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Europe’s largest steel producer has warned that it could abandon plans to convert two German steel factories into green production, and hit European plans to decarbonize heavy industries, causing Belgian flagship biofuel plants to close.
Arcelor Mittal said it would reject 1.3 billion euros in the adaptation of the Bremen and Eisenhüttenstadt facilities with public subsidies aimed at using hydrogen rather than coal in steel furnaces.
It also warns that Belgian flagship green ethanol plant could be shut down due to restrictive EU regulations defining biofuels and emission reductions.
Germany wanted the subsidies to encourage ArcelorMittal to convert existing steel plants and use hydrogen to launch furnaces as part of an ambitious plan to decarbonise the industry.
However, ArcelorMittal said that moving forward with plants is “not competitive” because Germany’s energy costs are too high and there is too much uncertainty about its future energy mix.
“We are pleased to announce that ArcelorMittal Europe’s CEO Geert Van Poelvoorde:
High energy costs are one of the biggest complaints of German struggling manufacturers, facing tough competition with China, and have recently suffered the heavy tariff blow imposed by US President Donald Trump.
Along with the automakers that form the backbone of an export-driven economy, the steel industry was in the pain of the most after the country was forced to quickly separate from cheap Russian gas after a full-scale Ukraine invasion in 2022.
New German Prime Minister Friedrich Merz has pledged to increase the country’s competitiveness after years of stagnant growth and a horror of incredible deindustrialization by reducing the energy costs of companies and sending red tape to infrastructure.
However, Germany, Europe’s largest greenhouse gas, is also facing the challenge of fulfilling its pledge to become carbon neutral by 2045.
The German Ministry of Economy regrets ArcelorMittal’s decision, but said it was an isolated incident related to the company’s own commercial situation. “The important thing here is that the funds have not been transferred yet,” the spokesman said. “And you don’t need to pay it back.”
The German government has approved a subsidy of approximately 7 billion euros for steel projects that support its climate target, including the total of abandoned arcelomite projects. The ministry said three other projects are ongoing.
In Brussels, the European Commission also places industrial decarbonization as it pursues ambitious climate targets and aims to prevent widespread reductions in industrial production.
By 2050, we have set a target for an entire block of 10% of renewable hydrogen in energy mixing, but many fear this is unrealistic.
Frederik Van Der Velde, CEO of ArcelorMittal Belgium, told the Financial Times that it had an over-focused on hydrogen in Europe.
He also said the company’s production of Ghent ethanol prevented steel manufacturers from charging premiums for their products as they are at risk due to European laws that do not allow production to qualify as “green.”
The project, published in 2017, is based on new technologies that drive ethanol out of waste carbon dioxide from the steelmaking process. The factory, intended to be a pilot for others throughout the group, is intended to produce 60,000-65,000 tonnes of ethanol per year.
“It’s probably the biggest facility built to decarbonise in Europe,” he said. “And ultimately, in the worst case scenario, we have to stop because we can’t survive given the new context created by Europe after we made our decision,” he said.
