Lakshmi Mittal transformed steelmaking. Can his son do it again?

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About half of ArcelorMittal’s revenue comes from Europe, where pressure to decarbonise steel production is becoming impossible to ignore

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of Sweden is ahead of it. Yet it has reduced debt to shore up its balance-sheet, giving it the flexibility to increase spending. Moreover, its presence in poorer countries such as India, where steel use per person is a fraction of its level in the West, gives it plenty of growth opportunities.

The transition will be costly, though. McKinsey, a consultancy, estimates that decarbonising steel requires investment of $145bn a year on average for the next 30 years, and could push the cost of making the stuff up by 30%. ArcelorMittal says its three low-carbon plants will cost $10bn in total by 2030, which is doable for a company with annual capital expenditure of about $3bn.

That is why the industry believes hefty state backing is essential. ArcelorMittal expects governments to fund about half of its $10bn decarbonisation commitments over the next ten years. Investors argue that subsidies for operational expenses such as electricity bills should be thrown in, too. The same, they say, goes for aid to ramp up production of clean hydrogen, whose price must fall by 60% for clean steel to become cost-competitive with the alternatives, according to McKinsey.

It goes beyond that. By the mid-2020s, Europe’s steelmakers will begin losing the free allocations of carbon permits they receive under theEmissions Trading System. To compensate, they await the introduction of a carbon-border-adjustment mechanism, starting in 2026, which will protect them further from importers selling cheaper dirty steel. They also need governments to help kick-start demand for green steel.

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