Stalled Shift to Green Steel

The progression of the green steel industry looks to be under threat of being perpetually delayed. In the West, economic pressures and shifting policies have led major steelmakers to delay or reconsider decarbonisation initiatives. In the East, the “build now, decarbonise later” approach taken by China and India continues to delay the industry’s transition toward a low-carbon future.

Leading European players, which once appeared at the forefront of green steel, are now scaling back. Previously approved decarbonisation strategies are being revised, with steelmakers seeking stronger policy support or financial guarantees. Caught between soaring decarbonisation costs and global overcapacity, firms like Thyssenkrupp and ArcelorMittal have recently delayed or scrapped key projects. ArcelorMittal’s $1 billion Hydrogen DRI plant in Spain was cancelled last November citing lagging hydrogen infrastructure and policy gaps in the EU’s CBAM. In March, Thyssenkrupp suspended its 151,000 tonnes/year hydrogen tender for its Duisburg plant, unable to secure affordable supply — with European hydrogen prices still around $10/kg, green steel production remains economically unfeasible. According to Westwood analysis, over 20% of European hydrogen projects have now stalled or been cancelled.

High electricity prices continue to undermine the viability of both hydrogen production and electric arc furnace (EAF) operations. Europe’s efforts to build a clean, affordable energy backbone have faltered amid power failures, supply chain inflation, and widespread project cancellations.

Compounding supply-side challenges is a weak and price -sensitive demand landscape. “Although customers are interested in low-carbon steel, their willingness to pay a premium is limited” says ArcelorMittal CFO Genuino Cristino. McCloskey’s reduced carbon HRC premium marker stood at just €60.46/t as of early June, but the broader market uptake remains shallow. Buyers remain selective, unwilling to bear the heavy costs of decarbonised steel.

Cheap imports are also undercutting Europe’s green steel push. Chinese exports hit a 7-month high of 10.6 Mt in May, up nearly 1 Mt year-on-year, with YTD exports exceeding 2022 levels by 23 Mt. Despite weak domestic demand and rising trade barriers, Chinese output remains strong. Reportedly positive margins raised crude steel production up 0.4% YoY to 345 Mt in the first four months of 2025.

Meanwhile, China and India are heavily lagging behind global green steel goals. Despite the ongoing overcapacity, China has an additional 62 Mtpa of steel capacity under construction according to Global Energy Monitor, the majority of it BF-BOF based, high-emission mills. Though hydrogen DRI-EAF projects exist, they remain marginal and with an average lifespan of 40 years, these investments risk locking in carbon-intensive production for decades.

In India, of the 28 Mtpa of steel capacity currently under construction, more than 70% is based on BF-BOF technology. While India’s growing demand — mostly driven by public infrastructure investment — could have enabled a green steel scale-up, most producers are sticking with conventional technologies.

That said, some ‘green shoots’ are emerging. In March, China announced plans to include steel in its national carbon trading market, aiming to incentivise low-carbon projects. In India, where steel accounts for 10–12% of total emissions, the government has introduced an action plan to support both supply and demand for green steel. With enough global effort, progress toward a more sustainable steel industry remains possible — but the transition is certainly proving more difficult than initially anticipated.

By Hamid Agassi, Dry Bulk Analyst, Research, SSY.