Workshop report: Scaling Pathways for Green Steelmaking in Europe
By Dr. Dagmar Kiyar and Ole Zelt, Wuppertal Institute
The stakeholder workshop “Scaling Pathways for Green Steelmaking in Europe with Hydrogen Direct Reduction of Iron Ore” took place on 19 March 2025 as part of the EU CHINA BRIDGE project. The online workshop brought together experts from the Swedish and German steel and hydrogen sectors in particular to discuss the challenges of green steel production.
‘Deep dives’ within the workshop focussed on critical aspects such as building the necessary ecosystem for the broad introduction of DRI in Europe and the effective linkage with hydrogen and energy systems. Another focus was on the concept of ‘renewables pull’, which might result in relocation of iron production to regions with favourable renewable energy conditions in the future. The role of natural gas as a bridging technology for DRI plants in the transition period was also discussed, taking into account the changed geopolitical situation and volatile energy prices in recent years.
The discussion shed light on the complexity of the task to scale up the steelmaking route based on hydrogen direct reduction of iron ore (H2-DRI). From a demand side perspective, the need for offtake agreements was highlighted, initiated for example through initiatives such as the First Movers Coalition and Steel Zero. It was further highlighted that OEMs, as relevant players along the steel value chain, must be an integral part of the discussion on green steel. With the needs of steel plant operators in mind, it was emphasized that sufficient availability of renewable electricity as well as hydrogen at competitive prices is one of the key factors for a green transition.
However, the participants agreed that several of the major challenges facing the industry are not related to green steel production or decarbonisation itself: challenges such as overcapacity in the global steel market, inflation or high and rising construction costs are not unique problems for green technologies, but would equally exist if the conventional production system were to be retained.
The participants also discussed the potential future role of ‘renewables pull’, particularly with regard to ironmaking. Respective markets for HBI (Hot Briquetted Iron) still have to develop, with a limited number of players currently active in this field. It became clear that steel manufacturers who have their eye on HBI imports assume that bilateral agreements still need to be made with the relevant manufacturers in the initial phase. Their hope, however, is that a fluid market for HBI will emerge in the longer term. The development will be influenced by various factors, including the availability of raw materials, renewable energy sources, and political conditions that support the production of direct reduced iron. As already indicated by earlier studies, HBI trade might enable a faster steel transformation. However, respective countries with favourable conditions to export HBI in the future are yet to make final investment decisions on H2-DRI projects. The success of these initiatives will largely depend on steel companies and manufacturers committing to specific production volumes and signing offtake agreements, without which H2-DRI production may not be viable. Voices critical of HBI imports pointed out that supposedly cost-effective relocation options for the steel industry in the past ultimately proved to be unsuitable – and that going for import options regarding DRI can also mean a loss of important degrees of entrepreneurial freedom.
During the workshop, various political measures were discussed to address the challenges facing the steel industry, particularly in terms of costs, demand, and sustainability: one of the major challenges in the steel industry is cost, as it is crucial for making a viable business case and creating demand. To drive this demand, green lead markets are essential, including the implementation of sustainable criteria in public procurement and the adoption of tax models in the private sector.
Another key question discussed was how to create favourable conditions for green products on the EU steel market. An effective carbon border adjustment mechanism would help level the playing field, while an international agreement on a global price for carbon dioxide would be an important long-term decision, as the steel industry heavily relies on exports. Closing off markets was not seen as a sustainable solution in the long run. Additionally, transparency in steel standards and labels was regarded crucial: if consumers are paying a premium, they must be assured they are receiving the desired product.
Finally, the role of natural gas and CCS in the steel transformation was discussed. Several experts emphasised that at this stage, natural gas plays a crucial role as a bridging element in steelmaking, as it remains vital while infrastructure delays persist and renewable hydrogen is not yet available at competitive prices. Another question raised was whether natural gas-based production, combined with carbon capture and storage (CCS), could serve as a bridge technology until economically viable hydrogen becomes available. A challenge, however, lies in limited CO2 storage and injection capacities and the lack of a CO2 pipeline grid, with the potential that such infrastructure development may be delayed even longer than hydrogen pipelines. Furthermore, a risk remains that CCS-based routes will not be able to stay below the emission levels of future green steel standards. However, stakeholders also stressed the steel sector’s excellent opportunity for direct avoidance of CO2emissions and concluded the industry is doing well to focus on direct abatement and the rapid ramp-up of hydrogen markets instead of strongly relying on CCS-based solutions.
