Brazil can play a strategic role in decarbonizing Europe’s steel industry, according to an IEA (International Energy Agency) report.

The organization points out that producing low-emission iron ore in the country, combined with exporting intermediate inputs, could significantly reduce the cost of so-called green steel in Europe.

According to the Energy Technology Perspectives 2026 study, many European industrial hubs face difficulties in producing low-carbon steel at competitive costs, mainly due to higher energy prices and structural limitations in some plants.

At the same time, pressure on the European industry has increased with the advancement of stricter climate policies, including the carbon market and taxation of emission-intensive products.

In this scenario, the IEA assesses that importing inputs produced in regions with cheaper and lower-emission energy, such as Brazil, could become a more efficient alternative.

The report highlights that Brazil has relevant advantages, such as competitive renewable energy availability and already established infrastructure in the iron and steel supply chain.

Thus, the country could produce low-emission iron and export this intermediate material for final processing in European steel plants.

According to the IEA, in this scenario, if Western European producers imported low-emission iron produced in Brazil, the additional cost of green steel—currently estimated at around 20% above conventional steel—would drop to levels close to price parity.

Some companies have already advanced in this direction.

Vale, for example, launched iron ore briquettes produced with lower carbon intensity, which can reduce emissions in steel production and meet the growing demand for cleaner steel inputs.

Another initiative is from the British company Brazil Iron, which is developing the Green Iron project in Bahia, focusing on producing ore, pellets, and direct reduced iron briquettes with low emissions, supported by renewable energy. The project is still under development.

In an interview with CNN, Emerson Souza, Vice President of Institutional Relations at Brazil Iron, highlighted that although the company is not yet producing the input, it already has contracted European customers, which he says reflects the growing demand for lower-emission raw materials.

“In this context, Brazil Iron is positioned to meet this demand. Construction begins in 2026, with operations scheduled to start in 2030. The first ten years of production are already contracted with strategic customers in Europe and Asia,” he said.

In the executive’s assessment, the trend is expected to intensify given the anticipated growth in demand for lower-emission inputs.

“McKinsey & Company estimates a shortage of 109 million tons of green iron as early as 2031. It’s a scarcity scenario that will guide investment decisions from now on,” Emerson concluded.

Source: IEA Sees Brazil’s Iron Ore as Key to Europe’s Green Steel.