How the US became a leader in green steel production

American companies made the decision to switch to electric arc furnace steel production with low CO2 emissions long before the world began talking about the need to combat the greenhouse effect in the atmosphere. As a result, today the steel industry in the US is essentially green. And, very importantly, it relies on its own raw materials.

The move to EAF

The structure of the American steel industry was once no different from that of Europe. In the mid-1970s, there were 45 BF-BOF plants in the country, with an annual production capacity of 1 million tons. Real giants were built, such as Gary Works in Indiana, with a capacity of 7.5 million tons. The restructuring of the industry began in the early 1980s, when the first electric steel mini-mills with R-EAF scrap-based technology appeared.

Their small production volumes enabled quicker sales of rolled products and allowed for a significant expansion of their product portfolio. Plus, it was possible to quickly reconfigure the furnace from smelting one type of steel to another. This helped to better meet current market demand and was the main advantage over traditional steel mills. At that time, no one was thinking about reducing the carbon footprint of finished steel products.

By 1992, there were already 65 EAF-based mills in the US with a total capacity of 25 million tons per year. And in 2001, their number exceeded 90, with a total capacity estimated at approximately 92 million tons. All this required huge investments, around $23 billion, but they paid off many times over.

Another advantage of EAF mills is their independence from imported iron ore. The raw material for EAFs is mainly scrap, and the volume of scrap collection in the US is enormous, 73.3 million tonnes by 2024. At the same time, the production of DRI, which is also used in EAFs, developed in parallel. A real breakthrough in this area occurred in the late 1990s. As a result, DRI production grew from 0.51 million tons in 1998 to 1.56 million tons in 2000. In 2022, the figure reached 5.24 million tons.

Thus, the American steel industry became green long before the EU and other countries began talking about switching to more environmentally friendly steelmaking technologies. According to Brandon Farris, vice president of the Steel Manufacturers Association (SMA), US steel producers are now 75-320% more carbon efficient than global markets. And this is indeed the case.

This is an average figure that includes the operation of steel mills using traditional BF-BOF technology. CO2 emissions from R-EAF scrap-based plants are in the range of 0.39-0.8 tons per ton of steel. In other words, they comply with current environmental standards. And the vast majority of plants in the US are of this type.

This explains why green premiums on the price of rolled steel in the US are zero, unlike in the European market. Incidentally, most American manufacturers, consumers, and experts believe that the difference in the selling price of hot-rolled coils produced in the US and the EU is, in fact, the green premium. But this does not mean that US steelmakers are resting on their laurels.

The American way of decarbonization: investment and innovation

The initiative to bring US steel industry to zero greenhouse gas emissions was actively promoted by the previous administration of US President Joseph Biden. And all major steelmakers tried to comply with it.

Notably, Nucor has invested $15 million and $35 million, respectively, in research by NuScale and Helion focused on developing small-scale nuclear and fusion reactors. These projects were initially intended to be built by 2030 to supply electricity to Nucor’s facilities in Alabama and Arkansas. It’s undoubtedly a highly innovative strategy.

The fact is that green energy has been developing rapidly in the US over the past ten years. In 2024, new solar power plants with a total capacity of 21.4 GW and wind power plants with a capacity of 2.8 GW began operating there. The Federal Energy Regulatory Commission (FERC) predicts that by September 2027, the country will have an additional 93.8 GW of solar power plants and 23.3 GW of wind power plants.

Therefore, Nucor could have chosen not to invest in the development of future reactors, contenting itself with traditional energy from renewable sources. Nevertheless, the company spared no expense on real innovation. Among other significant projects, the following stand out:

• Carbon capture, transportation, and storage from Nucor’s DRI plant in Convent, Louisiana. Under an agreement signed on June 1, 2023, oil and gas corporation ExxonMobil committed to capturing up to 800,000 tons of CO2 per year from the Nucor plant and storing it at its facility in Louisiana. The project was scheduled to begin operations in 2026.
• Construction of an H2 DRI plant in Ohio by Cleveland-Cliffs. The plant will have a capacity of 2.5 million tons per year. In addition to the H2 DRI unit, it will include two EAFs (120 MW each). The new equipment is intended to replace the blast furnaces at the Middletown Works facility.
• Carbon capture, transportation, and storage from US Steel plants in Ohio, Pennsylvania, and West Virginia. A memorandum of understanding with Norwegian oil and gas corporation Equinor was signed in June 2021.
• Capturing and storing CO2 from US Steel’s Gary Works steel mill in Indiana. The plan was to capture and mineralize up to 50,000 tons of carbon per year. CarbonFree Chemicals Holdings LLC, which developed the special SkyCycle technology for this purpose, was selected to carry out the work.

This is another fundamental difference between the American and European approaches to decarbonization. In addition to H2 DRI-EAF technology, companies in the US have developed another option: capturing greenhouse gases and converting them into a special chemically precipitated calcium carbonate (PCC).

Meanwhile, steel companies in the EU initially focused on creating “enterprises of the future” with H2 DRI-EAF. The problem is that this future turned out to be too distant. Faced with reality (the high cost of producing green hydrogen), European steelmakers are now forced to adjust their plans. In addition, this is a more complex and expensive path that does not give Europeans any competitive advantages.

Meanwhile, decarbonization processes in the US steel industry continue. Analysts attribute their further development primarily to the purchase of US Steel by Japan’s largest manufacturer, Nippon Steel. The Japanese investment plans are based on the transition from BF-BOF to R-EAF scrap-based for US Steel’s American enterprises. It is expected that about $7 billion will be allocated for these purposes.

This was one of the main conditions on which the US administration agreed to the deal for the acquisition of US Steel by the Japanese corporation. Thus, an important aspect of the green course in American steel industry is the competent policy of the authorities, regardless of party affiliation.

State regulation

The closure of the American steel market by tariffs, including the 50% tariff introduced by Donald Trump on June 4, protected investments in decarbonization made by local companies. This blocked the flow of cheaper steel produced using the old BF-BOF technology, which had rendered these investments economically meaningless.

It is likely that trade protection will soon be reinforced by implementing a carbon border adjustment mechanism similar to the EU’s CBAM, which would apply to the imported steel. This is what the American Iron and Steel Institute (AISI) is pushing for. And unlike the EU, the US has every reason to roll out CBAM, since Americans are already making eco-friendly steel.

Thus, regulatory measures have allowed the authorities to develop the following scheme for decarbonizing the US steel industry: “tariff protection of the domestic market” – “company investments” – “implementation of green projects.” The model works very simply.

Protective tariffs help steel producers secure higher profit margins, providing them with extra capital to fund green investments. In essence, the end consumer bears the cost of the industry’s future transformation.

The situation in the EU is quite different. A complicated and inefficient quota-based system for protecting the steel market has resulted in sustained import pressure and extremely low profit margins for European producers. This long-standing issue has significantly limited their ability to fund expensive hydrogen-based green transition initiatives.

Therefore, the European Commission and national governments are forced to help fund these projects. However, even with their support, the available resources have fallen short. Hydrogen steel is too expensive with current technologies. And the market is not ready to pay more. Therefore, the implementation of green transition projects in Europe is being delayed. Even despite multi-billion dollar budget subsidies.

This is probably due to a mistake in the choice of decarbonization technology. Meanwhile, European steelmakers simply needed to look at the successful experience of the Americans in this area and create key conditions: market protection and incentives for demand.