Despite numerous declarations, few buyers are willing to pay the premium for green steel. A new German study has calculated the cost thresholds needed for climate-friendly steel to become commercially viable, revealing a gap of up to 300 euros per tonne today and a long road to parity.
Producers currently offer flat green steel products at prices 170 to 200 euros per tonne higher than conventional steel, with some cases reaching 300 euros. According to Fastmarkets, the actual spread in Northern Europe in early July stood at 120–200 euros. This pricing gap severely limits demand, especially in the automotive sector, where green steel accounts for a single-digit percentage of total purchases. While automakers face regulatory pressure to reduce the carbon footprint of vehicles, the construction industry – the largest steel consumer – shows less interest, as most building steel comes from secondary production using scrap in electric arc furnaces, which already has a lower carbon intensity when powered by green energy.
Price gap and market reluctance
The automotive industry is a key potential customer for green steel because car body panels typically come from primary production – made from iron ore – which generates the highest emissions. Yet the current premium makes mass adoption impossible. The study, funded by the Hans Böckler Foundation and reported by Eurometal, notes that primary steel’s carbon footprint can only be meaningfully reduced through direct reduction using green hydrogen. However, hydrogen prices remain volatile. At the Central European Gas Hub, green hydrogen currently costs between 130 and 190 euros per MWh.
Path to profitability: hydrogen and electricity costs
According to the researchers, for direct reduced iron (DRI) plants using green hydrogen to be profitable, hydrogen must stay at around 140 euros per MWh until 2035, while electricity prices must be held at 60 euros per MWh. Both are highly sensitive to energy market swings – the 2022 price spike sent hydrogen costs soaring. The study proposes targeted discounts: 10 euros per MWh for electricity and 20 euros per MWh for hydrogen for industrial users. It also calls for substantial investment support, including direct subsidies or low-interest loans covering 50% of capital costs, with additional bonuses for companies that operate collective wage agreements. In strategic cases, the state (at state or federal level) should take equity stakes in steel firms to lower capital costs and secure the long-term transformation.
Demand-side measures are also recommended, such as favouring local producers in public procurement through local content rules. The report estimates that by 2050, EU demand will reach 160–180 million tonnes of steel annually, of which Germany would need to produce 40 million tonnes of climate-friendly steel – half primary, half secondary. Currently, 15 million tonnes of secondary capacity (75% of needed secondary output) is available, but primary green steel plans amount to only 8 million tonnes, mostly still on paper.
Źródło: WNP.PL, Fot. Piotr Myszor / PTWP
