U.S. Green Steel Could Cost $812 Per Metric Ton via Hydrogen DRI-EAF

An analysis of U.S. green steel production estimates that steel made through the 100% renewable hydrogen-direct reduced iron-electric arc furnace pathway could cost $812 per metric ton. The findings matter as U.S. steelmakers weigh investments in lower-emission capacity while competing with conventional blast furnace production that remains less expensive.

Why U.S. Green Steel Production Costs Matter

Global markets continue to transition toward greater use of lower-emission steel. However, fossil-free steel, also known as green steel, has historically been more expensive to manufacture than conventional, coal-based steel.

For the U.S. steel industry, developing cost-competitive zero- and low-emission steel at scale will be important to remaining globally competitive.

The paper investigates the primary factors influencing green steel production costs in the United States through the 100% renewable hydrogen-direct reduced iron-electric arc furnace, or H₂-DRI-EAF, technology pathway. It identifies H₂-DRI-EAF as the most developed pathway for green steel.

Following that analysis, the paper assesses policy options that could enable green steel to become cost-competitive with conventional steel produced through the blast furnace-basic oxygen furnace, or BF-BOF, pathway.

What Drives H₂-DRI-EAF Production Costs?

Green steel can be produced in the United States through the H₂-DRI-EAF pathway for an estimated $812 per metric ton.

Energy costs contribute about 39% of green steel production costs, driven primarily by the hydrogen electrolysis process.

Raw materials contribute about 38%, with high-quality iron ore accounting for the main raw-material expense. Other variable costs and annualized capital costs together account for about 23% of estimated production costs.

How Green Steel Costs Compare With Conventional BF-BOF Production

Producing green steel through a greenfield H₂-DRI-EAF facility is about 34% costlier than production through a relined blast furnace-basic oxygen furnace.

Many U.S. BF-BOF facilities are nearing the end of their useful lives, meaning producers will have to choose between relining existing facilities or investing in decarbonized capacity.

The green steel premium is smaller when compared with other BF-BOF investment scenarios. The premium is about 32% against a brownfield BF-BOF facility and about 24% against a greenfield BF-BOF facility, both of which require greater capital investment than relining.

Cheaper regional industrial electricity rates or the use of imported Brazilian iron ore could narrow the cost gap further.

How Federal Policy Could Narrow the Green Steel Cost Gap

Recently enacted and proposed federal fiscal policies could nearly eliminate the green steel cost premium if implemented as originally proposed.

Combining 10 years of Section 45V clean hydrogen tax credits with the $500 million grant and near-zero emission intensity iron production tax credit from the Steel Modernization Act of 2024 could reduce the green steel premium to just 5% compared with a relined BF-BOF facility.

As a first step, federal policymakers could extend the Section 45V tax credit, which is responsible for nearly half of the savings identified in the analysis.

Fully closing the 34% cost gap would require about $308 million per year per facility.

What Happens Next for Green Steel Capacity?

As an interim step toward increasing green steelmaking capacity, policymakers could consider providing support for natural gas DRI-EAF facilities.

These facilities can be developed to be hydrogen-ready, allowing a growing share of their operations to run on renewable hydrogen as hydrogen supply increases and costs decrease.