Europe’s Green Steel Push Hits Hydrogen Wall

Why It Matters

Hydrogen cost and supply gaps threaten Europe’s ability to meet steel‑decarbonisation targets, reshaping investment and supply‑chain strategies across the sector.

Key Takeaways

• Hydrogen demand for steel could hit 0.5 Mt by 2030
• Only 2.7 Mt of global green‑hydrogen capacity has FID
• Hydrogen price must fall to $2.5‑3/kg for steel viability
• Northern Europe and MENA emerge as low‑cost hydrogen hubs
• Flexible DRI‑EAF setups dominate as full hydrogen routes lag

Pulse Analysis

Europe’s green‑steel ambition hinges on hydrogen, yet the continent faces a stark supply‑cost mismatch. Clusters in Northern Europe and Spain, home to projects like Stegra’s Boden plant and the Blastr‑SSAB‑Hydnum consortium, benefit from abundant renewable electricity. However, electricity still accounts for 60‑70% of green‑hydrogen costs, pushing production to roughly $5‑$9 per kilogram—well above the $2.5‑$3 per kilogram threshold needed for competitive steelmaking. This price gap forces many steelmakers to retain dual‑fuel DRI‑EAF configurations, allowing a switch to cheaper natural gas when hydrogen remains uneconomic.

Project pipelines are increasingly volatile. Thyssenkrupp’s Duisburg tender and Salzgitter’s expansion have been postponed, while Iberdrola, Repsol and Shell have trimmed or cancelled hydrogen hubs. The global green‑hydrogen pipeline totals just 2.7 Mt of capacity with final investment decisions, a fraction of the projected 0.5 Mt demand from European steel alone by 2030. High European power prices—two to four times those in the US and China—exacerbate the cost challenge, making fully integrated hydrogen‑based steel plants less attractive in the near term.

The market response is a shift toward regional specialization and flexible supply chains. Low‑cost renewable regions, especially in Northern Europe and the MENA basin, are poised to become export hubs for green DRI, feeding downstream EAFs across Europe. Until hydrogen prices drop materially, steelmakers will prioritize adaptable DRI‑EAF units and cross‑border hydrogen trade over fully integrated, hydrogen‑only facilities. This fragmentation will shape investment flows, policy focus, and the competitive dynamics of Europe’s steel industry for the next decade.