GREEN STEAL – High-Risk Investments

Europe is investing billions of euros in low-emission steel. New facilities are being built, new agreements are being signed, and subsidies continue to flow. In presentations, everything looks impressive. There is just one small detail left to consider: will it actually bring profits?

The transformation of the steel industry is undoubtedly necessary. But it is equally reasonable to ask whether the chosen direction, pace and scale of investment reflect the realities of the market.

Billions at stake

SSAB has announced an investment of €4.5 billion in a new steel plant in Luleå. Salzgitter values the first stage of its SALCOS programme at €2.7 billion. GravitHy puts the value of its planned low-emission steel facility in Fos-sur-Mer at €2.2 billion. Together, these three projects alone represent €9.4 billion in announced investment, despite differing significantly in scope and stage of development. Then there are further projects moving through fast-track approval processes. ArcelorMittal is planning a €1.3 billion electric arc furnace project in Dunkirk, with commissioning scheduled for 2029. Meanwhile, Stegra announced in June 2026 that it had completed an additional €1.4 billion financing round.

These represent only a fraction of the overall investment being made in the transformation of the European steel industry, but they already illustrate the sheer scale of the capital committed.

Billions in investment, however, do not guarantee billions in success. Ultimately, profitability will depend on production costs, demand and the price customers are actually willing to pay.

Will anyone buy this steel? And at what price?

This may be the most important question facing the entire transformation.

It is not simply a question of whether demand for low-emission steel will grow, but how quickly, to what scale and at what price.

In an article published by the Financial Times, Bruno Ribo, CEO of ArcelorMittal France, acknowledged that the company has little visibility on how quickly demand will develop or whether customers will be able to pay more. He described the uncertainty surrounding achievable pricing assumptions as very high.

This is not the view of someone opposing the transformation.

It is the assessment of a business leader whose company is investing in it.

If the market already struggles to generate sufficient demand for conventionally produced steel, assuming sustained demand for a significantly more expensive low-emission alternative requires a considerable degree of optimism.

Vision matters. But it helps if there is also a customer with a budget on the other side of the transaction.

Offers from a well-known Swedish producer have indicated a premium of more than €300 per tonne for low-emission steel. In a market where companies negotiate over every €5/t, that is not a gap that can be justified by an attractive sustainability presentation.

Interest in low-emission steel does not necessarily translate into recurring orders.

A pilot project looks good on a corporate website, in a CSR report and on LinkedIn. The real test begins with serial production, when the premium for lower emissions has to be included in the cost of every subsequent tonne and every finished product made. That is when we find out whether green steel has secured a place in the procurement budget or merely in marketing.

Until marketing campaigns are followed by repeated orders, it is difficult to speak of a lasting change in purchasing behaviour. What we can speak of, however, is an only successful marketing campaign.

Who will pay for it?

If an investment case assumes a premium for low-emission steel and customers are unwilling to pay it, a gap appears in the financial model. Costs can be reduced. Lower profitability can be accepted. Additional public support can be used. Subsidies may help get production started, but they cannot by themselves create long-lasting competitiveness or generate demand at a price that covers production costs. What they can do is transfer part of the bill to public finances – and therefore, ultimately, to taxpayers. A customer may refuse to pay the green premium on an invoice. Nevertheless, as a taxpayer, the same customer may end up paying the same bill through a different route.

The automotive industry is frequently identified as one of the key prospective customers for low-emission steel. The question is how much of a price premium the European automotive sector can realistically absorb while it is already fighting for profitability and competitiveness – especially when the biggest turbulence facing the sector may still lie ahead.

If the answer once again becomes subsidies, then once again the taxpayer will cover the cost.

The most worrying point is that even the argument about “saving the planet” is difficult to justify. Steel production in the European Union accounts for only around 7% of global output, while the countries producing the largest volumes currently have a very different set of priorities (including the development of advanced technologies) and environmental considerations are neither first nor even second on their priority list.

An investment for decades. A promise valid only for one political term.

Even where subsidies are available, another question remains: will political support last longer than the government that promised it? Steel plants are built to operate for decades. During that time, governments may change, funding mechanisms may evolve and attitudes towards climate policy may shift. A subsidy paid today does not protect an investor from future changes in the conditions under which the plant will eventually have to operate profitably.

The United States offers a useful lesson here. On 20 January 2025, Donald Trump signed the executive order “Unleashing American Energy”, reversing a number of his predecessor’s climate-related decisions and ordering certain funding disbursements to be put on hold while their consistency with the new policy was reviewed.

Less legislative fantasy.

Low-emission steel needs customers, competitive production costs and predictable rules. More regulation and more subsidies cannot replace any of these conditions. If an investor is expected to spend billions on a facility designed to operate for decades, the business case should be based on something more durable than political enthusiasm lasting until the next election.

It is therefore worth returning to simple and enforceable rules for protecting the market – rules that take into account both steelmakers and the companies that buy their steel. Supporting the green transformation at the expense of customers is a highly questionable strategy: first we support production, then we wonder where the customers have gone. And finally, we launch another support programme.

There is only one letter difference between GREEN STEEL and GREEN STEAL. Whether we are financing the development of European industry or an expensive experiment ultimately paid by taxpayers will depend on the profitability of these investments and on who is held responsible for the risk. Because when profit remains a promise while the taxpayer’s bill is guaranteed, the misspelling in the title stops being a joke.

If you are already looking for ways to reduce emissions while keeping material costs at market levels, it is worth reading the article below and exploring Huta Częstochowa’s offering:

Huta Częstochowa: how to rebuild trust and deliver on plans