A PwC Germany study models three futures for European steel and rules out blast furnaces in all of them, with gas-based direct reduced iron from India and the Gulf 30% cheaper than the oxygen route by 2030.
European steelmaking will look substantially different by 2040, with the oxygen route uncompetitive and most primary production sitting outside Europe, according to a study by PwC Germany. All three of the study’s scenarios rule out the survival of blast furnaces.
The scenarios differ on how much of the industry stays. In the first, imports resurge while European countries fail to control energy costs, and ore-based iron making disappears from the continent. In the second, some primary green steel production takes hold in Scandinavia. In the third, better political and regulatory conditions with lower energy costs keep both iron and steelmaking in place.
Blast furnaces exit in every case. The study attributes that to political will exercised in the interest of the environment rather than to technology cost alone.
Gulf and Indian DRI sets the price
India and the Gulf states are building direct reduced iron capacity on the back of cheap domestic gas. By 2030, DRI-made steel from those regions will be 30% cheaper than oxygen-route steel produced in Europe, the study finds. That figure is the crux of its argument.
On that basis, the study questions the money German steelmakers are committing to converting their existing mills. Their low-emission steel would cost significantly more than material from Indian and Gulf suppliers. Only Scandinavia is judged likely to retain a role in primary steelmaking, through newly built low-emission capacity rather than converted plants.
The competitive niche left for the rest of Europe is scrap-based electric arc furnace production. Europe holds relatively large volumes of scrap, and the study treats that stock as the continent’s durable advantage in steel.
Three recommendations for German industry
The study sets out three responses. Companies should actively manage the relocation of energy-intensive production stages to other regions rather than resist it. Germany should build on its technical knowledge to support the value-added processes that remain, and fabricators should prepare for shifts in international supply relationships.
The third recommendation is geographic. Sophisticated production and processing needs dedicated regional clusters with a mix of players. For Germany, the study points to the Rhine-Ruhr area with its existing steel base, the northern coast with sea access and offshore wind, and the Lower Saxony heartland, home to Volkswagen and Salzgitter.
Andree Simon Gerken, partner for energy transition and decarbonisation at PwC Germany, said: “The relocation of energy-intensive raw material production abroad is not deindustrialisation if it is replaced by value creation based on knowledge, specialisation and system competence.”
For European producers weighing conversion capital against closure, the study reframes the question. It treats the location of ironmaking as already decided by energy prices, and puts the remaining choice on which downstream stages a country can hold.
