a result, Fastmarkets’ weekly assessment of the green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe remained stable week on week at €120-200 per tonne on July 2.
Fastmarkets defines green steel as material with combined Scope 1, 2 and 3 carbon emissions not exceeding 0.8 tonnes of CO2 per tonne of steel produced.
