Pure green steel costs almost double NW EU HRC price

Spanish Market: Hydrogen, Metals
02/01/25

Zero emission hydrogen-fed electric arc furnace-produced crude steel would currently cost almost double the price of northwest EU hot-rolled coil (HRC), according to data launched by Argus today.

The opex cost of green hydrogen-fed direct reduced iron/electric arc furnace (EAF) route steel was €1,074/t at the end of December, compared to a northwest EU HRC price of €558.25/t ex-works. That is also €544/t more than the cost of blast furnace/basic oxygen furnace (BOF)- produced crude steel, showing genuinely green steel would require a much higher finished product price than current blast furnace-based output, assuming a similar cost structure to today.

Most current green offerings from EU mills are still produced via the blast furnace, with emissions reductions achieved through mass balancing, offsetting, or by reductions achieved elsewhere in the supply chain. Buy-side desire to pay premiums for this material has been limited, particularly given the downturn in the European market in the second half of 2024. This has contributed to the market for premiums remaining immature, illiquid and opaque, and complicated by the lack of a commonly agreed definition for green steel.

Automakers have shown the most interest in greener steel, given their need to reduce emissions from the wider supply chain, as well as vehicle tailpipe emissions. Some automotive sub-suppliers suggest certain mills have been willing to reduce their green premiums to move tonnes — one reported paying a €70/t premium for EAF-based cold-rolled coil for a 2025 contract, but this was not confirmed.

Europe's largest steelmaker, ArcelorMittal, said over the second half of last year it would pause its direct reduced iron (DRI) investment decisions ahead of the European Commission's Steel and Metals Action Plan, and as it called for an effective carbon border adjustment mechanism and more robust trade defence measures.

Market participants largely agree that natural-gas fed EAF-based production is the greenest form of output currently available to EU mills, substituted with imports of greener metallics and semi-finished steels from regions with plentiful and competitively priced energy. Argus' new costs show BOF steel is currently just over €31/t more expensive than scrap-based EAF production fed with renewable energy.

Europe's comparatively high cost of energy is one key issue for transitioning to DRI/EAF fed production.

Last month, consultancy Mckinsey said mills could rely on "green iron" hubs going forward, with iron-making decoupled from production of crude steel, enabling DRI production to be located in regions with low-cost gas and ore, and raw steel production in regions with access to renewable energy.

The range of production costs, launched today, include five crude steel making pathways and are calculated using consumption and emissions data provided by Steelstat, in combination with Argus price data, including hydrogen costs.

By Colin Richardson

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US relaxes rules for H2 production tax credits

03/01/25

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