In the city of San Nicolás de los Arroyos, located in northeastern Argentina and known for its long-standing tradition of steel production, a new steelmaking complex is being built. This $300 million project has the potential to produce 360,000 tons annually of more environmentally friendly steel. Local enterprises are training the first operators to work with both electric arc furnaces and recycling systems that will supply the factory with raw materials.
When the plant begins operation at the end of 2027, it will become the first steelmaking site for the company Sidersa. Until then, Sidersa specialized exclusively in the sale and distribution of steel products. The company has committed to creating over 300 direct jobs and 3,500 indirect jobs in the community, whose history is closely linked to the smoke and massive pipes of traditional metallurgical production.
These plans, partially financed by a Chinese state bank, aim to reduce the carbon footprint. Sidersa positions the plant as a symbol of low-emission or 'green' steel, which, according to the company, 'the world will want' from Argentina. Since the steel sector accounts for 7–9% of global CO2 emissions, the transition to more environmentally friendly methods has become an urgent task for the industry and policymakers.
Producing steel from recycled scrap in electric arc furnaces, as planned by Sidersa, allows for an emission reduction of approximately 70% compared to the traditional method using iron ore in coal-fired blast furnaces. Although this technology is not new to Argentina, what distinguishes this project is the scale of investment and the political context in which it is being implemented.
However, the environmental friendliness of this steel will depend on the source of electricity and the availability of necessary scrap metal. The process chosen for Sidersa's plant in San Nicolás bypasses the blast furnace stage, which is energy-intensive and high in emissions. According to data collected by the Inter-American Development Bank (IDB), electric arc furnaces accounted for about 57% of steel production in Argentina in 2023.
Nevertheless, the use of an electric furnace itself does not guarantee environmental friendliness. Firstly, the purity of such equipment depends on the power grid, which is currently mainly supplied by gas thermal power plants. Sidersa has stated that it is considering future connection of the facility directly to renewable energy sources. In 2025, variable renewables (solar, wind, small hydropower, biomass, and biogas) covered 18.9% of Argentina's energy needs, and including large hydroelectric power plants, this figure exceeds 40%.
Despite this, the high-voltage grid has reached its capacity limit. Adrián Sergenti, an engineer and political scientist specializing in energy policy, told Dialogue Earth: 'The energy grid in Argentina has been overloaded for more than ten years.' He added that companies will have to decide whether to build their own capacity or cooperate with the nearest renewable energy generator capable of guaranteeing direct supply.
As of 2023, about 70% of global steel was produced using blast furnaces running on coal and basic oxygen furnaces (BF-BOF). Iron ore and coking coal are fed into the blast furnace to produce pig iron, which is then refined in a basic oxygen furnace before being cast into various forms of solid steel. This carbon-intensive process is a key factor in the growth of the steel industry's share of global carbon emissions.
The transition to Electric Arc Furnaces (EAF) can significantly reduce emissions compared to the coal-based BF-BOF route, especially if they operate on renewable energy sources. Most EAFs use recycled steel scrap as a complete or partial raw material to produce liquid steel. In some countries, including the USA, Italy, and Mexico, this method already constitutes the majority of steel production, whereas in China, this share is around 10%.
Direct Reduced Iron (DRI) is also an important component for low-carbon production in EAFs. Also known as sponge iron, it is created by removing oxygen from iron ore using 'reducing' gases, such as hydrogen. However, most DRI is currently produced using fossil fuels, primarily gas, while a small portion is produced using coal.
Therefore, the widespread use of green hydrogen (produced exclusively from renewable energy sources) in iron production is seen as an important potential driver for steel decarbonization. The combination of green hydrogen, DRI, and EAF represents the most mature and technologically feasible path to producing nearly zero-emission steel. Projects producing commercially at this route are currently limited.
Secondly, there is the issue of raw materials—scrap metal. The global scrap metal market faces growing shortages and export restrictions. Alejandro Galdeano, manager of the Sidersa steel plant, told Dialogue Earth that 'our surveys show sufficient availability in the domestic market to supply us with 100% domestic scrap metal.'
However, scrap metal collection in Latin America involves informal networks and transportation logistics, which create their own environmental problems, such as open burning of cables to extract copper and uncontrolled dumping of non-valuable materials. Sidersa is developing a supply plan that considers both large suppliers and cooperation with various local authorities across the country, aiming to create scrap collection points that allow local communities to clean up waste from the environment.
A steel expert consulted by Dialogue Earth, who wished to remain anonymous, explained that the viability of the project depends not only on the chosen technology or access to renewable energy but also on the economic and commercial context. The expert believes that the plant can only reach the planned production level provided there is sustained domestic demand.
The specialist added that achieving the production volume estimated by Sidersa would require 'some miracle.' In his opinion, this is only possible through an unusual growth in local demand for steel or a loss of market share by international competitors such as Acindar, Sipar Acero, or Acerbrás.
If Sidersa can successfully produce lower-emission steel, it could give it a competitive advantage when exporting to jurisdictions with high environmental standards, such as Europe. Since the beginning of this year, the European Union's Carbon Border Adjustment Mechanism has been applied to imports of iron and steel, linking their cost to the carbon emissions embedded in the product.
Currently, production is focused almost entirely on the domestic market for Sidersa. San Nicolás has reason to fear grand promises from companies. The city hosts the historical steel plant complex of General Savio, managed by Ternium Argentina. This company is facing lawsuits regarding waste and wastewater management. In 2023, an expert report prepared as part of an environmental injunction revealed a lack of permits for discharging industrial liquid effluents and the presence of heavy metals in regional groundwater.
Sidersa has also faced an environmental dispute related to the construction of the plant. The NGO United for Life and the Environment (UPVA) accused the company of causing 'huge environmental damage' through the illegal extraction of tosca (material used for leveling and laying foundations on industrial sites) at a quarry near the Ramallo stream without provincial or municipal permission. Civil and criminal cases have been filed, but construction work continues.
According to Sidersa, these accusations concern a supplier who claims the crushed stone was extracted from quarries authorized by the Buenos Aires provincial authority responsible for San Nicolás. Sidersa states that the extraction was carried out legally and with the necessary permits, as stipulated in the contract.
Lucresia Bayer, Director of Institutional Relations for Sidersa, told Dialogue Earth: 'We regret the lawsuit filed, which we are responding to through appropriate legal channels.' Initially, Sidersa sought financing from the private division of the IDB, IDB Invest, and the World Bank Group's International Finance Corporation. These agreements ultimately fell through. Sidersa ultimately decided to self-finance two-thirds of the investment, reducing the need for external funding. Sidersa eventually secured a loan of $100 million from ICBC Argentina, a local subsidiary of the Chinese state-owned industrial and commercial bank of China. This firm assists in purchasing imported equipment for the new plant.
The plant in San Nicolás became the first industrial project to utilize Argentina's Large Investment Incentive Scheme (Rigi). This law, passed in 2024, aims to attract large-scale capital by providing tax benefits and regulatory stability guarantees for up to 30 years. For the ruling party, this is a key tool for ensuring predictability for investors in a country where unstable economics have traditionally hindered confidence.
However, critics, such as the analytical center Fundar, argue that this scheme provides significant advantages to large companies without demanding specific conditions in return, such as environmental guarantees. Guido Zacc, Director of Economics at Fundar, notes: 'Every concession could be linked to a specific goal, and if that goal is not achieved, the concession should be revoked. This is done in other countries, such as Chile, Brazil, or Norway; such schemes only work when the public sector, by granting benefits, requires clear commitments regarding the development of local suppliers, production targets, and employment [...] and in the current climate—regarding renewable energy.'
As of September, project work was 27% complete, and the company expects the first steel production to begin in the first half of 2028. The prospects are ambitious. It remains to be seen whether Sidersa can secure its raw materials, as planned, almost entirely from scrap and low-emission electricity available in the Argentine market, and whether the benefits of the Rigi program will be sufficient to make less environmentally impactful steelmaking technology economically competitive.