European Steel Industry Faces Uncompetitive Blast Furnaces by 2040, Says PwC Study
The long-term economic viability of traditional blast furnace-basic oxygen furnace smelting in Central Europe is rapidly declining, according to a recent study by PwC Deutschland titled ‘The End of the European Steel Industry… or Just a New Era?’. Driven by soaring emission prices under the EU ETS and persistent energy cost disparities, conventional primary steel production faces severe financial headwinds. As a result, the European steel sector must accelerate its transition toward electric arc furnaces utilizing scrap and relocate energy-intensive primary processes to regions with abundant low-cost energy.
Rising Emissions and Global Cost Pressures
By 2045, climbing carbon prices will double conventional steel production costs across Europe. Meanwhile, the Carbon Border Adjustment Mechanism cannot close the structural energy cost gap. European producers face stiff competition. By 2030, gas-powered direct reduction iron and electric arc furnaces in the Gulf states will undercut European costs by about 30%. Germany has committed 5.9 billion euros in decarbonisation subsidies. However, experts argue these funds are inadequate for long-term global competitiveness. Consequently, European players are securing international supplies. For instance, Thyssenkrupp Materials Trading procures one million tonnes of hot briquetted iron annually from Meranti in Oman.
Restructuring the Value Chain and Scrap Dynamics
To maintain relevance, PwC advises splitting the European value chain. Primary reduction steps should move to regions with cheap energy. Meanwhile, secondary metallurgy, special steel smelting, and high-tech processing must stay in Europe. Electric arc furnace smelting fueled by scrap remains the cornerstone of sustainable EU production. However, scrap volumes alone cannot fully replace retiring primary capacity. New innovations are emerging to support next-generation efficiency. For example, Primetals Technologies introduced the EAF Ultimate Move furnace. European steelmakers rely on these solutions to adapt to strict environmental rules and shifting global trade patterns.
Market Impact
○ Impacted Metals: Pig Iron, Hot Briquetted Iron, Steel Scrap, Carbon Steel
○ Direction: Bearish
○ Time Horizon: 2040–2045
○ Affected Industries: Steel Manufacturing, Automotive, Construction, Industrial Machinery, Engineering
○ Related Price Reports: Stainless Steel Weekly Price Report
○ Watch Item: Monitor policy adjustments to the EU ETS and the practical execution of international HBI supply agreements into European ports.
SuperMetalPrice Commentary:
European steelmakers face an unavoidable structural pivot away from blast furnaces toward scrap-fed electric arc capacity. While relocating energy-intensive reduction phases preserves domestic downstream manufacturing, it fundamentally alters long-term raw material demand across global supply chains.
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