The European Commission approved a 460 million public subsidy to ArcelorMittal to back a cutting-edge technological shift. This change aims to partially decarbonize Asturias steel mills and enable steel production with minimal or no carbon emissions. The measure helps safeguard the future of the regional steel sector under the EU’s strict climate neutrality targets.
In about nineteen months, the Commission is expected to grant final clearance, with an estimated 1.6 billion euros in total support for the multinational to carry out its ambitious plan. The first phase involves more than one billion euros of investment. ArcelorMittal and the Spanish Government signed the public investment support agreement in July 2021 and sought mandatory community approval.
The Commission approved the aid this Friday under the rationale that the medium-term cost of hydrogen as a replacement for coal remains uncertain due to the high upfront costs and the early stage of clean steel technologies. The company states it will not pursue ecological steel production without public help, which grants the project an incentive status.
EU officials say the public funds will help achieve core policies: supporting a cleaner industry, cutting greenhouse gas emissions, and promoting domestic hydrogen production. This supports Europe’s energy independence and helps reduce reliance on fossil fuel imports, especially from Russia, while accelerating the shift to renewables.
Officials note that the aid will have a limited impact on competition and internal trade, and the amount will align with actual financing needs. Guarantees are in place, including a mechanism that if the project proves highly successful and yields additional net income, ArcelorMittal must return part of the aid to the Spanish State. The Commission also requires knowledge sharing with other European steelmakers through this jointly funded project with government resources to safeguard fair competition.
The project will be monitored for progress in reducing CO2, phasing out coal, and gradually replacing natural gas with renewable hydrogen in the steelmaking process.
Project
The current investment plan funded by the aid centers on replacing blast furnace A, which is nearing the end of its useful life around 2024–2025, and sinter B with a new direct reduction iron ore (DRI) furnace in 2025. This is a rare technology, with ArcelorMittal running a pilot in Hamburg, and it uses green hydrogen instead of coal. It also uses syngas produced from metallurgical gases and wastes to convert iron ore into pre-reduced iron. The new facility is designed to produce 2.3 million tons and may temporarily switch to natural gas if green hydrogen supply is constrained.
The pre-reduced feed will supply the existing ArcelorMittal electric furnace in Sestao, which will handle about one million tons, and the future hybrid electric furnace, with the remaining 1.3 million tons allocated to replace the Gijón steelworks.
Altogether, the two plants are expected to reduce CO2 emissions by about 70.9 million tons annually. Today, around 2.3 tons of CO2 are emitted per ton of steel, and the target is to bring that down to roughly 1.5 tons as renewable energy becomes the norm.
The project will reduce capacity and employment but preserve the sector’s viability
The PERTE framework for decarbonization, now approved by the Government and presented in Gijón, will allocate the aid exclusively to the DRI route. The future hybrid furnace, which will run on both pre-reduced iron and scrap to replace the Gijón plant, has already received other forms of public support under different programs.
This Friday’s announcement, backed by community approval, marks the first phase of Asturian steel decarbonization. A 2022 Davos agreement between ArcelorMittal and the Spanish Government outlined plans to replace the Avilés plant with a hybrid electric furnace akin to the Gijón model. The newer furnace is expected to emit fewer emissions than furnace A because it can utilize gases from coke ovens, with some capacity extending to 2032. This setup can also lower energy costs and earn emission rights.
The decarbonization plan, approved for part of the Gijón plant with European subsidies, aims to secure the sector’s survival in Asturias but will also entail job losses. About 900 positions are expected to disappear, most of them in Asturias where roughly 4,900 people are employed. While the Gijón electric furnace will have a capacity of 1.1 million tons (200,000 more than today), total capacity across Asturias will trend downward by about 1.5 million tons from the current level of around five million tons per year. The company notes that wage agreements with unions will be essential to implement the changes effectively.