Nicholas said that, “The funding gap at Stegra is just one example of the slowdown across Europe in steelmakers’ transition to direct reduced iron (DRI) and green hydrogen.” He noted that the company needs more than USD 1 billion to cover additional project costs, adding that the funding gap is partly due to insufficient financial support from the Swedish government.
Nicholas stated, “In the first half of this decade, Europe led the move away from coal in steel technology, much as it previously did in the power sector. However, momentum in Europe has recently slowed, and the advantage has shifted eastward.”
The analyst added, “China is increasingly dominating renewable energy capacity and technologies. Europe needs to do much more if it is to avoid falling behind once again.”
Nicholas said China is gaining speed in low-emission steel and leading the world in green hydrogen, noting:
“China Baowu operates a largely hydrogen-based DRI facility and has now launched a new green hydrogen project to supply this plant. The possibility that China will develop its own DRI technology should not be underestimated.”
Risk of Europe Falling Behind
Nicholas warned that Europe risks falling behind in green steel, much as it has in technologies such as solar energy and batteries. Recalling that countries like Germany once led the global transition to renewable energy through early leadership in solar and offshore wind power, he said, “That leadership has now been taken over by China.”
He emphasized that China is not only dominating capacity growth, but also clean energy technologies, including solar power, electric vehicles, batteries, and related critical minerals, adding that Europe is also losing ground in wind energy technology.
Nicholas cited Northvolt, described as the largest bankruptcy in Swedish industrial history, as an example of Europe’s inability to catch up and compete with China in battery technology. He noted that Stegra, which shares a common investor with Northvolt, is also facing financing difficulties despite building a green steel plant.
“Stegra aims to produce steel using DRI technology powered by 100% green hydrogen instead of fossil fuels. Once completed, it will represent a genuine global turning point for green steel,” Nicholas said.
DRI Facilities and Green Hydrogen Projects in China
Pointing to Baosteel’s Zhanjiang facility in China, Nicholas said:
“A DRI plant with an annual capacity of one million tons, operating largely on hydrogen, has recently come online. The facility currently relies on methane and coke oven gas, making it low-emission but not truly green.”
He added that the plant uses Energiron DRI equipment developed by Tenova and Italy-based Danieli.
Nicholas explained that China’s technological dominance is partly based on a strategy of encouraging Western companies to share technology in exchange for access to the Chinese market. He also noted that in January 2026, another Baowu subsidiary launched China’s first green hydrogen project directly connected to an offshore wind farm.
“The project will establish a hydrogen pipeline between Yangjiang city in Guangdong province and Baosteel’s Zhanjiang plant, enabling the facility to partially operate on green hydrogen,” he said.
Describing 2025 as a challenging year for green hydrogen, Nicholas stated:
“According to Hydrogen Insight data, nearly half of the 59 clean hydrogen projects that reached construction stage are located in China, with a combined production capacity of around 500,000 tons of green hydrogen per year. Projects in Europe, meanwhile, have been delayed due to financing and policy challenges.”
Nicholas concluded:
“If China maintains this momentum, Europe faces a serious risk of falling behind in both green steel and hydrogen.”
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