Report Highlights

Electric arc furnaces at a turning point: Market Overview

The global electric arc furnace market is valued at USD 8.2 billion in 2024 and is advancing toward USD 15.6 billion by 2034, driven by a fundamental reorientation of steelmaking away from blast furnace-basic oxygen furnace routes. EAFs currently account for roughly 29% of global crude steel output, but this share is accelerating as decarbonisation mandates tighten across the European Union, North America, and increasingly Southeast Asia. The market encompasses capital equipment sales, digital control systems, electrode technology, and a growing aftermarket service segment that now contributes nearly 35% of segment revenues among leading OEMs.

The defining turning point is the convergence of carbon pricing, green hydrogen commercialisation, and corporate net-zero commitments into a single directional pressure on steelmakers to retire blast furnaces early. The EU's Carbon Border Adjustment Mechanism, phasing to full enforcement by 2026, makes EAF-based production economically superior for export-oriented mills. Simultaneously, the U.S. Inflation Reduction Act's advanced manufacturing credits are incentivising domestic EAF capacity expansion, with Nucor, Steel Dynamics, and North Star BlueScope all announcing greenfield projects. These parallel policy tailwinds create the most favourable regulatory environment EAF technology has faced in three decades.

Key forces shaping electric arc furnace growth

Three forces are translating directly into EAF revenue growth. First, mandatory carbon pricing in the EU is making blast furnace steel structurally uncompetitive for European mills operating under the Emissions Trading System. This pushes major producers including ArcelorMittal and Thyssenkrupp to convert existing integrated mills to EAF routes, generating large capital equipment orders for OEMs like SMS Group and Tenova. Each converted mill represents USD 250–400 million in equipment and installation spend, and Europe has 12 confirmed conversion projects scheduled between 2025 and 2030. Second, the rapid cost reduction in renewable electricity—now below EUR 50 per MWh in Iberian and Nordic markets—removes the longstanding energy-cost disadvantage of EAF versus blast furnace steelmaking, directly improving EAF operating economics for high-volume producers.

Third, the growth of the circular economy and rising scrap steel availability in mature economies provides EAFs with a low-cost, low-carbon feedstock advantage that blast furnaces cannot replicate. The U.S. alone generates over 70 million tonnes of ferrous scrap annually, directly supplying the domestic EAF sector led by Nucor—which operates 25 EAF mini-mills. North America and Europe benefit most immediately from this dynamic, but Japan's high scrap recycling rate also positions its EAF operators favourably. The service and digital upgrade segment, particularly AI-driven process optimisation and predictive electrode management, is growing at a faster rate than hardware sales, creating recurring revenue streams that improve OEM margin profiles significantly.

Barriers and risks in the electric arc furnace market

The most significant structural risk is the uneven global availability of low-carbon electricity. EAFs are only genuinely green when powered by renewable or low-carbon energy sources; in markets like India and China, where coal still generates over 60% of the grid mix, EAF production carries a higher carbon intensity than often acknowledged. This creates reputational and regulatory exposure for producers claiming green steel credentials in those geographies, and limits the market's ability to command the green steel price premium that underpins much of the investment thesis. This is a structural constraint that cannot be resolved by equipment technology alone—it requires energy transition at the grid level, which unfolds over decades, not quarters.

The cyclical risk most dangerous to near-term growth is steel demand softness linked to construction and automotive sector slowdowns. EAF capacity additions are lumpy, capital-intensive investments with 18–24 month lead times; if steel prices weaken as they did in 2023 in Europe, project financing becomes difficult and greenfield orders are deferred rather than cancelled. The 2023 European steel demand contraction of approximately 8% directly delayed two confirmed EAF projects in Germany and France. While this is a cyclical rather than structural risk, it creates meaningful volatility in OEM order books. Structural carbon risk is the greater long-term threat; cyclical demand weakness is the more immediate disruption to revenue forecasts through 2026.

Emerging opportunities in electric arc furnaces

The most credible near-term opportunity is the DRI-EAF integrated route, combining green hydrogen-based direct reduction with EAF steelmaking to produce near-zero-emission steel without dependence on scrap availability. H2 Green Steel in Sweden and HYBRIT—jointly owned by SSAB, LKAB, and Vattenfall—are at commercial pilot stage, with HYBRIT targeting full-scale production by 2026. This route opens a new EAF equipment market segment for larger, higher-temperature furnaces capable of processing hot DRI, requiring distinct engineering specifications from scrap-fed units. The condition for this opportunity to materialise at scale is green hydrogen reaching cost parity below USD 3 per kilogram, which current electrolyser cost trajectories support by 2027–2028 in Nordic and Iberian markets.

The second emerging opportunity is the retrofit and digitalisation of existing EAF installations, particularly in the United States and China, where aging furnace fleets are approaching the end of their designed operational lives. Primetals Technologies and ABB are both targeting this segment aggressively with modular upgrade packages covering power supply modernisation, advanced process control, and heat recovery systems. In China alone, over 200 EAF units were installed between 1995 and 2005 and are candidates for major refurbishment. The condition required for this to generate significant revenue is steel producer profitability recovering to levels that support non-emergency capital expenditure—a threshold that current strip-mill margins in China are approaching but have not yet crossed.

Investment case: Bull, bear, and what decides it

The bull case for electric arc furnaces rests on three simultaneous catalysts: full CBAM enforcement in the EU accelerating blast furnace retirement across European integrated mills, green hydrogen achieving commercial cost targets by 2028 enabling the DRI-EAF route at industrial scale, and U.S. IRA manufacturing credits sustaining a domestic mini-mill construction cycle through 2030. Under these conditions, EAF's share of global steel production rises from 29% today toward 40% by 2034, equipment OEM revenues compound at or above the headline CAGR, and digital service revenues scale rapidly. Companies like Danieli, SMS Group, and Tenova capture USD 1.5–2.0 billion in combined European conversion order value between 2025 and 2028 alone.

The bear case centres on three specific failure modes. Green hydrogen costs remain above USD 5 per kilogram through 2030 due to electrolyser supply chain constraints, eliminating the economic rationale for DRI-EAF investment. Chinese steel overcapacity persists, depressing global steel prices and preventing EAF operators in Europe and North America from recovering the green steel premium needed to justify conversion capital expenditure. Third, permitting and grid connection delays—already evident in Germany's Thyssenkrupp transformation project—push European conversion timelines three to five years beyond current commitments, deferring equipment orders into the 2030s and creating a revenue gap for OEMs that cannot be filled by other geographies at the required scale.

The single swing variable is the price trajectory of green hydrogen. If electrolysis costs cross below USD 3 per kilogram by 2028 as current learning curves project, the DRI-EAF route becomes unambiguously economical, the full bull case activates, and EAF hardware and service revenues outperform the headline forecast. If green hydrogen remains structurally expensive—above USD 4 per kilogram into 2030—the market grows but at the lower end of projections, confined largely to scrap-fed EAF expansion in North America. The bull case is moderately stronger: electrolyser cost reductions are tracking ahead of 2022 projections, and policy support across the EU and U.S. is not weakening.

Market at a Glance

Regional performance: Where electric arc furnaces are growing fastest

Asia Pacific is the largest revenue contributor, accounting for over 38% of global EAF market value in 2024, driven primarily by China's steel output volume—the world's largest—and Japan's high EAF penetration rate of approximately 25% of domestic production. However, Asia Pacific's growth rate trails other regions as China's steel sector faces structural overcapacity and demand headwinds from a slowing property sector. South Korea represents the most dynamic sub-market within Asia Pacific, with POSCO and Hyundai Steel both committing to EAF and DRI investments supported by government hydrogen infrastructure funding through the Korean New Deal framework.

Europe is the fastest-growing region by CAGR, propelled by CBAM enforcement and the EU Green Deal's binding decarbonisation targets. Germany, France, and Sweden are leading in project commitments, with Sweden home to the globally significant HYBRIT and H2 Green Steel projects. North America is the second-largest market by value, anchored by the U.S. mini-mill sector's established EAF dominance—over 70% of U.S. steel is already produced via EAF—making growth here incremental rather than transformational. Latin America, particularly Brazil with its low-cost renewable power, presents a developing opportunity, while the Middle East and Africa benefit from Gulf state investments in DRI production capacity that is feeding EAF-ready feedstock pipelines.

Leading Market Participants

• Danieli
• SMS Group
• Tenova
• Primetals Technologies
• ABB
• Nucor Corporation
• Steel Dynamics
• ArcelorMittal
• POSCO
• Siemens Energy

Where electric arc furnaces are headed by 2034

By 2034, the EAF market reaches USD 15.6 billion, characterised by a bifurcated technology landscape. Legacy scrap-fed EAF mini-mills dominate North America and remain the volume base globally, while the DRI-EAF integrated route emerges as the premium, export-competitive green steel production pathway in Europe and South Korea. Market concentration among equipment OEMs tightens further as the technical complexity of DRI-compatible furnaces and digital process control systems raises entry barriers. The aftermarket and services segment, already at 35% of OEM revenues, grows toward 45% as installed base complexity increases and producers prioritise uptime optimisation over new equipment procurement.

Danieli and SMS Group are best positioned for 2034 due to their early and deep investment in DRI-EAF engineering capabilities and digital furnace management platforms. Danieli's Q-ONE power architecture and SMS Group's SHARC heat recovery technology address the two largest operating cost variables—energy and electrode consumption—giving them a durable competitive advantage that is difficult to reverse-engineer at scale. Primetals Technologies, backed by Mitsubishi Heavy Industries' balance sheet, is well-placed to capitalise on Asian market growth, particularly the South Korean and Japanese decarbonisation programmes. Producers who commit capital to DRI-EAF infrastructure before 2028 secure a structural cost position that late movers cannot replicate through incremental equipment upgrades alone.