ArcelorMittal Delays Low-Carbon Steel Projects In Europe

ArcelorMittal, one of the world's largest steelmaking and mining companies, announced today that it will delay a final investment decision on a series of projects aimed at producing low-carbon steel in Europe. The company cited a lack of positive momentum in European policy, energy, and market environments as the primary reasons behind the postponement.

Steelmaking is actually one of the most carbon intensive industries in the world with direct greenhouse gas emissions from fossil use around 7%–9%. Emissions are somewhat hard to reduce as traditionally the steel industry is founded on coal for blast furnaces - integral to the process of smelting steel. Among the most promising solutions to decarbonize the industry, the use of green hydrogen is considered one of the most promising solutions, enabling steelmakers to eliminate the need for fossil fuels in their production processes.

The proposed projects by ArcelorMittal include building hydrogen-ready Direct Reduced Iron (DRI) Electric Arc Furnace (EAF) facilities designed to replace several blast furnaces at the company's European operations. Electric arc furnaces use electricity to produce the heat needed for melting and shaping metal. In contrast, traditional blast furnaces rely on coal. The DRI method, using natural gas to reduce iron ore, would be a precursor to the use of green hydrogen once it becomes cost-competitive.

However, ArcelorMittal has stated that although some European governments have committed to funding the projects, the critical policy issues that will enable the projects to move forward are not being advanced. These include concerns over the European Union's carbon border adjustment mechanism (CBAM), which imposes a carbon tax on imported goods. Among some raised concerns over weaknesses in CBAM are those related to its vulnerability in the case of excessive production of steel worldwide. China is now aggressively involved with increasing imports of steel for sale within Europe. Such situations weigh down on the respective producers in Europe and exacerbate the transition towards such alternatives as low-carbon-based ones.

The slow development of green hydrogen as a fuel source, and limited customer willingness to pay a premium for low-carbon steel, are also important challenges. While ArcelorMittal has said that demand for low-carbon steel exists, customers willing to pay a premium for it remain in the minority.

Although these setbacks are present, ArcelorMittal is hopeful that future developments may present a more favorable environment for the projects. Review of the CBAM is due in 2025 and that of the EU's steel safeguards, which will stay until mid-2026, to protect European steel producers. The European Commission is expected to publish a Steel and Metals Action Plan, which might provide new policy frameworks for accelerating the transition to low-carbon steel production.

Chief Executive Officer for ArcelorMittal Aditya Mittal said in an interview that he sees hope in the development of policies that will push for fast transition. Among those, which he considers very important are the Green Deal Industrial Plan and the Steel and Metals Action Plan, including the set of regulations that they provide. He further stated that "low-carbon steel will not be able to meet the required change in demand.".

ArcelorMittal has pledged to achieve net-zero emissions across its operations by 2050 and is exploring several pathways to reduce its carbon footprint, including hydrogen, circular carbon technologies, and CCUS. While the company has stated that it remains committed to the decarbonization of its steelmaking operations, it acknowledged that CCUS is likely to become a significant tool for emissions reduction only after 2030.

Although these specific low-carbon projects are delayed, the company claimed that its capability to fulfill customer demand for low-carbon steel would not be affected. The company claimed that at its Sestao, Spain facility, which uses renewable energy to fuel an electric arc furnace with a high proportion of recycled scrap steel, it can still produce low-carbon steel in the meantime.

He further reassured the stakeholders that the company still remains committed to the goal of achieving net zero by 2050. "While decarbonization paths are continuously evolving, ArcelorMittal is fully confident of the ability to realize its sustainability targets, through adjusting its approach as appropriate, given developments in technologies and policies".