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Restructuring the Steel Industry in the Era of Carbon Competitiveness: Expansion of Low-Carbon Processes and Selective Resource Reallocation

2026.07.27

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The global steel industry is moving away from competition centered on scale and cost, entering a structural transition where carbon competitiveness dictates corporate survival. The pace of future decarbonization is likely to be determined not merely by the availability of technology, but by the timing at which low-carbon processes achieve economic viability relative to legacy processes through carbon pricing, green premiums, and governmental policy support. Consequently, the low-carbon transition of the steel industry is projected to unfold in phases, centered around regions where carbon costs are tangibly reflected and downstream sectors with high acceptance capacity for green premiums. In this regard, the role of government is critical to establishing initial markets and driving the self-sustaining expansion of demand for low-carbon steel.
Table of Contents

  • 1. Background of Review

  • 2. Historical Benchmark: Lessons from the Expansion of U.S. Mini-mills

  • 3. Adjustment Phase in Steel Decarbonization Transition

  • 4. 2040 Process Mix Shift and Restructuring Centered on Carbon Competitiveness

  • 5. Conditions for Cost Inversion and Selective Resource Reallocation

  • 6. Strategic Implications

Executive Summary

  • ○ The global steel industry has entered a structural transition phase where "carbon competitiveness" is emerging as a prerequisite for corporate survival, shifting away from conventional competition based on scale and cost.

  • ○ From this perspective, the case of U.S. mini-mill expansion provides a crucial historical benchmark.

    • Initial mini-mills secured competitiveness in lower-quality product segments such as rebar, subsequently expanding into high-value-added markets like flat products as operational and rolling technologies advanced.

    • Throughout this process, integrated blast furnace mills faced heavy fixed-cost burdens, surging imports, slowing demand, and competitive pressure from mini-mills, triggering "resource reallocation" such as the retirement of inefficient facilities.

    • This demonstrates that technological transition is not merely about adding new facilities, but represents a structural restructuring process where competitive processes expand market share and redefine survival conditions for enterprises.

  • ○ This implies that the current steel decarbonization transition must also be understood as a "structural reallocation" process where production shares and capital resources migrate toward low-carbon processes.

    • While low-carbon projects are moderating their pace due to policy uncertainties, deteriorating profitability, and high hydrogen costs, selective market penetration is progressing based on long-term offtake agreements with downstream industries such as automotive.

  • ○ By 2040, the global steel industry is projected to transition gradually from a blast furnace-dominant structure to an electric arc furnace-centric structure (with the EAF share reaching 48% by 2040).

    • Along with the global expansion of EAF shares, the competitiveness of the BF-BOF route will differentiate based on fuel efficiency improvements and facility relining/revamping strategies.

    • In particular, as end-of-life timelines for current blast furnaces (representing 71% of global capacity) concentrate around 2030, investment decisions made during this period will serve as the decisive variable shaping post-2040 carbon emission structures.

  • ○ Ultimately, the speed of decarbonization in the steel industry will likely be determined not by the presence of technology alone, but by when low-carbon processes achieve cost parity/competitiveness against legacy high-carbon processes.

    • Rising carbon prices (e.g., based on the EU ETS) increase the total cost burden of high-carbon processes, while improving the relative cost competitiveness of low-carbon routes such as DRI-EAF, BF-BOF with CCUS, and H2-DRI-EAF.

    • However, during the transition phase where carbon prices are not sufficiently high, the design of decarbonization support policies—including green premiums, public procurement, and tax incentives—remains essential.

  • ○ Therefore, future steel decarbonization is unlikely to unfold as an immediate worldwide shift, but rather as a phased and selective resource reallocation centered on specific regions that reflect carbon costs in prices (e.g., the EU) and strategic off-takers with a high willingness to pay green premiums.

    • In the initial phase, where limitations exist regarding the organic diffusion of low-carbon steel markets, the government's policy role is of paramount importance in establishing the institutional foundation by generating demand through public procurement, designing certification frameworks, and leading the deployment of core infrastructure.

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