Green steel is coming. Just not fast enough.

Ending coal-based steelmaking by 2040 will require a major build-out of DRI units to produce green iron and EAF steelmaking units to process this green iron into green steel, or to boost the levels of steel recycling even higher.

The start is promising, but much still needs to happen. If all announced projects would be delivered on time, the EU could have a capacity of about 28 Mt DRI and an additional capacity of 50 Mt EAF by 2035. This corresponds to 40% of current coal based ironmaking capacity (33 Mt new of 82.5 Mt total) and 53% of coal based steelmaking (52 Mt new of 98 Mt total) or 60% of current EAF capacity (33 Mt new of 75 Mt total). But these numbers only matter if projects are delivered fast enough to displace coal-based production rather than simply add new capacity.

The window is this decade. Europe already has the technologies and the project pipeline. Companies will make the investment decisions, but policy will play a critical role in determining the conditions under which those decisions are made. Policymakers need to create the conditions for that to happen: affordable clean electricity, renewable hydrogen where it is needed, grid and infrastructure connections, stronger demand for near-zero-emissions steel, access to finance and set a clear policy direction away from coal.

Around 44% of EU steel (53.9 Mt in 2024) is made in electric arc furnaces, which mostly melts down recycled scrap. Europe already recycles over 80% of its waste steel, and better collection, sorting and copper removal could raise this share further. But scrap has a ceiling: even with these improvements, it could supply at most around 55 to 75% of EU steel by 2050.i

The other 55% (68.2 Mt in 2024) still comes from coal-based blast furnaces feeding basic oxygen furnaces (BF-BOF). The ironmaking step is the most emissions-intensive part of steelmaking and most of the work to reduce emissions must come from swapping blast furnaces for direct reduced iron (DRI) plants, run on renewable hydrogen, that feed EAFs.

Companies have a few proven pathways to play a role in producing green steel:

• Operate an integrated hydrogen-based direct reduction of iron + electric arc furnace DRI+EAF plant powered by renewable energy and green hydrogen. The EAF can process the green steel from the DRI unit directly, along with varying percentages of scrap steel to produce primary steel. In the long run, 100% renewable energy would need to power both the EAF and used to produce green hydrogen used in the DRI unit, however obtaining consistent supplies of both in the volumes required across all of the EU today can be a challenge. It is more important to build these plants now and run them on a mix dirty/green energy until the underlying energy infrastructure can catch up and meet the 100% goal (see roadblocks section below).i
• Produce only green iron using a hydrogen-based direct reduction DRI plant. The dynamics of DRI production and regional availability of cheap and abundant renewable energy supply (both now and in the future), mean it might be advantageous for certain companies to produce green iron in one location with and either ship it to another site with an EAF to process or trade it to another steel company to do the same.i
• Produce only green steel using an Electric arc furnace or EAF powered by 100% renewable energy. For every batch, the EAF can be fed with scrap steel, green iron made elsewhere (such as hot briquetted iron or HBI) or a mix. Steel produced this way on today's grids produces substantially less emissions than the BF-BOF process and falls close to zero with 100% clean power.i

It is important to note that efficiency and cost considerations for making primary steel via the blast furnace + basic oxygen furnace process are fundamentally different compared to the dynamics of producing green steel via the direct reduction of iron + electric arc furnace process. Iron no longer needs to be made where steel is made. Regions with cheap renewable power could produce green iron and ship it to EU steelworks and these structural cost competitive advantages will likely reorientate the global industry.i

There are also other green primary steel production technologies on the way, such as molten oxide electrolysis (MOE) or electrowinning, but are not yet commercial. While some other promoted options cut emissions too little to count.i

The EU is home to some of the most advanced near-zero emission steel projects in the world. The challenge is getting enough of them through the four stages to completion, and at a faster pace.

The road to building a new green steel project is long and each project must travel through four checkpoints: announcement, investment decision, construction and operation. Europe has 24 projects travelling at different speeds on this road. Nine are under construction, fifteen are waiting at earlier checkpoints, and as much capacity as is still waiting has permanently stopped or left the road entirely.

Eliminating or minimising the identified roadblocks can unblock checkpoints and speed up travel.

Across the EU, a new generation of steel projects is taking shape. Three flagship DRI-EAF projects are already being built:

• Stegra Boden: Boden, Sweden, Stegrai
• SALCOS: Salzgitter, Germany, Salzgitter AGi
• Power4Steel: Dillingen and Völklingen, Germany, Stahl-Holding-Saari

They will show whether near-zero emissions steel works at commercial scale. Most others are still much further back on the long road from plan to production, which runs through four checkpoints:

In addition to this, projects can experience problems and be:

Placeholder: what happens at the announcement stage, how long projects typically stay here, and why many never move on. For example: announcements are cheap, so this is where the pipeline looks biggest and is least certain.

Whether Europe's green steel pipeline moves from plans to production depends on the conditions created now and policy will largely determine the outcome: prevent coal lock-in, keep the carbon-price signal strong, create demand for green steel, and deliver the clean energy and infrastructure projects need.

This decade is critical. If the enabling conditions are put in place quickly enough, the EU can turn its early lead into a new industrial base.