ArcelorMittal has decided to delay its final investment decision on projects aimed at reducing carbon emissions in its European steelmaking facilities. This move comes as a response to challenges in European policy and energy markets, impacting their plans to produce low-carbon steel. The projects, which focus on utilizing hydrogen-ready DRI-EAF technologies, are crucial for the transition toward greener steel production. However, the company faces significant obstacles, such as slow policy progress and insufficient demand for low-carbon steel.
ArcelorMittal’s current predicament can be better understood by looking at the broader industry context. Steel production is one of the significant contributors to global CO2 emissions, accounting for 7% to 9% of direct emissions from fossil fuels. Despite efforts over the years to curb emissions, the sector remains challenging to decarbonize. Past attempts to introduce green hydrogen as a fuel source have been hindered by slow technological advancements and economic viability concerns. Comparatively, similar initiatives in the past faced delays due to lack of support and infrastructure, underscoring the persistent obstacles in achieving low-emission steel production.
What Plans Are Affected?
The projects put on hold involve constructing facilities equipped with hydrogen-ready direct reduced iron (DRI) and electric arc furnaces (EAF). These facilities are intended to replace several traditional blast furnaces that rely on coal, offering a more sustainable method of steel production. Currently, the facilities would use natural gas until green hydrogen becomes a financially competitive energy source. Despite offers of financial backing from host countries, ArcelorMittal cites insufficient policy progress and market readiness as barriers to moving forward.
Can Policy Developments Improve the Situation?
Policy development is critical, as noted by ArcelorMittal, which pointed to deficiencies in the EU’s carbon border adjustment mechanism (CBAM) and the need for measures against China’s steel import overcapacity. However, upcoming policy reviews, including a scheduled CBAM review and the European Steel and Metals Action Plan, could potentially create a more favorable environment for these projects by 2025. The company remains hopeful that these developments will offer the necessary support for advancing their plans.
Aditya Mittal, ArcelorMittal’s CEO, expressed optimism about future policy changes facilitating the transition to low-carbon steel production. He emphasized the importance of regulatory measures to boost demand for such steel, acknowledging that few customers are currently willing to pay a premium for it. ArcelorMittal is committed to reaching net-zero emissions by 2050 through innovative steelmaking methods, including hydrogen integration and carbon capture technologies.
Despite the setback, ArcelorMittal reassured its ability to meet current low-carbon steel demand from its existing projects, such as in Sestao, Spain, which utilize renewable energy. The company continues to explore various technologies to reduce emissions, though it acknowledges that significant progress in carbon capture and storage may not be feasible until after 2030. ArcelorMittal’s commitment underscores the industry’s broader transition toward sustainable practices.
The challenges faced by ArcelorMittal reflect the complex interplay between policy, market demand, and technological readiness in transitioning to low-emission steel production. While the delay highlights obstacles in achieving these goals, ongoing and future policy developments may provide the necessary impetus for progress. Understanding these dynamics is crucial for stakeholders in the steel industry and policymakers aiming to support decarbonization efforts effectively.
