The steel industry is experiencing a historic turning point. Responsible for approximately 7% of global CO₂ emissions, the sector faces increasing pressure to reduce its carbon footprint, especially in light of the European Union's adoption of carbon taxes and international carbon neutrality targets by 2050. In this scenario, Brazil is emerging as one of the protagonists of a shift capable of redefining the market's foundations: the adoption of green hydrogen in steel production.
With more than 111 announced projects and an investment volume that already exceeds R$454 billion, the country has unique conditions to lead the global production of green steel, exploiting competitive advantages that few can replicate.
The context of industrial transformation
The Brazilian steel industry accounts for approximately 4% of Brazil's greenhouse gas emissions and consumes 6.2% of the country's energy. In the conventional process, each ton of raw steel generates 1.8 to 2.0 tons of CO₂, a result of the intensive use of metallurgical coke in blast furnaces.
The urgency for low-carbon alternatives has gained momentum with the Paris Agreement. Estimates indicate that $600 billion annually will be needed by 2050 to completely decarbonize the global steel industry—opening the way for those who develop clean technologies competitively.
Brazilian competitive advantages
Brazil has a rare set of attributes that place it in a strategic position to lead this transition.
Renewable energy matrix
The country relies on 88% to 90% of its energy coming from renewable sources—hydro, solar, and wind—integrated by the National Interconnected System. The cost of clean electricity ranges between US$30 and US$39/MWh, with an expected drop to less than US$30/MWh by 2030.
Abundant natural resources
As the world's second-largest iron ore exporter, Brazil offers high-quality ore with low levels of impurities. Furthermore, it has abundant water resources to support large-scale electrolysis processes. Currently, 21.6% of Brazil's steel production already uses scrap, demonstrating its expertise in more sustainable approaches.
Strategic location
The proximity to markets such as Europe and North America, combined with ports such as Pecém, Suape, Açu and Parnaíba — and incentives from Export Processing Zones (ZPE) — favors the export of low-carbon steel products.
Technologies under development
Direct reduction with hydrogen (H2-DRI)
This technology replaces coke with green hydrogen, cutting emissions by up to 98% and producing superior sponge iron. Each H2-DRI plant requires investments of between US$200 and US$300 million.
Molten Oxide Electrolysis (MOE)
Created by Boston Metal, this innovation eliminates the use of hydrogen, producing steel directly from ore through electrolysis. The first commercial plant is expected to come online between 2026 and 2027, with the potential to impact the entire production chain.
Projects and references
Initiatives in Brazil
CSN received R$102.8 million from Finep to develop green hydrogen annealing furnaces in partnership with Senai CIMATEC. ArcelorMittal Tubarão signed a memorandum with EDP to evaluate the feasibility of a pilot plant.
The Green Energy Park, in Piauí, is expected to become the largest green hydrogen plant in the world, with a capacity of 400,000 tons of hydrogen and 2.2 million tons of green ammonia per year — an investment of R$27 billion.
International examples
In Sweden, the HYBRIT project, a partnership between SSAB, LKAB, and Vattenfall, has already produced iron with properties 20% superior to conventional steel. H2 Green Steel raised US$4.9 billion to build the first commercial green steel plant, with clients including Mercedes-Benz, Porsche, and Scania.
Regulatory framework and incentives
Law 14,948/2024, the Green Hydrogen Legal Framework, defines the product as one generated by electrolysis with renewable energy, limiting emissions to 7 kgCO₂eq/kgH₂ by 2030.
The REHIDRO program offers tax incentives, such as the suspension of PIS/COFINS on equipment imports, with estimated benefits of R$18.5 billion by 2032. The National Hydrogen Program (PNH2), created in 2021 and regulated in 2024, coordinates efforts between the government, companies, and research institutions.
Economic opportunities
Export
Europe plans to import 10 million tons of green hydrogen by 2030, paying around US$3/kg. In the US, the Inflation Reduction Act provides subsidies of up to US$3/kg, increasing the attractiveness of hydrogen for Brazilian exporters.
Jobs
Projections indicate 177,000 direct and indirect jobs will be created by 2050, 40,000 of which will be specialized. The impact on GDP could reach R$15 billion in 2030, R$38 billion in 2040, and R$61.5 billion in 2050.
Challenges and paths
Barriers
Green hydrogen still costs two to three times more than fossil fuels, needing to drop to around US$2/kg to compete. Furthermore, there's external dependence on technology and the need to invest US$200 billion in infrastructure.
Strategies
Production scale, public-private partnerships, financing through green bonds and carbon credits, and robust technical training programs will be crucial to overcoming these barriers.
Long-term vision
More than a technological shift, the adoption of green hydrogen could reposition Brazil as a global energy powerhouse. With a projected capacity of 1.8 gigatons per year, the country is poised to lead global exports, surpassing the production of many oil-producing countries.
To achieve this, it will be essential to coordinate efforts between the government and the private sector, invest heavily in R&D, train professionals, and establish strategic agreements for technology transfer.
The opportunity is there, the resources exist, and the regulatory framework is already in place. The next step is to execute with a long-term vision to transform potential into effective leadership in green steel.
