Steel decarbonization will progress more slowly and along more varied paths than previously expected, according to a new study by German plant manufacturer SMS group. The choice of technology will depend largely on energy costs, raw-material availability and local conditions.
Green Steel Horizons – 2026 Edition sets out three scenarios for the industry through 2050, without assigning a probability to any of them. The analysis uses information available as of September 2025 and simulations run with SMS group’s Plant Assessment Tool. It considers operating and capital costs, energy use and emissions across the value chain.
In the incremental-transition scenario, which prioritizes growth and competitiveness, global steel production reaches about 2.65 billion tonnes. The blast furnace-basic oxygen furnace (BF-BOF) route accounts for 61% of output, fully scrap-based electric arc furnaces for 27%, and direct-reduction routes for 11%.
Under the gradual scenario, balancing growth, resource constraints and emissions cuts, production totals about 2.22 billion tonnes. BF-BOF’s share falls to 51%, while scrap-based EAF production reaches 34% and direct-reduction routes 14%.
In the accelerated scenario, with tighter emissions limits, production stabilizes at around 1.92 billion tonnes. Scrap-based EAF steel becomes the leading route at 854 million tonnes, or 44% of output. BF-BOF accounts for 33%, while direct reduction reaches 21%, or 411 million tonnes.
“The differences between the scenarios are not about whether the technology shift will happen, but about its pace, the balance between economic efficiency and climate protection, and how resources are allocated regionally,” the study says.
Upgrades rather than wholesale replacement
Blast furnaces would remain in use even under the fastest transition scenario. SMS group says investment is increasingly focused on upgrading existing plants and adopting hybrid configurations rather than replacing equipment entirely. Options include injecting hydrogen or syngas, electrification, and carbon capture, utilization and storage (CCUS).
Combining modernized blast furnaces with EAFs and direct-reduction plants would allow operators to tailor configurations to individual sites. The role of CCUS, however, will depend on technical progress and regulatory clarity.
Expansion of lower-emission production also depends on supplies of high-quality scrap, affordable low-carbon electricity, hydrogen and high-grade iron ore. Conventional direct reduction could face a shortage of suitable pellets as early as the beginning of the 2030s. According to SMS group, ore with an iron content above 67% accounts for only about 4% of global iron ore supplies.
This is prompting greater interest in processes that can use lower-grade feedstock. One option combines direct reduction with an electric smelting furnace to produce hot metal for further processing in a basic oxygen furnace.
Europe and imports of reduced iron
The study sees Europe and North America mainly as markets undergoing transformation, while India is expected to drive demand growth. North America would benefit from an established scrap supply chain and competitive energy prices.
In Europe, scrap-based EAF production could approach 70% of output by 2050 in the accelerated scenario. Its expansion would be constrained by access to high-quality scrap and affordable green electricity. The Middle East and North Africa, by contrast, could strengthen their position as production and export hubs for direct reduced iron (DRI) and hot briquetted iron (HBI), supported by natural gas and renewable-energy potential. European producers may consequently rely more heavily on imports, further separating ironmaking from steelmaking geographically.
“The path to competitive, low-emission steel production is not the same everywhere. Solutions need to reflect regional conditions and existing facilities,” said Thiago Campos, SMS group’s global head of green steel and a co-author of the study. He said a competitive transition depends on bringing climate targets and economic viability together.
The authors conclude that global steel production is facing fundamental and irreversible structural change, but its pace and technologies will be shaped by regional resources and economics.
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