Europe cannot afford to hesitate on “green” steel, an industry that could still unlock industrial competitiveness for the region, according to researchers at the Stockholm Environment Institute (SEI).
“Scaling up European primary green steelmaking is essential for supply chain resilience and the competitiveness of strategically important downstream industries. By failing to move from innovation to deployment, the EU risks losing its relevance in global industrial development,” they warn in a report seen by Kallanish.
Chinese producers are squeezing European firms out of global markets. This has happened in sectors such as solar panels, battery cells and electric vehicles. Similar dynamics are now emerging in wind turbines and electrolysers, SEI notes.
The paper comes as Swedish firm Stegra struggles to close a funding round to implement its green hydrogen, green iron and green steel ambitions. Last year, the prospective producer received state aid from the Swedish government, which was below the amount approved by the European Commission. Despite securing customer deals, Stegra still faced additional state aid rejection for port infrastructure and write-downs.
“As the case of Sweden and Stegra illustrates, EU-level initiatives must be complemented by effective coordination across the Commission and member states to ensure delivery of the European Green Deal,” comment SEI research associate Jindan Gong and co-authors, including Max Åhman, professor and head of division, Environmental and Energy Systems Studies at Lund University.
Green steel is estimated to have a premium price of 20-30%, although costs will vary geographically. Northern Scandinavia, Portugal and Spain are said to offer unique cost advantages in Europe.
Separate research by Åhman suggests that the EU Emissions Trading System and the enforcement of the Carbon Border Adjustment Mechanism (CBAM) could make hydrogen-based steel production in these locations competitive by 2026. With a green hydrogen cost of €4.12-5.5/kg ($4.8-6.5/kg), the H2-DRI-EAF steelmaking route could be competitive with conventional production routes, the researchers claim.
However, the institute argues that if the costs of producing green steel are likely to be higher everywhere else in the near term, “the strategic question for Europe is not whether to act, but how decisively [it will act]”.
It notes the EU has three clear options: transition to low-carbon primary steelmaking using domestically produced clean energy or green iron imports; offshore its steel production; or continue to rely on fossil fuel imports. SEI concludes the consequences of delaying or retreating would be “profound” for European innovation, strategic autonomy and competitiveness.
The institute suggests that by 2030, green steel cost will range from €625 to €906/tonne.
