Roadmap of Europe's low-carbon steel production projects

Europe is expected to cut carbon emissions by 55% compared with 1990 levels by 2030 and to achieve climate neutrality by 2050. With around its 200 million mt/year of CO2 emissions, the steel industry is responsible for 5% of global emissions and is working towards a target of zero emissions.

To achieve this, European steelmakers are switching technologies; there are around 60 projects that have the potential to reducing CO2 emissions by 81.5 million mt/year by 2030, according to Eurofer, the European steel association.

S&P Global Commodity Insights interactive map shows the main low-CO2 projects already being planned by leading steelmakers. Decarbonization projects in Europe are set to cut emissions by 30% by 2030 and entirely by 2050, the map shows, with companies shifting mostly to electric arc furnaces with the use of hydrogen where possible.

Most projects are expected to be completed between 2030-2045, with some more advanced than others; a number of companies have managed to secure funds and some have started to order direct reduction modules.

Because global steel demand is forecast to rise by 30% by 2050 from the 1.88 billion mt produced in 2022, according to worldsteel data, the main lever for the steel industry to decarbonize is expected to come from the adoption of low-carbon production processes. For that reason, the industry needs to carry out radical change since steel is such a crucial raw material for so many industries that use steel to cut their Scope 3 emissions.

According to worldsteel data from 2022, on average, every metric ton of steel produced leads to 1.91 mt of CO2 emitted. The carbon intensity changes depending on the route and raw materials used to produce steel.

The blast furnace and basic oxygen furnace process releases the highest carbon emissions: 2.33 mt of CO2 emission per ton of crude steel. The direct reduced iron and electric arc furnace (DRI-EAF) process releases 1.37 mt of CO2 emission per metric ton. The scrap steel and electric arc furnace (scrap-EAF) process releases the fewest carbon emissions at 0.66 mt of CO2.

In Europe 57% of steel is produced via the blast furnace route that uses coal as a raw material, and the rest from electric-arc furnaces route that uses scrap as a raw material.

Challenges

Policymakers want steelmakers to cut emissions, with most funding now being directed into replacing blast furnace technologies with DRI production using green hydrogen to feed EAFs powered by renewable energies. However, to achieve this, there are still many challenges the industry needs to overcome.

Problems sourcing sufficient scrap are only likely to become more common. Global annual scrap supply is currently estimated at around 600 million-650 million mt/year while demand is expected to rise to 800 million mt/year by 2030 and around 1 billion mt by 2050, the latest report published by UK Steel showed.

Green energy and hydrogen are currently not easily sourced and economically viable, and although the EU has provided funds to sustain the gradual transition, these fundamental issues are yet to be resolved.

Platts low-carbon steel prices

Many companies in different industries across the steel value chain are buying increasing volumes of low-carbon "green" steel to reduce their Scope 2 and 3 emissions, closing offtake supply agreements to secure low-carbon raw materials.

European buyers have started to show greater interest in carbon-accounted steel, although demand for green steel remains significantly below that of traditional steel.

Following the market trend and the new technology innovations, Platts, part of S&P Global, launched its carbon-accounted price assessments in May 2023.