Iron and Steel Decarbonization in the MENA Region
2026 Status Report

The Middle East and North Africa region is becoming strategically important in the global low-carbon steel transition. Its main opportunity does not lie in large-scale exports of finished green steel. Instead, it lies in leveraging its existing direct reduced iron (DRI) and electric arc furnace (EAF) base, expanding upstream pelletizing, and growing hot briquetted iron (HBI) capacity, positioning the region to supply low-carbon iron to steel value chains undergoing decarbonization. In 2024, MENA produced around 62.5 million metric tonnes (Mt) of DRI, equivalent to roughly 44% of global DRI output, which gives the region a stronger starting point for hydrogen-based ironmaking than coal-based blast furnace systems.

MENA can build on its natural gas-based DRI experience, renewable energy potential, strategically located port infrastructure in key industrial hubs, and emerging hydrogen strategies to become a competitive supplier of low-carbon iron metallics—particularly DRI and HBI—and potentially develop more complex finished steel segments at a later stage. This sequencing is commercially important because HBI allows ironmaking and steelmaking to be geographically decoupled: energy-intensive iron reduction can take place where renewable power, hydrogen potential, gas infrastructure, ore logistics, and port access are favorable, while downstream steelmaking can remain closer to end-use markets.

The European Union’s Carbon Border Adjustment Mechanism (CBAM) is accelerating this shift. CBAM turns embedded carbon into a market-access and compliance cost, thereby increasing the value of verified low-carbon production. While the legal compliance obligation rests with EU importers, MENA exporters must provide verified emissions data to demonstrate the carbon intensity of their products. For MENA exporters, this creates both risk and opportunity. Carbon-intensive exports to Europe will face higher compliance and cost pressures, especially where producers lack robust monitoring, reporting, and verification (MRV) systems. At the same time, producers able to demonstrate lower embedded emissions may gain a stronger position in European low-carbon supply chains, particularly through DRI, HBI, and other metallic inputs increasingly required by EAF producers as Europe transitions away from blast furnace steelmaking.

The opportunity is reinforced by energy economics. Analysis from the Organisation for Economic Co-operation and Development (OECD) suggests that producing green iron in Egypt and exporting it to Europe could be nearly 25% cheaper than producing hydrogen-based DRI in the EU under modelled scenarios. This indicates a potential regional cost advantage where enabling conditions are in place.

However, the transition faces significant barriers. Green hydrogen supply remains limited and costly, while grid integration, transmission capacity, industrial power-purchase agreements (PPAs), and clean electricity supply remain underdeveloped. DR-grade pellets may constrain DRI and HBI expansion; water-related challenges include desalination concentration and brine disposal.

Regulatory and certification gaps are equally important. Steel-specific decarbonization policies remain uneven, while carbon markets, MRV systems, standards, and certification frameworks remain fragmented. Without credible emissions accounting, low-carbon production may struggle to capture CBAM advantages, bridge green premiums, or build buyer confidence.

Bankability is therefore the primary criterion for moving low-carbon iron and steel production projects from strategy to execution. Projects require long-term offtake, credible hydrogen and power supply, recognized certification, and clear risk allocation. A phased transition can begin with natural gas or blended hydrogen and deepen as cleaner inputs become available, provided financing, offtake, certification, and risk allocation develop in parallel. MENA’s opportunity to supply low-carbon and transition-ready iron depends on converting its DRI base, renewable resources, sovereign capital, and industrial ambitions into bankable, certified, and export-ready value chains.