EU countries are relying more on imported steel to meet domestic demand, pushing up emissions and threatening the bloc’s aspirations to be leaders in green steel production, according to market analysis from Transition Zero.

Not-for-profit analysts Transition Zero claim that the gap between supply and demand is being filled by dirtier and more emissions-intensive imports.

The company found that crude steel production fell by 11% across the EU and 12% across non-EU European countries in 2022, far deeper than the overall global decline of 4.3%. Proportionally, Europe’s steel slump was second only to Russia and Ukraine

Steel consumption across the continent is expected to fall by 3.5% in 2022 and 1.7% in 2023. With production dropping 11-12%, cheaper imports with a higher emissions footprint are filling the gap

The EU27+UK passed a tipping point in steel emissions in 2014. Since then, growing import reliance has added 15.3Mt CO2 to the industry’s global footprint – equivalent to Lithuania’s annual emissions

Taiwan, Vietnam, Egypt and Brazil – all countries with steel emissions intensities below the global average – have lost EU market share to China, Russia, Ukraine, India and South Korea, which have much higher emissions factors for steel products.

Transition Zero believes that the EU’s Carbon Border Adjustment Mechanism (CBAM) will help create a level playing field between EU and non-EU steel producers. The analysis reveals that if the CBAM had been in force, the CO2 levy raised on EU steel product imports would have ballooned from €250m in 2017 to €2.7bn in 2022

TransitionZero’s analysis shows that electric arc furnace (EAF) based steel production offers cheaper and deeper mitigation pathways than injecting hydrogen into blast furnaces and claims that the gap between CO2 abatement costs and current EU-ETS carbon pricing will narrow as allowances are removed to achieve the EU’s tightening carbon targets, making conventional steelmaking more expensive.

According to Transition Zero, decarbonisation presents an opportunity for Europe to reinvigorate its steel industry and reverse declining production and rising import reliance.