A report by steel advocacy group, SteelWatch, has alleged ArcelorMittal is “failing in its claim” to be a climate change leader by spending just one-third ($500m) of the $1.5bn it pledged to invest into decarbonisation over the past three years.

Under the world’s second largest steelmaker’s “Innovative DRI” pathway it announced plans to transition its blast furnace plants to direct reduce iron (DRI) making processes using green hydrogen and/or electric arc furnaces (EAF) to clean up its operations.

Read more: Will DRI be key to producing sustainable steel?

Having shipped 55.6 million tonnes of steel in 2023 and subsequently generating 114.3 million tonnes of carbon dioxide equivalent (CO2e), ArcelorMittal has already secured some €3.5bn ($3.77bn) in subsidies to support its decarbonisation plans, which it estimated to cost $10bn by 2030.

Most recently, the company had €1.4bn ($1.5bn) of German grants approved by the European Commission to support the decarbonisation of two steel plants in Germany with low-carbon hydrogen.

Read more: €1.3bn ArcelorMittal grants approved for hydrogen-based steel production in Germany

With various other grants approved for similar projects across France, Belgium, Spain and Germany, all the plans have stated that natural gas will initially be used in the DRI process before transitioning to hydrogen. However, dates have not been set for the switches.

Allegations of misusing subsidies 

SteelWatch says it exists to accelerate the transformation to a decarbonised steel sector. Its vision is a steel industry that underpins a zero-emission economy and ‘enables the environment, communities and workers to thrive’.

The organisation’s report said recent “backtracking” by ArcelorMittal suggested the company will continue to use fossil gas instead of hydrogen and/or delay various projects, something ArcelorMittal has denied to H2 View.

In February (2024), Geert van Poelvoorde, CEO of ArcelorMittal Europe, was reported by Dutch magazine Trends to have said using green hydrogen in EU steel mills is not profitable.

Furthermore, SteelWatch cites a report from the Spanish publication On Economia, which said the company had “given up” on its Gijon project to have a green hydrogen-powered DRI plant ready in 2025.

Having secured €450m ($484m) in grants from the Spanish Government for the plant, On Economia reported ArcelorMittal will press ahead with the DRI plans, but will operate it on “fossil gas,” while keeping the grants.

While green hydrogen DRI can reduce steelmaking CO2 emissions by up to 95%, natural gas DRI does offer a significant cut to emissions compared to blast furnace routes. A Journal of Cleaner Production study said the CO2 emissions associated with the natural gas DRI-EAF route were 1.4 tonnes CO2/ tonne of crude steel (TCS), compared to 2.2 tonnes CO2/TCS from blast furnace routes.

The company has returned $11bn to shareholders via buybacks and dividends in the past three years alone

Caroline Ashley, Director of SteelWatch, said, “ArcelorMittal makes a lot of shiny claims about cleaning up its operations, but it has no right to call itself a climate leader when it secures billions in government subsidies before backtracking on plans to end fossil fuel use.”

The group said such state support has come at a time of “record shareholder returns.”

“The company has returned $11bn to shareholders via buybacks and dividends in the past three years alone,” SteelWatch said.

In its 2023 annual report where it logged revenues of $68.3bn, ArcelorMittal said in addition to the $8.6bn share buyback programmes completed from 2020 to 2022, and $1.2bn from shares repurchased during 2023, it returned a total of $12bn to shareholders.

The company said additional buybacks under the outstanding programme announced in May 2023 would be allocated to the 2024 capital return.

In a right of reply response to H2 View, an ArcelorMittal spokesperson said, “[ArcelorMittal] has not backtracked on any plans and any statements indicating so imply a lack of understanding of both the plans we have set out and the availability of the clean energy the steel industry requires to transition to Net Zero.”

They said the company was clear that its planned DRI units would initially operate on natural gas and would switch to green hydrogen “when green hydrogen was available at competitive prices.”

At this stage, green hydrogen is not available in Europe. There is no indication that it will be available at the price or capacity we need to provide competitive low-emission steel by 2030.

“At this stage, green hydrogen is not available in Europe,” the spokesperson said. “There is no indication that it will be available at the price or capacity we need to provide competitive low-emission steel by 2030.”

They added that the company was working on testing hydrogen in DRI so it is “well prepared” to make the switch as and when green hydrogen becomes a “viable option.” The company expects its DRI-EAF projects to clear final engineering studies by the end of 2024.

On the side of shareholder returns, the spokesperson told H2 View, the company’s “clearly defined” capital allocation policy states that 50% of its free cash flow will be returned to shareholders and 50% will be reinvested in the business to “progress strategic priorities, which include decarbonisation.”

SteelWatch said the company should commit to and invest in producing or purchasing green hydrogen-based DRI, ensure any use of gas for DRI is “strictly time-bound” with a transition pathway and timeline for green hydrogen use, and commit to phase our fossil fuel use by 2040 in Europe and 2050 globally.

Lobbying

The SteelWatch report claims the company has “huge” political influence and has “actively lobbied” for slower or weaker climate policies in the EU and South Africa.

“One could expect a self-proclaimed corporate climate leader to leverage its political clout in order to advance pro-climate policies,” the report reads. “But in practice, the evidence suggests political clout has been used either to weaken climate action or has been focused on securing subsidies.”

ArcelorMittal’s spokesperson told H2 View, “Our approach on climate policy is to not block climate policy – rather we speak up when we believe climate policy could impact the viability of the steel industry to operate.”

If the result is actually to make steelmaking unviable then we believe it is counter-productive, not fulfilling its purpose and potentially only leading to carbon leakage and theoretically higher emissions

They said climate policy should “enable and incentivise” the steel industry to transition to lower carbon technology.

“If the result is actually to make steelmaking unviable then we believe it is counter-productive, not fulfilling its purpose and potentially only leading to carbon leakage and theoretically higher emissions,” they added.

The spokesperson said the company is committed to conducting its direct and indirect policy lobbying and advocacy work “in line with the Paris Agreement.”

Impact and future direction

Alongside the backtracking claims, the SteelWatch report said ArcelorMittal continues to build “new, highly polluting” blast furnaces in India via its joint venture (JV) with Japan’s Nippon Steel.

It said the ArcelorMittal/Nippon Steel (AM/NS) India JV, in which it holds a 60% stake, is not considered a part of the wider ArcelorMittal Group and is not included in the group’s climate targets. It suggested the JV did not have climate targets beyond 2030.

The group’s 2030 target is to reduce the carbon intensity of its steel by 25% on a Scope 1 and 2 basis only, with Scope 3 emissions included in its 2050 Net Zero target. The ArcelorMittal spokesperson confirmed to H2 View the AM/NS India JV is not included.

“AM/NS India is aware of the need to support India’s economic growth and the responsibility it has to start a journey to Net Zero,” they said. “ It has therefore developed a plan to reduce its emissions intensity and recently set a reduction target of 20% by 2030 when it published its inaugural climate action report.”

The spokesperson said, the company undertook “substantial work” to “better understand” its Scope 3 emissions so it can set “realistic” Scope 3 targets.

Julia Hovenier, campaigner at BankTrack & the Fair Steel Coalition, added, “We need strong action from governments and financiers to get ArcelorMittal’s investments in line with a just and fossil-free future.”