ArcelorMittal, the world's second-largest steelmaker, is facing significant hurdles in its green steel transition, particularly concerning the cost of energy. The company recently canceled plans to convert two plants in Germany to carbon-neutral production, turning down $1.5 billion in public subsidies, citing prohibitively high energy costs. This decision underscores broader challenges for the German industrial sector, which is still contending with the loss of Russian gas supplies.
In France, ArcelorMittal has committed €1.3 billion to build a 2 million tonnes/year electric-arc furnace (EAF) at its Dunkirk plant, with an expected startup in 2029. This project aims to produce steel with significantly lower carbon emissions, benefiting from state support through Energy Efficiency Certificates. However, the company has scaled back its initial plans for two EAFs and a larger DRI module, and has stated that no further EAF investments will be initiated until the Dunkirk project is closer to completion, expected around 2029-2030. This cautious approach is driven by persistent high input costs for key materials like natural gas and hydrogen, as well as elevated electricity prices in Europe.
The broader European green steel market is also experiencing difficulties. In 2025, the flat-rolled green steel market was subdued, with traded volumes below 200,000 tonnes and premiums facing downward pressure. Fastmarkets' green flat steel premiums (less than 0.8 tCO2 per tonne of steel) dropped to €125 per tonne from €160 a year earlier, and three-digit premiums are primarily achieved through offtake agreements rather than spot market activity. Even lower-cost alternatives, like reduced carbon emissions flat steel (1.4-1.8 tCO2/tonne steel), saw their premiums fall by 50% within three months, now commanding just €25 per tonne, indicating buyers' prioritization of cost over incremental emissions reduction.
Despite these challenges, low-emission steel is still forecasted to command a premium in a supply-constrained market, though this premium is expected to narrow over time. Fastmarkets predicts a 23% green steel premium in 2025 will fall to just 8% by 2035, as expanding EAF capacity eases supply constraints and conventional steel faces higher compliance costs. ArcelorMittal's current market view is one of cautious neutrality among analysts, with a consensus rating skewed towards "Hold," reflecting a focus on macro factors over specific company fundamentals and a wait-and-see approach regarding its long-term green steel strategy.
