Europe’s ambitions to decarbonize its steel sector using hydrogen-based direct reduced iron (DRI) have suffered a significant blow, as ArcelorMittal confirmed it is scrapping its €1.8 billion DRI and hydrogen plant in Dunkirk, France.
The decision—announced during a parliamentary finance committee hearing by ArcelorMittal France CEO Alain Le Grix de la Salle—comes despite an €850 million support agreement signed last year with the French energy transition agency ADEME.
At the heart of the cancellation is a stark assessment of the project’s economics and policy context. Although the Dunkirk plant was originally intended to use natural gas in its early stages, the long-term condition was a full switch to green or low-carbon hydrogen—an input that remains both scarce and costly in France. Le Grix de la Salle was blunt: under current gas, electricity, and green hydrogen prices, there is no viable business model to make hydrogen-based DRI competitive, particularly without robust state protection and predictable carbon pricing mechanisms.
The Carbon Border Adjustment Mechanism (CBAM), touted as a key tool to shield EU producers from cheaper, carbon-intensive imports, has not yet offered the level of predictability or economic assurance needed to support multi-billion-euro steel decarbonization investments. Meanwhile, market uncertainties and insufficient trade safeguards leave European producers vulnerable to low-cost imports, further eroding project feasibility.
This cancellation follows a pattern. Earlier this year, ArcelorMittal also abandoned plans to transition its German plants to carbon-neutral production, again citing unsustainably high electricity costs. In Poland, the company has warned that the energy-intensive nature of green steel production leaves the sector unable to shoulder decarbonization costs without substantial public backing.
Yet while hydrogen-based DRI is off the table for now, ArcelorMittal is not fully retreating from Dunkirk. It plans to move ahead with a €1.2 billion investment in an electric arc furnace (EAF), scheduled to begin operations by late 2028 or early 2029. A second EAF, estimated at €700–800 million, may follow. Unlike the scrapped DRI unit, EAFs can rely on scrap-based steelmaking—a decarbonization strategy with lower upfront costs and greater short-term viability.
The company insists its long-term presence in Dunkirk is not in question. “The idea of closing Dunkirk is absurd,” Le Grix de la Salle said, responding to concerns over the more than 600 jobs potentially affected by the DRI project’s cancellation. However, the future of another French site, Fos-sur-Mer, remains undecided, with clarity expected once the European Commission finalizes its decarbonization roadmap for the steel industry.
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