Forging a global clean steel economy: Leveraging trade to reduce the green premium
This report examines how decarbonising the global steel industry requires separating ironmaking from steelmaking. By leveraging international trade, countries can co-locate energy-intensive processes in resource-rich regions like Brazil, Australia, and India. This strategic approach reduces production costs and helps lower the green premium for clean steel.
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OVERVIEW
Introduction
In order to build the backbone of a truly resilient, clean energy economy, securing a clean, sustainable steel supply will require reducing the steel industry’s dependence on fossil fuels (1). Fossil fuels are consumed primarily in the ironmaking step, while most of the economic value is created downstream in steelmaking (1). The ironmaking step can be completely decoupled from steelmaking, providing supply chain flexibility and opportunities to co-locate the most energy-intensive steps of the process in regions with abundant clean power resources and low production costs (1).
Pathways to steel decarbonisation
Steel manufacturing accounts for about 7% of global CO2 emissions (2). Decarbonisation has mainly come from scrap recycling and direct reduced iron (2). Reducing emissions from ironmaking will be the most important factor for further decarbonising the sector (2). Hydrogen direct reduced iron (DRI) accounts for 56% of investment under construction or operating and 38% of all announced investment among clean ironmaking projects (3). Fossil-based, hydrogen-ready facilities account for 57% of the total investment tracked by the Clean Investment Monitor (3). These facilities serve as an important transitional technology, reducing emissions by up to 40% compared to blast furnaces in the interim (3).
In a competitive, globally traded industry, input costs matter
About 10% of announced investment in hydrogen-only DRI facilities was cancelled in 2025 due to concerns over hydrogen availability and costs (4). Notably, 87% of cancelled capacity came from ArcelorMittal projects (4). Natural gas DRI accounts for about 10% of global steel production due to slow industrial turnover (4). Producing a tonne of clean steel with hydrogen is fuel- and material-intensive, and the cost of raw inputs accounts for the majority of the levelised cost of production (4). Reducing the two most significant costs of clean steel—fuel and materials—will be crucial to reducing the green premium (5). One way to achieve this is to import these inputs from regions with large, high-quality endowments of clean fuels and materials to lower costs for clean steel producers (5).
Analysing regional advantages
Europe has dominated investment into hydrogen DRI, but growth in iron demand will occur in India and the rest of the world, meaning there is a misalignment between current investment and likely overall demand growth (5). Countries with resource and cost advantages represent the best opportunity for early investment and strategic trade partnerships (6). Potential leaders emerge when analysed across five distinct pillars: fuel costs, material resources, cost factors, DRI readiness, and policy (7). For resource-constrained nations, partnering with advantaged suppliers to import iron would provide a more cost-effective way to meet goals while retaining higher-value steelmaking (9).
Brazil
Brazil is exceptionally rich in all the ingredients required for hydrogen DRI (9). However, domestic DRI production is currently nonexistent in Brazil (9). The states of Minas Gerais and Pará boast exceptionally high-quality ore reserves (9).
Australia
Australia is the uncontested current leader of iron ore exports, accounting for over half of shipments worldwide (9). Most shipments are destined for blast furnaces in China, with DR-grade pellets making up less than 1% of total exports (9). Australia provides subsidies for green hydrogen production and state funding for clean iron decarbonisation (9).
India
India is the world’s third-largest ore producer (10). Initiatives are in the works to specifically support clean steel totalling over $2 billion (10). Much of the direct reduction capacity is small, coal-based rotary kilns, which are optimised to use low-quality ores (10).
Middle East and North Africa (MENA)
MENA accounts for 44% of global DRI production, with Iran being the world’s largest producer of DRI steel (10). New project announcements have indicated an intention to transition to hydrogen as it becomes economically feasible (11).
No supply without demand
A strong demand signal is needed to justify expanding investment into clean steel (11). Clean steel capacity will exceed demand by a factor of 1.8-4.3x by 2030, with a similar mismatch in 2035 (11). Cross-border partnerships—particularly those that include long-term purchase agreements—can play a crucial role in bolstering demand, reducing costs, and sparking further investment (12).
