European Commission approves Eur515 mil grant for ArcelorMittal green steel output

The European Commission has approved Eur515 million ($549 million) as a part of the EU hydrogen strategy to help ArcelorMittal decarbonize its steel production in Spain and Germany and reduce the region’s dependence on Russian fossil fuels, it said Feb. 17.

Of the total grant, Eur460 million will help ArcelorMittal to partially decarbonize its steel production in Gijón, northwest of Spain, where the company currently operates two blast furnaces.

The Gijon steelworks’ transformation will see the construction of a renewable hydrogen-based direct reduced iron (DRI) plant, which together with a new electric arc furnace (EAF) would substitute old blast furnaces. Natural gas, initially used in the DRI unit, will be gradually replaced with renewable hydrogen and syngas generated from waste and metallurgical gases.

The new facilities, which are likely to start coming online in late 2025, will produce 2.3 million mt/year of low-carbon DRI, thereby avoiding the release of 70.9 million mt of CO2.

In Hamburg, northern Germany, meanwhile, the remaining Eur55 million grant will contribute toward the construction of a demonstration plant for the production of 100,000 mt/year DRI using renewable hydrogen.

Once operational from 2026, ArcelorMittal Hamburg is expected to avoid the release of over 700,000 mt/year of CO2.

Net-zero goals questioned

Although these projects will provide ArcelorMittal with insights into the production of emissions-free steel and help in the decarbonization of its EU-based steel operations on a larger scale, the company’s path to net zero still falls under scrutiny as it plans for new blast furnaces at other locations, against its low-carbon steelmaking strategy for Europe and North America, according to a Feb. 16 report by the Institute for Energy Economics and Financial Analysis.

“ArcelorMittal, the world’s second-largest steelmaker, appears to be planning a two-speed decarbonization, with hydrogen-ready, direct reduced iron technology to be installed overwhelmingly in developed nations while building more coal-powered blast furnaces in the developing Global South,” the Institute’s analysts Simon Nicholas and Soroush Basirat pointed in the report.

In October 2022, ArcelorMittal broke ground on its $1.3 billion transition to DRI-based steelmaking in Ontario, Canada, and has similar plans in Spain, France, Belgium and Germany. At the same time, through its joint venture with Nippon Steel, ArcelorMittal will bring two blast furnaces online in 2025-2026 in India’s western coastal Gujarat state. With a very different technology and emissions approach adopted for India, there is doubt on ArcelorMittal’s ability to reach net zero by 2050, analysts added.

The blast furnaces, which are under construction at Hazira in Gujrat, with a total capacity of 6 million mt/year of steel output will lead to a rise in CO2-equivalent emissions by 2 mt tons per ton of steel produced, or by 12 million mt/year if they run at full capacity, EEFA estimates.

New integrated steel plants that are also planned at Kendrapara and Paradip in the eastern state of Odisha, India, would add more emissions, the EEFA report said.

ArcelorMittal is keen to expand in India because the country is a major steel growth market with a planned doubling in capacity this decade alone, However, efforts to bring the global steel sector toward net zero will not be achieved if India relies on new coal-based steelmaking to meet its high forecast demand growth while Europe is accelerating its shift away from reliance on coal-based smelters, EEFA report said.

When asked to comment on the EEFA report, a spokesperson for ArcelorMittal said that ArcelorMittal/Nippon Steel India is adding new steelmaking capacity to support the economic growth of the country. However, the companies are aware of the need to start a journey to net zero in that part of the world.

Plans for India

The ArcelorMittal-Nippon Steel joint venture in India has developed a plan to reduce its emissions intensity and is currently working on a 2030 target which it is yet to announce, the spokesperson said.

The spokesperson insisted that the blast furnace was seen as the best technology for that expansion, but the potential to add on a carbon capture and storage solution to the furnaces in the future will partially offset their carbon footprint.

The enterprise will also consider using hydrogen in the blast furnaces, which will then result in a further decrease in emissions, the spokesperson said, adding that ArcelorMittal/Nippon Steel India also has DRI-based capacity, which it can convert to green hydrogen when it becomes economically available. “5 million mt out of 14 million mt will have the potential of working on a very high H2 percentage,” the spokesperson added.

Other ArcelorMittal/Nippon Steel India’s decarbonization efforts include the announced $600 million investment in a 975 MW renewable energy project, which will supply 20% of the electricity the Indian joint venture operations consume.

“We have been very clear about the fact that the journey to net zero for the steel industry will require more than one technology route — one utilizing green hydrogen and the other carbon capture utilization and storage, and a third [being in development is] direct electrolysis,” said the spokesperson. “The International Energy Agency, for example, forecasts that over 50% of steelmaking will be capture utilization and storage-based by 2050,” he said.

ArcelorMittal reiterated it was committed to achieving its net zero targets by 2050 and reducing emissions intensity by 25% across its global operations by 2030.

— Ekaterina Bouckley