North African green steel will soon be in demand in the EU: an overview

The economic potential of the North African states is based on the same resources as in the GCC: plenty of sunshine and oil and gas. However, there is still less oil and gas here than in the Gulf. And this affects the investment opportunities for Egypt, Algeria, Libya and Tunisia in moving towards a carbon-free economy, including steel industry.

As for Morocco and Mauritania, there is virtually no oil and gas. There are, however, significant iron ore reserves. So do Libya, Algeria, Tunisia and Egypt. Therefore, the structure of regional metallurgy is identical to that formed in the GCC.

These are exclusively EAF-plants operating on locally produced DRI. That is, at this stage it is quite green production. And very soon North African DRI will be in great demand in the EU, after the introduction of CBAM from January 2027. Then the European steelmakers will need a replacement for pig iron smelted in BF. This sets the trends for the steel industry in North Africa.

DRI Driver

In recent years, North African countries have been increasing steelmaking due to strong demand for long products from the construction sector. But at the same time, DRI production is growing at a faster rate. This indicates its high export potential.

It will increase further in the future. This will be facilitated by the implementation of SWAM in the EU from January 2027, which is very soon. At that time, Euro steelmakers will need to replace pig iron with a low-carbon material for steelmaking to avoid additional costs. North African NG-DRI is well suited for such purposes.

And it has a serious advantage in competing with Middle Eastern NG-DRI, due to the geographical proximity of Egypt, Algeria, Morocco, etc. to Europe compared to the Gulf region. First, it gives consumers cheaper logistics. Secondly, less Scope 3 due to lower CO2 emissions during transportation. Therefore, a number of new projects are now being prepared in the region.

• In Mauritania, state-owned SNIM, the second largest African iron ore miner, together with the CWP Global consortium intends to build a DRI plant with an annual capacity of 2.5 million tons. The plant will be located in the AMAN industrial zone, where a combined 5.5 GW (Stage I) WES and SES and a green H2 plant are also planned. That is, it will be a completely carbon-free production;
• In Egypt, a 2.5 million tons DRI plant is planned to be built at a cost of €1 billion with a subsequent increase to 4 million tons. The plant will be powered by equipment from Germany’s SMS Group in the Suez economic zone;
• In Algeria, local company Copresud, together with Italian consortium CEIP Scarl, are planning a €1 billion DRI plant, without specifying the potential capacity. It is likely to be of the order of 2.5 million tons, similar to the Egyptian project;
• In Libya, Turkey’s Tosyali Holding, together with local state-owned company SULB, intend to build the world’s largest DRI plant with an annual capacity of 8.1 million tons. SMS Group received the order for equipment supply;
• In Libya, state-owned company LISCO intends to build a DRI plant with annual capacity of 2 million tons. The equipment supplier will be Italy’s Danieli;
• In Morocco, as part of the $32 billion Moroccan Offer initiative, local company Nareva has declared its intention to produce H2 DRI along with green ammonia;

In addition, there are opportunities to increase DRI output at existing plants. For example, Algerian Qatari Steel Co. in 20222 announced an expansion from 2.5 to 5 million tons by early 2026.

Existing and future DRI plants are potential drivers of demand for green H2 and have the potential to accelerate the development of the hydrogen industry in North Africa. And hence the complete transition to carbon-free steelmaking in the region.

Green potential

Today, Egypt’s Elmarakbysteel is the leader in this aspect. Its CO2 emissions are only 0.62 tons per 1 ton of finished steel. The other companies do not disclose data. But it is estimated that their figure is about 1.4 tons per 1 ton of steel products, based on total industry emissions and steel production.

Let us remind you that Emirates Steel, the greenest steel company in the GCC, has greenhouse emissions of 0.67 tons per 1 ton of steel. At the same time, 86% of electricity used in production is obtained from renewable energy sources (RES). By comparison. Egypt’s Ezz Steel, the leading producer in North Africa, has only 12%.

Therefore, further decarbonization of the steel industry in Egypt, Algeria, Tunisia and Morocco directly depends on the development of green energy. Almost all countries have ambitious programs in this sector.

• Egypt plans to increase the share of RES in the energy mix from 20% in 2022 to 42% by 2030 and to 58% by 2024. The government’s portfolio contains 16 projects for the construction of wind and solar power plants with a total capacity of 55 GW. All of them are at different stages: from memoranda of understanding to practical implementation;
• Algeria’s National Renewable Energy Plan envisages capacity increase from 4.5 GW in 2020 to 22 GW in 2030, of which SES accounts for 10.5 GW and WPP for 4 GW, plus 2 GW for electricity storage;
• Libya plans to increase the capacity of WPP from 0.6 to 1 GW in 2020-2025, SES from 0.3 to 0.8 GW. This will increase the share of RES in the energy mix from 7% to 10%. The National Strategy for Sustainable Energy envisages the growth of green capacities up to 4.1 GW by 2035. Their share in the energy balance will amount to 25%;
• The Tunisian government sets the task to increase the share of RES in the energy balance up to 35% by 2030, compared to 3% in 2024. In 2035 the indicator should reach 50%, by 2050. – 100%. At the same time, the installed capacity of RES will increase from 0.4 GW in 2021 to 4 GW in 2030. Currently, the authorities have approved concession projects for 2.2 GW;
• Morocco’s Renewable Energy Action Plan envisages an increase in the share of RES in the energy mix to 52% by 2030, compared to 7.1% in 2021. The installed capacity of RES in this case will increase from 1.9 GW to 16.3 GW;

Mauritania does not have an approved government strategy for renewable energy. But the International Energy Agency (IEA) estimates that the implementation of the planned green H2 projects will require the creation of 16 GW of renewable energy capacity by 2030.

The use of green hydrogen is the next important step towards a carbon-free future. Not only in steel sector, but also in power generation, cement industry, fertilizer production, etc. Taking into account the enormous potential for RES development (the level of solar radiation in the region is 2000 kWh/m2), all the countries of North Africa without exception claim to be a supplier of green H2 for the European Union. The EU, in its turn, emphasizes its interest in such projects.

• The national hydrogen strategy of Egypt contains 2 scenarios, basic and green. In the first case by 2030 it is planned to ensure production of 1.5 mln. tons. of “blue” H2, by 2040 – 5.6 million tons. In the second case – 3 million tons by 2030 and 5.8 million tons by 2040. Thus, these options differ only in the speed of implementation at the first stage. The baseline scenario envisages export of all H2 produced by 2030, and by 2040 the figure should increase to 3.8 million tons. This will require deployment of 13 GW of electrolysis capacity. To supply them with green electricity, 19 GW of RES capacity is needed;
• The energy intensity of Algeria’s hydrogen industry should reach 40 TWh by 2040, of which 10 TWh will be used for domestic consumption. At the same time, it is planned to produce over 1 million tons of green H2 by 2040, the rest volume – blue H2.
• Mauritania’s strategic roadmap envisages production of 20.1 million tons of H2 by 2050. Of this, 12 million tons of green H2 and 8.1 million tons of blue H2. The government has initiated 4 green hydrogen projects with a total energy potential of 85 GW. This is expected to give Mauritania up to 1.5% of the global H2 market and up to 1% of the global green steel market by 2050;
• Tunisia’s National Green Hydrogen Strategy has set a target of producing 8.3 million tons of H2 per year by 2050, of which 6.3 million tons will be exported, mainly to Europe. This would require 90 GW of renewable energy capacity. Green H2 exports should reach 0.3 million tons by 2030 and 1.6 million tons by 2040;
• Morocco’s Roadmap for Hydrogen Industry Development envisages an energy intensity of 14 TWh by 2030, of which 10 TWh will be used to support H2 exports, 4 TWh for domestic purposes. This requires 6 GW of renewable energy capacity. By 2050, a fairly wide range of 154-307 TWh is projected. The government has approved $32 billion worth of green H2 investment projects;
• Libya’s National Sustainable Energy Strategy makes reference to the possibility of using RES to produce green H2. Pilot projects are expected to be launched by 2030. No specific production targets are given;

Blue hydrogen production in North Africa will require the deployment of a CCUS industry that can also be utilized in steel mills. As in the Gulf countries, there are good prerequisites here: the availability of a large number of depleted oil and gas wells suitable for carbon storage. But so far there are not even pilot projects in this area. Local oil and gas producers are conducting relevant studies.

Risks and prospects

The Gulf countries rely on their investment resources in the process of economic decarbonization (development of RES and H2 production). North African states do not have such broad opportunities. Therefore, their projects are tied to foreign financing. These are the African Development Bank, the European Investment Bank (EIB), the European Bank for Reconstruction and Development, and the World Bank.

They express their willingness to lend to green projects in northern Africa. But in fact, these are far from the volumes required. For example, the total cost of green transition programs in Egypt until 2030 is $246 billion. – As of June this year, the EIB has allocated $312.6 million for these purposes. Yes, there are other international financial institutions (IFIs) listed above. However, it is clear that their support does not even come close to matching the needs.

It is also important to remember that MFI money is a loan. They will have to be paid back, and with interest. Therefore, the payback on green projects is critical for North African countries. They simply cannot afford to act like Saudi Arabia. Which launched the construction of the $8.4 billion NEOM industrial complex, which includes the production of green ammonia and hydrogen, a power plant and related transportation infrastructure – without any firm guarantees of sales.

According to media reports, the operator Air Products has now managed to contract only half of future production. Obviously, at some point this investment will still pay off. And the Saudis can wait. But the North African states will not be able to wait. To be more precise, their creditors are unlikely to want to wait. Hence the limited amounts of green financing from their side.

For Libya, there are additional risks, as the country is still unable to emerge from the chaos of the civil war that began back in 2011. The last escalation of hostilities dates back to May of this year.

• In the 2020s, only small pilot projects in various sectors are possible;
• In the 2030s – scaling up green electricity and H2 production to industrial volumes. At the same time, almost all the resulting products are exported to the EU;
• In the 2040s – active use of green resources on the domestic market to ensure a carbon-free future for local industry, including metallurgy;

This scheme is entirely satisfactory to North African steel producers, as their products now already meet green criteria.