'Green hydrogen is too expensive to use in our EU steel mills, even though we've secured billions in subsidies'
Head of ArcelorMittal’s European arm says that decarbonised steel could be made with imported DRI instead
Steel giant ArcelorMittal has said it cannot operate its European plants using green hydrogen, despite being granted billions of euros of EU subsidies to install equipment to do so, because the resulting green steel would be unable to compete on international markets.
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Producers such as ArcelorMittal are hoping to use hydrogen to decarbonise their steel mills, which together account for 7-8% of all global carbon emissions.
Policymakers want producers to eliminate emissions from the sector by using green-hydrogen DRI that is then turned into green steel using renewables-powered electric arc furnaces.
At present, European electrolysis schemes can only produce hydrogen at around €6-7/kg, van Poelvoorde asserted, possibly €5/kg with some optimisation. Even green hydrogen imports would not be feasible, he added, noting that it costs €1.50/kg just to transport it from Africa, where it is cheaper to produce.
“We are happy to use hydrogen, but only if our furnaces remain competitive,” van Poelvoorde said. “Surely it would be absurd that I might be able to get hydrogen, but at such a high price that I could no longer produce [steel].”
Moreover, he says that inflation has pushed up costs, with the expected €1.1bn cost to install DRI and electric arc furnaces at its Ghent plant ballooning to nearly €2bn, throwing doubt on whether the project will ever be built.
“How can I explain to our global headquarters that I want to invest almost €2bn, when I already know the plant cannot cope with the global competition?” he asked.
Supply
“In Hamburg, we have planned a hydrogen pilot plant,” he said. “But a consortium that would provide the hydrogen has fallen apart because there is no solid business plan that makes hydrogen profitable.”
It is not clear which consortium van Poelvoorde is referring to, although it is likely a reference to the Hamburg Green Hydrogen Hub, which ArcelorMittal was at one point partnering for its Hamburg DRI plant (although it was not part of the consortium leading the hub).
The consortium was dealt a blow last year with the exit of industrial heavyweights Shell and Mitsubishi, leaving a 74.9% equity stake to be sold to asset manager Luxcara.
“There was also a big consortium around hydrogen for our steel plants in Spain, where we get €450m in subsidies,” van Poelvoorde added, referring to the HyDeal España project in which ArcelorMittal was originally a co-developer. “That too has disintegrated, because it would require an investment of €8bn.”
According to Lepercq, ArcelorMittal, the offtaker, wanted green hydrogen priced at €1.50/kg, while renewables developer Enagas Renovable wanted it priced at €4.2/kg. Neither company has yet responded to requests for comment on Lepercq’s assertion.
Lepercq is now pursuing a slimmed down version of HyDeal, independently of his former consortium partners.
Carbon taxes
But the ArcelorMittal executive gives no mention of either the European Hydrogen Bank (EHB), which aims to bridge the cost gap between green hydrogen (and its derivatives) and fossil-fuel equivalents, or Germany’s H2Global scheme, which has the same goal for green hydrogen imports and offers subsidised one-year supply contracts to boot.
The most likely explanation is that the timing of H2Global and the European Hydrogen Bank will not sync with the company’s green steel efforts either.
All of ArcelorMittal’s proposed green steel projects in Europe envisage first operation between 2025 and 2026. The first €800m pilot of the EHB, meanwhile, is unlikely to finance more than a few hundred megawatts of annual green hydrogen production, and developers have five years from the grant award to begin commercial operation — potentially not until 2029.
Volumes imported as part of H2Global’s initial €900m auction — the winners from which are expected to be announced in late spring — could be delivered as soon as this year, however it is not yet clear how much will be available.
“My first priority for Ghent now is the electric furnaces,” he told the Belgian newspaper, without making reference to ArcelorMittal’s other DRI projects. “We can solve that [with] a good electricity price. If the electric furnaces are there, the plant is saved. Because then steel production will remain.”
“It is not a tragedy if we build the DRI a bit later,” he added. “The material from the DRI can temporarily come from elsewhere.”