Kallanish Green Steel Strategies held in Brussels on 27 November debated the key obstacles holding back the decarbonisation of Europe’s steel industry, including renewable energy and hydrogen bottlenecks, legislative restrictions, financing availability and raw materials supply limitations.

High European electricity costs make steelmakers uncompetitive on global markets

Henrik Adam, vice president of European corporate affairs, Tata Steel Ltd and president of Eurofer, said that Europe was not a level playing ground on energy costs, while Stanislav Zinchenko, chief executive of consultancy GMK Center, expects steelmaking to relocate within the bloc to where low-cost energy is, noting that EU members were now also competing among themselves.

“We can assume production in the EU will move away from high power cost countries to low-cost ones,” Zinchenko said.

“We have all the ingredients with speed and the right mindset to make Europe great again,” Adam noted.

Lack of regulatory frameworks, demand-side policies hinders investment and uptake

“When we build a strategy, it cannot be a global strategy. We know what to do in India for the Indian market, we know what to do in America for the American market, we don’t know what to do in Europe because the clarity is not there,” observed Stephane Tondo, head of climate change at ArcelorMittal.

Åsa Ekdahl, head of environment and climate change at the World Steel Association, told delegates: “There are quite a lot of policy developments on the supply side but very little on the demand side," adding that not enough was being done.

Meanwhile, while some bemoaned a lack of regulation, many were critical of the EU’s Carbon Border Adjustment Mechanism in its current form.

“It’s the right tool; it needs development over many years to come … There is a lot of work still to be done," said Christoph Zinsser, head of project finance at Stegra.

Several participants also called for the scope of products to be expanded further to avoid carbon leakage, which Adam said was forcing customers to leave Europe, with finished car products then being imported into the bloc.

“We want to decarbonise but do not want to de-industrialise,” Adam asserted.

Missing ‘green steel’ definition making buyers reluctant to commit to premiums

Ekdahl pointed to the lack of a global standard for green steel as being a barrier, while Josu Piña Bilbao, director of business development at SSAB Europe, noted the lack of regulation clarity on a green steel definition.

For some steelmakers, future offtake contracts were being agreed with a premium, but for others it was not their priority, with companies reluctant to agree a premium without a set definition several years ahead of delivery.

The automotive industry was said to be a key driver of demand for green steel, while the white goods and construction sectors lagged behind for now.

Challenges, roadblocks hamper available decarbonisation options – many concentrated in certain regions

The supply of high-quality scrap and potential trade barriers could hamper the growing adoption of EAFs, panellists noted.

“There’s not enough clean scrap around,” noted Metalshub co-founder and managing director Sebastian Kreft.

Daniel Pietikainen, trade and environment officer at the Bureau of International Recycling, said trade barriers could discourage investment in scrap processing and see scrap suppliers exiting the supply chain.

Europe is currently the epicentre for announced decarbonisation projects, but the US and the Middle East are catching up. However, the EU will not be a cost competitive location for hydrogen reduction.

Most panellists agreed that hydrogen will not be shipped, regardless of logistics costs. Instead, hydrogen hubs would become iron hubs, with green iron being a cost competitive material which can be shipped to steelmakers without resources available locally.

On carbon capture and storage, a panellist from Transition-Asia noted that the costs and risks outweighed the benefits.

On hydrogen availability, amid project delays and high costs, Anna Pekala, market director green energy transition at Ramboll, said the EU’s plans to annually import 10 million tonnes of hydrogen and produce the same amount domestically by 2030 were “unfortunately very unlikely.”

“The realistic capacity will be at only 25-30% of that. Not more than 50-65 GW of installed capacity of electrolysers,” she added.

On metallics, the supply of different grades of iron ore would likely become a challenge for miners and steelmakers.

“The mining companies are desperately looking for solutions for lower to mid-grade iron ore. In the future, they will end up in an oversupply, while the higher-grade iron ores are already looking at an undersupply,” said Alexander Fleischanderl, Primetals chief technology officer & head of green steel.