The steel giant also casts doubt on whether direct iron reduction from natural gas will be competitive in Europe.
ArcelorMittal has announced that it will delay final investment decisions across its portfolio of projects to decarbonise the company, including green hydrogen-ready direct-reduced iron (DRI) plants originally scheduled for installation next year.
“These projects were premised on a favourable combination of policy, technology and market developments that would facilitate decarbonisation investment by helping offset the significantly higher capital and operating costs that this transition strategy would involve,” the steel giant said in a press statement this morning.
“This included being able to use natural gas until green hydrogen became competitive.”
In a climate action report originally published in 2021, ArcelorMittal had scheduled hydrogen-ready DRI plants to be commissioned at its sites in Dunkirk, France and Sestao, Spain in 2025. Meanwhile, it had also planned to demonstrate 100,000 tonnes of annual steel production using DRI and an electric arc furnace at its site in Hamburg, Germany the same year.
ArcelorMittal also planned to install DRI plants at its steelworks in Ghent, Belgium and Bremen, Germany, with operations scheduled to start in 2026.
In the same climate action report, the steel firm expected the cost of green hydrogen could fall to $1.5/kg by 2030 from $3.50-5/kg in costs estimated at the time, although more recent assessments of the cost of producing renewable H2 in Europe are much higher than this range.
However, even a $1.50/kg cost would still “require significant public support beyond 2030 to be competitive versus other carbon neutral steelmaking routes” since the company estimated that H2 would have to fall below $1/kg to compete with gas-based DRI in Europe excluding CO2 costs.
ArcelorMittal has already racked up billions of euros in grants from national and regional governments towards its European DRI projects.
However, the company now argues that Europe’s policies and energy markets have not gone in the direction that it had initially expected.
“Green hydrogen is evolving very slowly towards being a viable fuel source and natural gas based DRI production in Europe is not yet competitive as an interim solution,” it noted.
“Furthermore, there are significant weaknesses in the carbon border adjustment mechanism (CBAM), trade protection measures need strengthening in response to increasing imports due to overcapacity in China, and there is limited willingness among customers to pay premiums for low-carbon emissions steel.”
ArcelorMittal suggests that it may be unable to meet its targets to reduce emissions intensity by 25% in 2030 compared to 2018 levels, with new targets due to be set out in an updated climate action report. It notes that absolute emissions from European operations have fallen by 28.2% since 2018, but only because of lower steel production due to weak demand.
“We expect several important developments in 2025, including the scheduled review of the CBAM, an anticipated review of the steel safeguards, and the publication of the Steel and Metals Action Plan,” ArcelorMittal continued.
“When complete, these initiatives will provide the parameters needed to shape the business case for decarbonisation investments in Europe.
“In the meantime, we are continuing with engineering work, as well as analysing a phased approach that would first start with constructing electric arc furnaces, which can also be fed with scrap steel to significantly reduce emissions.”