ArcelorMittal faces green steel price test at flagship low-carbon plant
Company has ‘no real visibility’ over whether its new electric-arc furnace will be able to pass on added costs to buyers
ArcelorMittal may struggle to charge more for steel produced at its new €1.3bn low-carbon plant, the Dunkirk facility’s boss has warned, exposing the challenge facing the industry in Europe: how to curb emissions while remaining competitive and profitable.
The group’s flagship electric-arc furnace, which should cut greenhouse gas emissions per tonne of steel by two-thirds compared with a traditional blast furnace but whose costs are far higher, is scheduled to start production in 2029.
Bruno Ribo, chief executive of ArcelorMittal France, said the company had “no real visibility” over how quickly demand for green steel would grow or whether buyers “will be able to pay more”.
Pointing to European carmakers, among the region’s biggest consumers of steel, Ribo said the company had made certain assumptions over how much it would be able to charge, “but the uncertainty level on this hypothesis is very, very high”.
Green steel is typically 20-30 per cent more expensive to make because of the large upfront investment needed for new plants and the electricity required to power them.
Decarbonised steel production also uses a higher than normal proportion of recycled steel, presenting a further challenge because processes need to be adapted to the differing chemical composition of scrap metal, according to Ribo.
The decision to go ahead with the Dunkirk furnace followed months of lobbying by ArcelorMittal and steel industry bodies for greater protection against cheaper imports, which have undercut European producers already suffering from lower demand.
Data from the continent’s steel industry body Eurofer shows that imports of the alloy from outside Europe rose to 26 per cent of the region’s supply from 20 per cent between 2016 and 2025, while EU production declined to 57.3mn tonnes from 69.3mn tonnes.
“Our market is being flooded by imports . . . normally if you have a recession imports also go down,” said Axel Eggert, Eurofer director-general. “But imports didn’t go down. Only our own sales went down and that’s not normal.”
Measures introduced by the EU this year have raised hopes within the industry that some of the pressure will ease.
The carbon border adjustment mechanism, which aims to impose the same carbon cost on imports as on goods made in the EU, came into force at the start of the year. New trade quotas introduced on July 1 are intended to cut the amount of steel that can be imported duty-free by 47 per cent compared with 2024 levels.
Brussels also eased the requirements of the EU emissions trading system in July in response to industry concerns, delaying a planned phaseout of free carbon permits by four years.
ArcelorMittal has secured electricity for the Dunkirk plant from the nearby Gravelines nuclear power station at a guaranteed price through an agreement with French state energy group EDF, as well as subsidies via a French energy certificate scheme.
Improved conditions in Europe have helped lift steelmakers’ share prices. Thyssenkrupp is up 55 per cent this year, Salzgitter over 30 per cent and ArcelorMittal almost 70 per cent.
Talks for India’s Jindal Steel to buy a stake in Thyssenkrupp’s steel unit were halted in May after the German company said assumptions underpinning the sale had “significantly changed in recent months”.
Jindal had pledged to invest €2bn in an electric-arc furnace and a direct-reduction plant, which extracts iron from iron ore using natural gas or hydrogen rather than the traditional coke-fuelled blast furnace, with the project supported by €2bn in German government subsidies.
Thyssenkrupp has struggled to find a buyer willing to meet its asking price for the steel unit and assume pension liabilities estimated by analysts at about €2.7bn. Earlier talks with Czech billionaire Daniel Křetínský also stalled and were abandoned last year.
As restructuring measures progress and market conditions improve, unions have urged Thyssenkrupp to list the steel division.
“Financially, the conditions have not been so good for a long time,” said one person close to Thyssenkrupp’s supervisory board.
However, the person added that the steel business would need to show investors it could generate enough cash to fund the investment needed to reduce emissions.
Stronger market sentiment is not enough to resolve the industry’s deeper problems. Decarbonisation projects across Europe have stalled as concerns about energy security and economic competitiveness have taken precedence over emissions reduction.
Those postponing projects include Germany’s Salzgitter, Czech steelmaker Třinecké Železárny and Sweden’s SSAB. The German company, however, in late July formalised plans to install a new electric-arc furnace at its site in Duisburg, backed by €200mn of federal and state funding.
The industry initially presented such projects as part of an “ambitious vision”, said Alon Olsha, metals and mining analyst at BloombergNEF. But the expected subsidies, regulatory frameworks and a touted hydrogen network have not materialised, so steelmakers have “retrenched from a lot of their plans”.
ArcelorMittal’s Dunkirk project is a scaled-back version of its original €1.8bn plan, which included a second electric-arc furnace and a direct-reduction iron plant. The company also scrapped a similar project in Germany.
“The pace of the transition has proven more complex and challenging than anticipated, as economic, technological and geopolitical factors have shifted many of the assumptions our earlier plans were based on,” the company said in its latest sustainability report.
Geert Van Poelvoorde, ArcelorMittal’s former chief executive for Europe who left last month, told the FT the electric-arc furnace in Dunkirk would only replace one of the site’s blast furnaces, meaning the financial risk was limited.
France was also one of the few European countries where the economics stacked up, he added. “In Germany I have no electricity at a decent price, in Belgium they are working on nuclear, and in Spain they are working on renewables, but we have no back-up for the moment.”
The EU’s carbon border adjustment mechanism did not go far enough to fully protect Europe’s decarbonised industry, Van Poelvoorde added, because it did not cover downstream products such as the electrical steel used in electric vehicle engines.
“You will just move the imports from steel to imports of engines and doors and car parts,” he said.
The tighter trade quotas are expected to cut imports by about 10mn tonnes a year. But the industry’s optimism about reclaiming that market share also creates risks, according to Olsha, as steelmakers restart capacity or increase output.
“Everyone’s gearing up to push more metal into the market,” he said.
“But if those imports actually remain more elevated than expected or demand remains weak . . . they could be bringing volumes into the market when there’s already enough and then put pressure on prices.”