Green steel is costly for Europe

S&P Global Platts analyzes low-emission steel production costs in Europe in 2020 to remain high based on high iron ore pellet prices and green hydrogen cost assumptions, while potential for natural gas-based direct reduced iron production will improve with lower gas prices.

Last year, market carbon prices in the EU, averaging € 24.50 /tonne ($ 30.08 /tonne), were not high enough to significantly reduce the cost differential between blast furnaces and DRI. The main raw material costs for blast furnace steel, at about 2.2 Mt C /t of steel, were much lower than theoretical DRI iron ore pellets and renewable green hydrogen DRI.

Even with much higher carbon prices, a significant cost gap remains, leading to discussions on government support and mechanisms to start producing clean steel and energy infrastructure.

This was based on Platts prices for steel feedstock and energy estimates in the Netherlands, which are the main recipients of coal and iron ore.

Blast furnaces use coke as the main energy reducer. Low coking coal prices last year helped lower higher iron ore costs.

Last year, between April and July, natural gas prices in the Netherlands were particularly low due to the decline in global industrial activity at the height of the coronavirus pandemic, when manufacturing and services adapted to the initial wave of falling demand.