Shifting from coal-based blast furnace-basic oxygen furnace (BF-BOF) to electric arc furnace (EAF) steelmaking in Europe could cost $400 billion, Bloomberg Intelligence analysts say in a note seen by Kallanish.
Steelmakers are expected to shoulder about $90 billion in direct furnace conversion costs, while clean power, hydrogen electrolysers, and associated transport and storage account for the rest. Around 190 to 300 terawatt-hours (TWh) of carbon-free electricity might be required for a complete transition, compared with 75 TWh today. Factoring in renewable capital spending costs of $691-2,852/kilowatt, this may translate to a potential $126 billion for new generation capacity. Steel’s share of the hydrogen infrastructure and grid firming could add another $200 billion, Bloomberg estimates.
For Europe, its steel resilience depends on this “costly shift”, the analysts highlight. A large part of EU steelmakers’ iron ore and coal needs – essential for the over 55% of EU steel made through the BF-BOF route – is met through imports. Switching to EAFs, which melt scrap and/or direct reduced iron (DRI) using electricity, can lower the bloc’s import reliance.
“For Europe, green steel is a route to supply chain resilience and competitiveness, not just lower emissions,” they add.
However, the sector’s transition to a more resilient green steel model hinges on major policy changes. Europe needs to secure the input base, with scrap treated as a strategic feedstock; lower clean energy costs; protect the investment case from unfair imports; and create low-carbon steel demand through green public procurement.
“The optimal European steel model is circular first, EAF-led, enabled by direct reduced iron, power-competitive and trade-protected,” Bloomberg says. However, EAF conversion, while technically feasible, is hindered by power prices, grid capacity, DRI availability, and weak margins. In the case of hydrogen, while essential for deep decarbonisation, “Europe should not assume full upstream self-sufficiency.”
“The realistic end state is hybrid: domestic EAFs using high-quality scrap, hydrogen clusters where economics work and selective green hot briquetted iron imports, protected by the EU carbon border tax and trade defences,” the analysts conclude.
