06/02/26
Q&A: GravitHy expects policy clarity to shape economics
London, 6 February (Argus) — Argus spoke with French direct-reduced iron (DRI)
firm GravitHy's chief executive Jose Naldin to explore the company's strategy,
cost position and partnership plans in a rapidly shifting competitive landscape.
The company is progressing with its Fos-sur-Mer plant, scheduled to begin
production in 2030. Edited highlights follow: Some other green steel companies
will start with natural gas and gradually introduce H2, mostly because of the
price of hydrogen. Does GravitHy plan to use green H2 from the start or have a
similar strategy to others? We follow a different approach. While other projects
adopt gradual strategies, we are fully committed to energy independence and
decarbonisation, and we believe the technology for hydrogen production and its
use in DRI is already mature. Our strategy is to start with hydrogen from day
one. A key advantage of our site in France is access to baseload electricity,
allowing us to produce and use hydrogen on site, which is more cost effective
and technically sound. We will still use some natural gas to add carbon to the
product, but only for carburisation, and hydrogen will be the reducing agent
from the start. This is why we will install significant electrolyser capacity.
GravitHy's competitiveness depends heavily on electricity and hydrogen prices in
the EU. Which EU policy tools and trade measures support your cost position
most? DRI/HBI production has two main costs: energy and cost of capital. Iron
ore is a global commodity, so electricity becomes the differentiator. This is
why choosing France, with its competitive and decarbonised nuclear-based mix, is
essential. But competitiveness also requires a level playing field. Without
strong policies ensuring others follow the same decarbonisation rules, European
producers are at a disadvantage. Europe must remain committed to the Green Deal
and Fit for 55 because decarbonisation is not only about climate, but also about
industrial resilience, sovereignty and security. The fundamentals are set out in
the Clean Industrial Deal and the Steel and Metals Action Plan. What matters now
is implementation. We are waiting for the Industrial Accelerator Act to detail
lead market mechanisms and define green steel in a way that incentivises
resilient European value chains. North Africa, particularly Algeria, is rapidly
scaling low-carbon DRI. Given this growing supply of low cost, hydrogen-ready
DRI/HBI in nearby markets, how does GravitHy position itself competitively while
producing in a higher cost environment? Competitiveness must be analysed
globally and this is where policies matter. Imported material must face the same
carbon costs, and safety and quality criteria. Projects outside Europe also face
rising cost of capital and natural gas prices. When you add these factors
together — plus CBAM payments, transport costs and a strengthened ETS — our
projections show that early in the next decade, GravitHy can be competitive
against natural gas-based HBI imports. There is confusion because people compare
today's HBI prices with future costs for new projects. But the market will
change: free allowances will phase out, CBAM becomes financially relevant and
carbon prices will likely rise. Under these conditions, our modelling shows
competitiveness around 2030. But this depends on EU policy implementation —
especially the Industrial Accelerator Act and a strong ETS — to maintain clear
decarbonisation incentives. Your current schedule targets commercial production
in 2030, with testing beginning in 2029. Is this timeline still valid, given
delays at other European decarbonisation projects? For now, yes. As engineering
and procurement advance, we will confirm the dates. The timeline depends on
permitting and reaching an investment decision, but it remains ambitious and
achievable. It will also depend on the progress of our engineering studies and
procurement strategy. Europe faces tightness in DR-grade pellet supply. Has
GravitHy secured long-term pellets, and how exposed are you to fluctuations? We
have already signed a contract with Rio Tinto, one of our shareholders, for high
grade pellets covering part of our needs. We are in discussions with other
pellet suppliers to complete our strategy. Globally, there is existing pellet
capacity and numerous new projects. If all materialise, there could be
tightness, but this is a bottom-up situation. For the first wave of DRI
projects, supply is sufficient. And if DRI capacity expands significantly,
pellet producers will react as it is an attractive market. Mining companies are
flexible and investment driven. So I am less concerned than many. Our aim is
long-term partnerships across all inputs and we believe our project's value
strengthens this position. GravitHy has recently signed an agreement with
Marcegaglia, which aligns with Marcegaglia's plan to start electric arc
furnace-based flat steel production in Fos around 2028. What does this
co-operation entail? Potential supply agreement or infrastructure sharing? These
projects are still in development, so the goal is to build strong value chains
early. Collaboration is much easier at this stage than after plants are built.
GravitHy, Marcegaglia and Nucor are in the same area and there are many
potential synergies: logistics, infrastructure, circular economy streams,
resource use and environmental co-ordination. If you collaborate too late in
heavy industry, it becomes difficult or impossible because of cost and technical
constraints. The MoU is not a commercial negotiation, it is about exploring how
to make development faster, more efficient, safer and more cost effective
through collaboration. Are you exploring partnerships with northern European
electric arc furnace/mini-mill projects? No. We remain a small but growing team
focused on maximising our project in Fos. We look at northern Europe mainly to
understand how we can support their decarbonisation by supplying the iron units
they need, rather than forming MoUs similar to the one with Marcegaglia and
Nucor. There is only so much we can do with our current size; the focus is on
maximising the project in Fos. By Elif Eyuboglu Send comments and request more
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