OPIS Insights

Spreads between green steel premiums accepted by spot buyers compared to projects and end-users remain wide as back-to-back sales remain the driver of low-CO2 steel demand.

Multiple sources reported increased demand from the construction industry, as it is easier to source steel with lower CO2 content than other construction materials, helping meet decarbonization targets. The automotive segment exhibits a similar trend, holding strong at the forefront of green steel consumption. Steel represents one of the easier materials used in car production to decarbonize, compared to plastic-based components, for example.

Both sectors commonly achieve premiums for green hot-rolled coil (HRC) at EUR160–200/ton, or even higher, sourced from a variety of greenfield projects, upcoming equipment installations and existing electric-arc furnaces (EAFs). Sources describe to McCloskey how some steel mills, previously accepting premiums of approximately EUR100/t in deals to end-users, have now increased premiums to as much as EUR200/t.

One steelmaker emphasized that premiums do vary on factors such as final buyer or individual specification, but confirmed the general price range.

Automotive and construction consumers alike can more easily absorb green steel premiums into their total production costs. Distributors, however, continue to avoid purchasing low-CO2 steel due to higher cost exposure, only really able to find a consistent margin when bridging back-to-back with end-users.

As a result, acceptable premiums for spot buyers have historically fluctuated between EUR60/t and EUR100/t.

On a longer-term perspective, market sources anticipate that traditional steel prices will exceed those for green steel products within a few years. Rising emissions costs from declining CO2 emission allowances – both on an overall and free allocation basis – will present higher operating costs for steelmakers with more polluting production, especially for those operating more carbon-intensive blast furnaces (BFs).

“I think green steel premiums are a temporary thing,” said one steelmaker. “Traditional steel prices will rise as free emission allowances decrease – soon low-CO2 projects could see a cost advantage,” a steelmaker said.

Green Steel Demand

Demand for green steel is projected to grow, although at a relatively slow rate in the short to medium term. The European steel market first needs to adapt to disruption to its traditional supply chains, such as from the Carbon Border Adjustment Mechanism (CBAM), which began imposing carbon costs on imports in January 2026, and the anticipated reduction in the EU’s tariff-free steel import quotas from July 1.

Both policies present significant uncertainties, as exporters will only be able to fully account for the embedded emissions imported into the EU throughout 2026 and from the earliest, 2027, exposing buyers to high-cost risk from punitive default values in the meantime. Additionally, while EU authorities have confirmed the new quota volumes per product, critical details on country-specific allocations and melt-and-pour requirements have not yet been fully clarified.

Despite these uncertainty-based headwinds, market participants remain largely positive regarding the longer-term consumption outlook for green steel, especially given recent regulatory developments.

A recent proposal to adjust carbon-neutral targets for the automotive industry is one such policy expected to stimulate green steel consumption. In late 2025, the European Commission proposed to relax rules requiring all cars sold from 2035 to have a net-zero carbon footprint, effectively mandating the shift to electric vehicles. The aforementioned changes allow some combustion-engine vehicle production to continue, but only where their remaining emissions are offset through other measures, including construction from low-carbon steels.

However, other industrial policy developments are viewed less positively: such as the failure of the European steel lobby to secure the extension of “Made in EU” public procurement criteria to the steel sector under the Industrial Accelerator Act (IAA). Instead, the Commission mandated only that a portion of steels in public procurement or state-supported purchasing be “low-carbon,” while also postponing efforts to define what “low-carbon” means in the EU to delegated acts of the Ecodesign for Sustainable Products Regulation (ESPR).

Beyond regulatory support, some steelmakers have also suggested that geopolitical tensions in the Middle East, which has triggered significant fluctuations in energy prices as well as oil and gas supply disruptions, could push European industry closer toward renewable energy sources, to reduce the bloc’s dependence on fossil fuels. Both wind power plants and solar panels require steel, and those projects traditionally prefer steel with less embedded carbon emissions.

The decarbonization of EU steelmaking will itself reinforce and stimulate demand for renewable energy uptake, due to the transition toward new fuel and reductant sources in green hydrogen. More information on decarbonization projects in the European and global steel sector can be found in McCloskey’s Global Green Steel Profile (subscription required).

Stegra Financing Welcomed

Green steel startup Stegra announced a new EUR1.4 billion financing round (subscription required) on April 14, enabling it to complete construction of an integrated steel mill in Boden, Sweden.

The news was positively received by other steelmakers, particularly those building greenfield operations. The Boden plant is the first new steel mill constructed in Europe in 50 years, and the success of this startup would directly impact the willingness of investors to finance other new projects in the EU.

“In around 12-18 months from now, we will see both green steel and green iron coming out of the facility in Boden,” said Stegra CEO Henrik Henriksson, during the Tube & Wire fair.

Stegra plans to begin operations on 100% ferrous scrap feedstock before transitioning to direct-reduced iron (DRI). The scrap-DRI mix will be roughly 50/50, but will vary depending on individual finished steel specifications and costs. Henriksson expects ferrous scrap prices in Europe to continue to rise as more EAFs are built in the region for decarbonization purposes, increasing scrap demand.

Iron ore to feed Stegra’s DRI production will be sourced from Brazil, Canada, and northern Sweden.

Around 40% of Stegra’s existing sales contracts have been agreed with buyers from the automotive segment, but also include the construction and white goods industries.

Steel for automotive purposes generally requires quality certifications or approvals, which themselves require a production history. While Stegra acknowledges that this likely prevents immediate steel shipments from the new plant to automotive customers, the steelmaker claims to have foreseen those challenges, confirming that quality verification lead times could take between 18 and 24 months, but that Stegra will offer its production as non-prime steel in the interim.

“We have found different ways of coming out to the market, one of them is partnership with Thyssenkrupp Materials,” Henriksson explained in response to McCloskey’s questioning.

Earlier this year, Stegra signed an agreement with Thyssenkrupp’s (subscription required) service center division, Materials Processing Europe (TKMPE). Under the multi-year deal, TKMPE will acquire the majority of Stegra’s non-prime steel to supply customers in various industries across Europe. Interestingly, Thyssenkrupp will not be able to claim or advertise any benefit for the low-carbon profile of the steel, as Stegra decouples the ‘green value’ for independent sale in the form of Environmental Attribute Certificates (EACs) which can theoretically be used as an offset mechanism to support corporate climate targets.

Henriksson stated that cooperation between companies could also assist in mitigating Stegra’s lack of production history for certification purposes.

“We expect that there will be cooperation with some of our customers, and we will honor other companies’ qualifications as well,” Henriksson said. “So, if a supplier can qualify a batch of products [for automotive use], and we have similar products, then we could exchange volumes – as we can trust the channel – which could also allow us to cut lead times [for green steel] for first-tier suppliers in the automotive industry.”

Other market sources confirmed to McCloskey that said approach could more easily facilitate sales to carmakers in the absence of production history.