EU green steel projects are faltering just as China accelerates its low-carbon transition with OEM tie-ups and state-directed financing. In the last six months alone, three of Germany’s flagship decarbonisation initiatives have been delayed, downsized, or abandoned—an unsettling signal for miners, mills, and end-users banking on Europe’s green transformation.
Salzgitter pushes SALCOS back three years
Germany’s Salzgitter AG, the country’s second-largest steelmaker, has postponed phases two and three of its €2.5 billion SALCOS hydrogen-DRI programme by three years. While phase one, backed by about €1 billion in grants, remains on track for a 30% CO₂ reduction by 2027, the later phases—which are critical for reaching a 95% cut—are now pushed to 2028–29 instead of 2026.
CEO Gunnar Groebler cited a still-nascent hydrogen market and lagging policy reforms. The delays undermine expectations that SALCOS would serve as Europe’s green steel model, and they raise doubts over the region’s ability to deliver on its climate goals without decisive infrastructure support.
Thyssenkrupp pauses hydrogen procurement
At Thyssenkrupp Steel Europe, economics are the stumbling block. Its planned €3 billion Duisburg hydrogen-based steel site has been described as Europe’s largest industrial decarbonisation project. But in March, the company suspended a major hydrogen tender after supplier bids came in significantly higher than expected.
Negotiations with Berlin and Brussels continue over a €2 billion subsidy package, but executives warn that without affordable green hydrogen, the project’s viability is in doubt. The pause signals that even with strong political backing, Europe’s green steel transition cannot be de-risked without scaling cheap hydrogen and securing stable offtake agreements.
ArcelorMittal cancels German conversions
In June, ArcelorMittal scrapped plans to convert its Bremen and Eisenhüttenstadt plants to carbon-neutral production. The company even declined €1.3 billion in subsidies, citing untenable German energy prices. Government officials expressed disappointment, while unions warned of industrial contraction if Europe’s largest steelmaker continues to retrench.
The cancellation highlights the fundamental challenge: EU climate ambitions collide with a high-cost energy environment, leaving producers squeezed between compliance mandates and international competition.
China advances with work plan and HBIS–BMW deal
By contrast, China is accelerating. Beijing’s new 2025–26 Steel Industry Work Plan outlines tighter capacity controls, digital upgrades, and green transformation mandates, with state-backed financing mechanisms to ensure execution.
On the demand side, HBIS Group partnered with BMW Group China in 2022 to establish a low-carbon steel supply chain. BMW will start using HBIS green steel in its Chinese-made vehicles from 2026. The partnership offers a textbook case of how OEM-anchored offtake agreements can de-risk large-scale industrial decarbonisation projects—a model still largely absent in Europe.
Trade defence cannot replace investment
EU policymakers have leaned heavily on trade defence, imposing definitive countervailing duties of up to 35.3% (on top of an existing 10%) on Chinese EV imports since October 2024. But tariffs on downstream products don’t create hydrogen pipelines or cheaper renewable electricity. Without viable economics, Europe risks locking in high-emission capacity even as it shields domestic producers from external competition.
Market temperature check: iron ore steady
Despite policy turbulence, commodity signals remain stable. 62% Fe iron ore futures are holding at $105–106 per tonne on the Singapore Exchange, reflecting sustained demand in Asia. For miners, the steady pricing indicates that Asian mills are pressing ahead with output while Europe stalls on structural change.
Why it matters for miners, mills, and OEMs
- For miners: EU delays mean blast furnace demand for metallurgical coal and iron ore may persist longer than expected. Meanwhile, Chinese EAF/H₂ pilots are likely to increase demand for higher-grade pellets and DR-ready ore between 2026 and 2030.
- For steel mills: Projects with OEM-backed offtake and integrated financing, like HBIS–BMW, are gaining bankability. Stand-alone European pilots look riskier without guaranteed buyers.
- For OEMs and construction: Europe faces a green steel supply dip in 2026–28 unless imports or carbon-reduction certificates fill the gap. Trade defence measures against Chinese EVs reduce inflows of downstream products but don’t expand low-carbon slab availability.
Skillings analysis
- Europe’s dependency on affordable hydrogen remains the choke point; without cheaper electrons and infrastructure, timelines will continue to slip.
- China’s policy–finance–offtake triangle compresses project risk in ways the EU has not yet matched.
- A two-speed global green steel market is emerging: Asia scaling industrial pilots backed by OEM demand, Europe leaning on transitional efficiency tweaks and certificates.
Outlook
As Q4 2025 approaches, European steelmakers are bracing for a winter of high energy costs and slow hydrogen deployment. Unless Brussels accelerates infrastructure funding and industry–OEM partnerships, Europe could enter the next decade with an innovation gap in steel—leaving the competitive advantage with Asia. For miners, OEMs, and policymakers alike, the next 18 months will be decisive in shaping the global map of green steel supply.
