Most African countries have in-use steel stocks below 1 tonne per capita—less than one-twentieth of industrialised country levels. Of 1.5 billion people, 600 million lack electricity and 400 million lack basic water: direct consequences of insufficient steel-dependent infrastructure.
Building this infrastructure requires decades of sustained steel production in developing countries themselves. Importing steel is neither plausible at the scale required nor rational when these countries possess the iron ore and renewable energy to produce it. Without green iron industries starting now, this trajectory is foreclosed.
Meanwhile, Europe's steel industry faces an existential challenge. Despite €10 billion in subsidies for domestic green iron production, only one of ten major projects has reached final investment decision. ArcelorMittal, despite securing €1.65 billion in subsidies, has indicated that producing green iron in Europe is not economically viable. Germany offered €50 billion in production-based Carbon Contracts for Difference. No company accepted. The current approach is failing.
A new perspective article in Technology Review for Carbon Neutrality argues these are not separate problems. They share a solution.
Steel production accounts for 7%–9% of global emissions—the single largest source in the industrial sector. How decarbonisation proceeds matters enormously: a high-cost approach that stalls in implementation threatens global climate goals. Given fixed policy resources, lower-cost production achieves more decarbonisation per unit of subsidy expenditure.
The technological shift that makes this possible is hydrogen-based direct reduced iron (H2-DRI). Conventional steelmaking uses blast furnaces to produce molten iron from iron ore using coal, then converts it to steel in basic oxygen furnaces—an integrated process that must be co-located. H2-DRI changes this fundamentally: it produces solid iron that can be compressed into Hot Briquetted Iron (HBI) and shipped globally, then converted to steel in electric arc furnaces at a separate location.
This separation creates a choice for European steelmakers. Route A: import HBI produced where green hydrogen is cheapest. Route B: import both iron ore and hydrogen to produce green iron domestically.
Route B faces severe problems. Hydrogen is expensive and complicated to transport—requiring conversion to ammonia, shipping, and reconversion, or long-distance pipelines with attendant infrastructure dependence and security vulnerabilities. Under Route B, Europe imports the cheap input (iron ore) easily and the expensive input (hydrogen) with difficulty, then combines them at high-cost locations. The only benefit is keeping the H2-DRI furnace in the EU.
Route A is simpler: produce green iron where both iron ore and renewable energy are abundant, ship the solid HBI cheaply by standard vessels to multiple destinations, and conduct steelmaking in Europe. HBI stockpiles cost-effectively at ambient conditions and can be sourced from multiple continents—superior supply security to hydrogen dependence.
Recent quantitative research shows sweetspot locations—South Africa, North Africa, Brazil—could deliver HBI to German steelmakers at 27% lower cost than domestic production using hydrogen pipeline infrastructure.
The jobs argument often raised against Route A does not withstand scrutiny. Primary ironmaking accounts for roughly 10% of steel sector employment. The remaining 90%—steelmaking, steel products, and downstream manufacturing—stays in Europe under both routes. Route A actually strengthens these jobs by providing lower-cost inputs that enhance competitiveness.
There is a further structural reality. Industrialised countries are shifting toward scrap-based secondary steelmaking as their accumulated steel stocks reach saturation. The USA already produces 70% of steel through electric arc furnace recycling; the EU 43%. As this shift proceeds, domestic demand for primary iron shrinks. Building expensive domestic green iron capacity in a declining market risks stranded assets.
Yet current subsidy structures restricted to domestic production make developing country alternatives unbankable—not because they lack cost advantages, but because they cannot access the policy mechanisms needed during early deployment.
"This is a profound development issue," said Hilton Trollip, Associate Researcher at IDDRI and affiliated with the University of Cape Town, who authored the article. "Developing countries cannot afford the green premium and cannot take the conventional carbon-intensive path. They possess the iron ore and renewable energy resources. What they lack is bankable offtake—and current policy actively prevents it."
The article proposes a specific configuration. Consumption-based Carbon Contracts for Difference would support green steelmakers sourcing HBI from sweetspot producers through long-term offtake agreements. European steelmakers gain lower-cost inputs, enabling competitive decarbonised steel without permanent operational subsidies. Developing country producers gain bankable anchor investment.
Critically, those export-oriented facilities become the foundation for domestic steel sectors. The same production capacity that supplies export markets simultaneously supplies steel for local infrastructure. The export partnership provides the scale that makes investment viable; that investment enables the parallel development of green steel industries and infrastructure that developing countries require.
"The export partnership provides the anchor investment; the anchor investment provides the foundation; the foundation enables a development trajectory otherwise foreclosed," Trollip said. "This is commercial partnership on competitive terms."
No new policies are required—just adjustment of existing mechanisms. Current German regulations already allow imported hydrogen as feedstock for Carbon Contract for Difference support; the same logic could apply to HBI. The technology is proven. The cost advantages are quantified.
Any claim that Sustainable Development Goals on basic needs can be achieved by 2030 does not account for the material reality that steel infrastructure takes decades to build. The window for first projects is now. Delay pushes the entire multi-decadal pathway further into the future—for European decarbonisation and for developing country industrialisation and servicing dire basic services gaps alike.
Technology Review for Carbon Neutrality
How could steel industry decarbonisation benefit the global south?
30-Dec-2025