The suspension of ArcelorMittal’s green steel project in Gijón, Asturias, has raised alarms about the economic viability of Spanish initiatives dependent on renewable hydrogen.

Despite receiving a €450 million grant from the Industrial Decarbonization PERTE, the steel giant halted the initiative due to high costs and lack of guaranteed demand—an issue that could affect other similar projects.

In an interview with Energía Estratégica España, the company explained that this decision was ultimately made because “European policy, the energy environment, and the market have not evolved in a favorable direction.”

They also stated that “green hydrogen is evolving very slowly toward becoming a viable fuel source, and the production of DRI from natural gas in Europe is still not competitive as a temporary solution.”

Hydrogen use in the steel industry requires highly competitive prices to be viable.

“Steel needs hydrogen at prices between €2 and €3 per kilogram to be profitable. Without those levels, projects cannot be sustained,” explained Brais Armiño Franco, partner at AtlantHy, to Energía Estratégica.

In this case, the initial costs of the project doubled, far exceeding the €400 million originally budgeted for the project under the PERTE.

A Structural Issue for Hydrogen in Spain

The issue is not limited to ArcelorMittal’s case. According to Marcos Rupérez Cerqueda, hydrogen engineer and consultant, “several Spanish initiatives have requested grants without conducting a realistic analysis of profitability.”

The lack of off-takers worsens the situation, and he adds: “Without buyers guaranteeing a market for these green products, the initiatives won’t have a future.”

The Renewable Hydrogen PERTE was designed to position Spain as a leader in the energy transition, but this case exposes flaws in the business models supporting the projects. Many rely on an expected increase in demand for green products that, for now, is not materializing.

An Unequal Market Reality

In addition to internal challenges, projects in Spain face pressure from the global market. In sectors like steel, China dominates with significantly lower prices, displacing European producers.

According to ArcelorMittal, this competition, combined with the lack of progress in policy and regulation, makes it difficult to justify investments economically.

In a recent statement, the company emphasized that direct reduction of iron ore (DRI) projects, key to decarbonizing steel production, were based on the premise of a favorable political, technological, and market environment.

However, the current conditions do not meet these expectations. According to Aditya Mittal, the company’s CEO, “We need a regulatory framework that allows steel with low emissions to be competitive in Europe. Without it, investments are not viable.”

Grants and Realities: A Fragile Balance

The Spanish government remains committed to the Gijón project, even if another actor must take on its execution. However, the ArcelorMittal case demonstrates that grants alone do not guarantee success. The dependence on public subsidies without a consolidated market puts other projects in the program at risk.

Rupérez warns: “Many projects in Spain will fail if there is no regulatory requirement to consume products associated with green hydrogen.”

To avoid widespread failure, it will be essential to ensure economic viability and strengthen market commitments.

The Gijón case is a symptom of a broader issue. The entry of renewable hydrogen into the industry must follow a logical order, according to Armiño: “Just because hydrogen can be used doesn’t mean it’s viable to do so immediately. A solid economic structure must be ensured before moving forward.”

Meanwhile, the lack of a robust political framework and weak demand for green products complicates the execution of these projects.

Despite these challenges, ArcelorMittal remains committed to its net-zero goals for 2050 and other investments in Europe, such as the modernization of its plant in Sestao.

However, the company expects progress on key policies, such as the Carbon Border Adjustment Mechanism (CBAM), before making final decisions.