An update to our previous insight: “Green steel – pressing the accelerator with the handbrake on”
The escalation of the US–Iran conflict in 2026 has reinforced a reality already emerging in the steel sector: decarbonisation is no longer just a technology transition—it is a geopolitical and energy system challenge. What has changed in recent months is not the destination, but the structure of the journey. Rising energy costs—particularly for natural gas—are not only slowing the transition, they point towards where and how steel might be made in the years ahead. Based on the emergence of a global market for traded iron units, the gradual decoupling of ironmaking and steelmaking should not be discounted as a possibility. As upstream inputs to steelmaking become more geographically and operationally distant, the accounting and assurance of their associated carbon emissions becomes both more complex and more critical.
Energy shock as the catalyst
The US-Iran war has tightened global energy markets, pushing up natural gas prices and increasing volatility—particularly for import-dependent regions such as Europe, Japan and Korea.
For steelmakers, the implications are immediate:
This is especially significant because natural gas underpins one of the key climate transition pathways: gas-based direct reduced iron (DRI). Yet gas itself is volatile, geopolitically exposed, and increasingly expensive.
Decoupling iron and steel: marginal or mainstream future?
While integrated production remains the dominant model today, there is evidence that ironmaking and steelmaking could, to some extent, decouple geographically over time. The key enabler of decoupling is the ability to produce and transport iron in intermediate forms such as DRI and hot briquetted iron (HBI).
This expansion provides the physical basis for a more modular system.
At present, global trade in DRI/HBI remains limited: only around 5–6% of production is traded internationally. However, this is expected to change dramatically. Direct-reduction technology provider Midrex expects global demand for direct-reduced iron and hot briquetted iron to reach 180 million metric tons by 2030. Currently, DRI and scrap account for approximately 5%-7% and 30%-32% of the total global metallics mix, with hot metal accounting for the remainder. This is expected to grow to 13%-15% for DRI and 40%-42% for scrap by 2050.
Industry analysis also points to the development of “green metallic hubs”—regions that combine:
In the current environment, this points toward:
While EAFs have traditionally relied on scrap, structural constraints are emerging. As a result, iron ore-based inputs (DRI/HBI) could become an increasingly important complement to scrap. Taken together, these trends point toward a potential reconfiguration of the value chain: iron is produced where energy is cheapest, steel where demand exists.
The accounting and assurance challenge of scope 3 emissions
Decoupling does not just change physical flows—it fundamentally challenges how emissions are measured and attributed. In a world of traded iron units:
This shifts emissions from being primarily site-based (Scope 1 and 2) to being value chain-based (Scope 3). It also puts further pressure on steelmakers to obtain better quality scope 3 emissions data as a precondition to doing business with their suppliers.
Sourcing iron units is no longer just a cost and quality decision—it becomes a carbon strategy decision. Steelmakers must therefore compare suppliers not just on price, but on verified emissions intensity and integrate carbon into procurement and contracting decisions. Two steel products produced in identical EAFs could have very different emissions profiles depending on inputs. This means steelmakers must track emissions at a product or batch level, and then provide customers with product-specific carbon footprints.
Assurance and Verification Become Critical
Given the complexity of global supply chains, self-declared data is not sufficient.
Steelmakers will require:
Standards, including ResponsibleSteel, LESS and C2F, have an important role to play in ensuring consistency of accounting and assurance approaches. But at the same time, customers need to become more active in driving demand for steel products that are certified under one of these Standards.
Inertia and fragmentation
Despite these structural drivers, the shift toward decoupling should not be overstated, as integrated BF-BOF assets represent multi-decade investments in infrastructure, workforce, and supply chains. This creates inertia: decoupling is emerging at the margins, but whether or not it will become mainstream depends a lot on what will happen to future gas availability and prices. The US-Iran war has put further pressure and uncertainty into the steel industry, which may result in a more distributed, globally fragmented system. But this shift also accentuates an existing need: the ability to measure, track, and assure emissions across fragmented value chains. Green steel is no longer just about how steel is made. It is about where each step happens—and how its impact is accounted for.