New steel plant is early test for Argentina’s big investment scheme

San Nicolás de los Arroyos in north-east Argentina is a riverside town with decades of steelmaking tradition. The noise of heavy machinery emanating from a 15-hectare site is the sound of its next era taking shape. A new, USD 300 million steelworks is being built, one with the potential to make 360,000 tonnes of greener steel annually. In local workshops, its first operators are being trained to run both an electric furnace and the recycled scrap processing systems that will feed it.

When it begins operations in late 2027, the plant will be the first steelmaking facility for Sidersa, an Argentine company which, until now, specialised in the marketing and distribution of steel products.

Sidersa has pledged to create more than 300 direct jobs and 3,500 indirect jobs in a community whose history has long been linked to the soot and huge chimneys of traditional steelmaking. But these plans, partly funded by a bank of the Chinese state, require less carbon. Sidersa describes the plant as a symbol of the low-emissions or “green” steel that “the world will want” and Argentina can offer.

With the steel sector accounting for 7-9% of global CO2 emissions, a transition towards greener processes has become a growing imperative for the industry and policymakers. Producing steel from recycled scrap in electric arc furnaces, as Sidersa plans to do, reduces emissions by around 70% on average compared to conventional steelmaking, which uses iron ore in coal-fired blast furnaces.

This is not a new technology for Argentina; what sets this project apart is the scale of the investment and the political context in which it is taking place. However, just how green this steel will be depends on the source of the electricity and the necessary scrap metal.

Cleaner steel needs greener grid and scrap supplies

The process chosen for Sidersa’s San Nicolás plant sidesteps the coal-hungry, emissions-intensive blast furnace stage. In Argentina, electric arc furnaces accounted for around 57% of steel production in 2023, according to data compiled by the Inter-American Development Bank (IDB).

However, using an electric furnace does not automatically make steel production environmentally friendly. Firstly, such a furnace is only as clean as the grid that powers it. The steelworks will be supplied, at least initially, by the national grid, currently dominated by gas-fired thermal power stations. Sidersa has said it is considering the possibility of powering the facility directly from renewable sources in the future.

During 2025, variable renewable energy sources (wind, solar, small-scale hydropower, biomass and biogas) met 18.9% of Argentina’s electricity demand. When large hydroelectric plants are included, that figure exceeds 40%.

However, the high-voltage grid is at capacity. “The electricity grid in Argentina has been saturated for over a decade,” Adrién Sergenty, an engineer and political scientist specialising in energy policy, tells Dialogue Earth. “The company will have to decide whether to build its own facilities or partner with a nearby renewable energy generator that can guarantee its supply directly.”

Secondly, there is the basic raw material: scrap metal. The global scrap metal market is facing growing shortages and export restrictions. “Our surveys show there is sufficient availability on the domestic market to supply us 100% with domestic scrap metal,” Alejandro Galdeano, steelworks manager at Sidersa, tells Dialogue Earth. However, scrap metal collection in Latin America involves informal networks and transport logistics that pose their own environmental challenges, such as the open-air burning of cables to recover copper, and the uncontrolled disposal of non-valuable materials.

Sidersa says it is drawing up a supply plan that takes into account both large suppliers and collaboration with various local authorities across the country. It aims to establish collection points for scrap metals that enable local communities to remove waste from their surroundings.

A steel expert consulted by Dialogue Earth, who asked not to be named, explains that the project’s viability depends not only on the technology chosen, or on access to renewable energy, but also on the economic and commercial context. The expert says the plant will only be able to reach its projected production level if there is sustained demand in the domestic market.

The specialist adds that achieving the scale of production estimated by Sidersa would require “some sort of miracle”. They think it would only be possible via extraordinary growth in local steel demand or a loss of market share by international competitors, such as Acindar, Sipar Acero or Acerbrás.

If Sidersa can successfully produce lower-emissions steel, it could give it a competitive advantage in exporting to jurisdictions with high environmental standards, like Europe. Since the start of this year, the European Union’s Carbon Border Adjustment Mechanism has applied to iron and steel imports, linking their cost to the carbon emissions embedded in those products.

For now, however, production is focused almost entirely on Sidersa’s domestic market.

Mining products being loaded onto cargo ships in San Nicolás de los Arroyos. The city is home to the General Savio steelworks complex, which is facing legal challenges over its management of waste and effluents (Image: Henri Martin / Alamy)

Environmental concerns

San Nicolás has good reason to be wary of grand promises made by companies. The city is home to the historic General Savio steelworks complex, operated by Ternium Argentina. The company is facing legal challenges over its management of waste and effluents. In 2023, an expert report undertaken as part of an environmental injunction highlighted the lack of a permit for the discharge of industrial liquid effluents, and the presence of heavy metals in local groundwater.

Sidersa is also facing an environmental dispute over the construction of the plant. The NGO United for Life and the Environment (UPVA) has accused it of causing “enormous environmental damage” by illegally extracting tosca (a material used to level and lay foundations on industrial sites) from a quarry near the Ramallo stream, without provincial or municipal authorisation. The courts have opened civil and criminal cases. Construction work continues.

According to Sidersa, these allegations relate to a supplier that claims the rubble was extracted from quarries authorised by Buenos Aires, the provincial authority of San Nicolás. Sidersa says the extraction was carried out legally and with the necessary authorisation, as stipulated in the contract.

“We regret the lawsuit that has been filed, to which we are responding through the appropriate legal channels,” Lucrecia Payer, Sidersa’s director of institutional relations, tells Dialogue Earth.

Chinese funding and the Rigi initiative

Sidersa initially sought funding from IDB’s private arm, IDB Invest, and the World Bank Group’s International Finance Corporation. These agreements eventually fell through.

Ultimately, Sidersa opted to finance two-thirds of the investment itself, shrinking the amount of external finance needed. Sidersa eventually secured a USD 100 million loan with ICBC Argentina. This local subsidiary of the Chinese state-owned Industrial and Commercial Bank of China is facilitating the purchase of imported machinery for the new plant.

The San Nicolás plant has become the first industrial project to benefit from Argentina’s Incentive Scheme for Major Investments (Rigi). This law, approved in 2024, seeks to attract large-scale capital by offering tax benefits and guarantees of regulatory stability for up to 30 years. For the ruling party, it is a key tool for providing predictability to investors in a country where turbulent economics have traditionally made certainty hard to come by.

But critics, such as the think-tank Fundar, say the scheme grants significant benefits to large companies without demanding specific conditions in return. For example, environmental safeguards. “Each concession could be linked to a specific objective, and if that objective is not met, the concession should be withdrawn,” says Guido Zack, Fundar’s director of economics. “This is how it is done in other countries such as Chile, Brazil or Norway; such schemes only work when the public sector, as well as granting benefits, demands clear commitments regarding the development of local suppliers, production targets and employment […] and, in the current climate, also in renewable energy.”

Work on the project was 27% complete as of September, and the company expects the first steel production to take place in the first half of 2028.

The outlook is ambitious. Whether Sidersa will manage to source its raw materials, as planned, almost entirely from scrap and low-emission electricity available on the Argentine market, and whether the advantages offered by the Rigi programme will be sufficient to make a steelmaking technology with a lower environmental footprint economically competitive, remain to be seen.