Posted on 18 Mar 2026
The cost of producing “green” steel in the EU calls its competitiveness into question. This is according to a study by Fastmarkets experts.
Green steel production in Europe is growing rapidly thanks to policy incentives, early capital investments, and government funding. However, despite the EU’s leadership in announced and under-construction capacity, competing regions hold significant advantages.
The potential for low-cost hydrogen, natural gas, and affordable clean electricity in the MENA region and Canada positions them as potential suppliers of competitive “green” steel, HBI, and DRI to Europe, even in light of the EU’s trade restrictions.
It is expected that by 2030, approximately 80% of global capacity for electric arc furnaces operating on hydrogen-based DRI will be held by European producers. Large capital-intensive projects in Scandinavia (e.g., Stegra, Hybrit, and Blastr green steel) benefit from access to low-carbon electricity, government support, and regulatory cost advantages thanks to the ETS.
However, despite government funding, the transition to decarbonization in Europe remains quite “painful” for steel producers. The commercial viability of using hydrogen for DRI production is still a matter of debate, as the transition to electric arc furnaces and EAF/DRI entails a sharp increase in electricity demand.
Electricity prices in Europe are significantly higher than in many other regions. Industrial rates often exceed €100/MWh, which is 2–4 times higher than in the United States and China. Thus, European hydrogen-based flat steel production is often structurally more expensive. In 2030, the average producer in MENA will have costs 17% lower than a European competitor, due to lower labor, electricity, capital, and hydrogen costs.
Consequently, importing hot-briquetted iron (HBI) and direct-reduced iron (DRI) from sources such as the Middle East and North Africa region, where their production is more commercially viable, is becoming a plausible scenario in the coming years.
In addition, access to low-cost renewable energy allows hydrogen to be produced in the MENA region at a significantly lower price than in Europe — it is expected that by 2030, the average cost of this in the region will be half that of European plants. Furthermore, production in natural gas-fired electric arc furnaces remains structurally advantageous in the Middle East and North Africa.
CBAM partially levels the playing field for European producers of green steel, but does not eliminate it.
It should be noted that with the growth of direct reduced iron (DRI) production and planned projects, the MENA region will require more high-quality DRI pellets in the near future.
Source:GMK Center
