European Commission approves $1.4 billion for ArcelorMittal steelmaking ops decarbonization in Germany

ArcelorMittal will receive €1.3 billion ($1.4 billion) in state funding to decarbonize its steelmaking operations in Bremen and Eisenhüttenstadt, Germany, the European Commission said earlier this month.

The aid will take the form of a direct grant and will support the construction of a direct-reduced iron (DRI) plant and three new electric-arc furnaces (EAFs) at ArcelorMittal’s Bremen and Eisenhüttenstadt plants.

ArcelorMittal first applied for funding in 2021, and the state aid is part of a total €2.5 billion investment in the two sites.

The DRI plant will be initially fed by natural gas with plans to switch to low-carbon, renewable hydrogen. Ultimately, the new installation will operate using exclusively renewable hydrogen.

The planned expansion of these two sites could bring an estimated 3.8 million tonnes of finished steel to the market. The new installations are expected to come online in 2026.

The new equipment will replace two of the three existing blast furnaces (BFs) and two of the four existing basic oxygen furnaces (BOFs) in Bremen and Eisenhuttenstadt.

ArcelorMittal Bremen runs two BFs with a combined capacity of 3.6 million tonnes per year of pig iron, and two BOFs with a combined capacity of 3.7 million tpy of crude steel. The Bremen steelworks can produce hot-rolled, cold-rolled and galvanized coils.

In Eisenhüttenstadt, the company has a 1.7 million tpy BF and two BOFs with a combine capacity of 2.7 million tpy. The site also produces hot-rolled, cold-rolled and galvanized coils.

ArcelorMittal Europe has set a target to reduce CO2 emissions by 35% by 2030, and to reach carbon neutrality by 2050.

Most European blast furnace-based steelmakers have been investing in green steel projects in the past years, cutting emissions to comply with strict EU regulations. Under the European Green Deal, the European Commission proposed a new EU target to reduce greenhouse gas emissions by at least 55% by 2030, compared with the levels emitted in 1990.

Additionally, the growing cost of carbon emissions in the EU has also pushed mills to seek alternative ways of steelmaking.

The price for a CO2 emissions permit in the EU reached a historical peak of €105 ($96) per tonne in February 2023. In February 2024, carbon permits prices ranged between €52-68 per tonne. When free carbon allocation under the European Emission Trading System are halved by 2030, carbon prices might jump to €200-250 per tonne, according to market participants.

Low-carbon steel is an integral part of sustainability goals for European steelmakers.

Green steel market in Europe

Despite limited demand for green steel, all major European steelmakers have recently developed their own brands of low-carbon emission content steel and are charging high premiums for such products. Despite slow sales, producers have shown no intention of undercutting prices, sources said.

“There are very few suppliers in Europe who are able to supply [flat] steel [produced in electric-arc furnaces] with CO2 emissions below 500 kg [per tonne of steel], and supply is unlikely to grow substantially in the next couple of years, while demand [for such products] is likely to rise fast,” a mill source in Europe told Fastmarkets.

Fastmarkets’ weekly price assessment of green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe was €150-250 ($161-268) per tonne on February 22, unchanged since December 14, 2023.

Market sources in Europe reported the premium for EAF-produced steel with CO2 emissions below 0.4 tonnes per tonne of steel at €200-250 per tonne and the premium for steel with zero carbon emissions under Scope 1 and 2 at €300-350 per tonne from a Nordic supplier.

Premiums for blast-furnace produced steel with reduced emissions were lower, and Fastmarkets’ weekly assessment of the flat steel reduced carbon emissions differential, exw Northern Europe was €40-60 per tonne on February 22, stable week on week.

Published by: Julia Bolotova