Close to the Arctic Circle in northern Sweden, work is under way to complete a €6.5bn project that aims to cut the carbon emissions from traditional steelmaking by 95 per cent.
H2 Green Steel expects to begin production of the metal by mid-2026 at its greenfield site in Boden, with ambitions to ramp up supply to the European market initially to 2.5mn tonnes a year, growing to 5mn tonnes annually by 2030.
At the heart of the project is the use of hydrogen — produced through electrolysis using Sweden’s excess capacity of green hydroelectric power — as an alternative to conventional coking coal. Hydrogen gas will be used to reduce iron ore, turning it into hot “green” iron that can then be mixed with recycled scrap and rolled into fresh steel in electric arc furnaces.
Electrolysers with a capacity of 700MW at the integrated plant are intended to produce 100,000 tonnes of the gas per year, making it one of Europe’s biggest planned green hydrogen facilities.
The venture’s planned steel output remains modest compared with the 152mn tonnes a year that trade body Eurofer, the European Steel Association, calculates is produced across the EU. But Boden’s backers hope the plant will serve as a blueprint for decarbonising steelmaking elsewhere in the trading bloc, and beyond.
The need to decarbonise the industry is pressing worldwide. Steel production remains heavily dependent on coking coal in traditional blast furnaces, which produces huge amounts of carbon dioxide. Electric arc furnaces typically used in the recycling of scrap or final stages of steel production are less carbon-intensive but can also be highly polluting, depending on the carbon footprint of their electrical power supply.
Overall, steel production is calculated to be responsible for 7-9 per cent of the world’s annual CO₂ emissions, according to the World Steel Association. Using hydrogen instead of coal in the process, however, produces water vapour rather than carbon dioxide.
Henrik Henriksson, chief executive of H2GS, says: “This is our first project, not our last.” The company has also identified Canada, Brazil, the US and Portugal as locations that — given the development of sufficient renewable energy — could also be suitable for hydrogen-powered plants.
But the short-term fortunes of the Swedish steelmaker depend on securing a market of customers prepared to pay a premium for green steel, instead of “brown” steel produced in conventional and coal-fuelled blast furnaces.
“There is a green premium over the brown steel index — people are paying 25 to 30 per cent more for green steel,” admits Henriksson.
The company has secured “take or pay” contracts covering half its initial output target from manufacturers prepared to pay more for cleaner steel to reduce emissions in their supply chains. These include the vehicle makers BMW, Porsche, Volvo Group and Scania.
Rival Swedish green steel venture Hybrit — a consortium formed from the country’s leading steelmaker SSAB, hydropower provider Vattenfall and iron ore producer LKAB — has already successfully delivered “fossil-free” steel from its hydrogen-fuelled pilot in northern Sweden. It now plans full-scale production by the end of the decade.
Other European incumbent steelmakers are also accelerating attempts to reduce their greenhouse emissions, in part backed by government subsidies that are aimed at protecting jobs in traditional rust belts. ArcelorMittal, Thyssenkrupp, Salzgitter, Saarstahl and Voestalpine of Austria, and Tata Steel are among those to have announced similar projects.
The Leadership Group for Industry Transition (LeadIT), a UN-backed group that monitors progress in reducing greenhouse gas emissions, is tracking efforts by the steel, cement and other heavy industries to decarbonise. Its latest Green Steel Tracker, in April, identified 99 publicly announced investments aimed at decarbonising primary steel production, which excludes secondary recycling.
Eileen Torres-Morales, lead analyst on the research, notes that hydrogen direct reduction remains the leading method for low-carbon projects — the bulk of which are in Europe.
But LeadIT is also tracking other technologies — such as molten oxide electrolysis and deployment of natural gas along with carbon capture and storage — in schemes aimed at cutting emissions by at least 50 per cent.
Per Andersson, head of the LeadIT secretariat, says progress in adopting green industrial technology is needed at a scale and pace not seen before.
The latest survey revealed a slowdown in new project announcements in Europe but a wider spread of new investments globally. These included a full-scale hydrogen direct reduction (H-DRI) project by China’s HBIS in Inner Mongolia and a “hydrogen-ready” project by Jindal Steel in Oman.
Even so, for all this growing interest in low-emissions steel, the sector is far from being on track to meet net zero ambitions.
A report produced by LeadIT in collaboration with Global Energy Monitor (GEM) last October suggested that planned capacity for coal-based blast furnaces is 208Mtpa (million tonnes per annum) — which is two-and-a-half times that planned for greener iron and steel production. That trajectory has not shifted significantly since, says Torres-Morales. “We need to flip that number.”
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ArcelorMittal, the world’s second-largest steel producer and Europe’s biggest, has won €3bn of state support within the EU for greener projects. These include switching from coal-fired to electric arc furnacing, and using direct reduced iron (DRI) facilities, in which natural gas can be replaced by green hydrogen in the reduction process.
Still, ArcelorMittal notes that lowering the carbon emissions of steelmaking across Europe will require access to competitively priced natural gas, renewables and green hydrogen — and development of clean energy infrastructure, particularly for green hydrogen, has been slow. “Green hydrogen is therefore not expected to be available at scale in Europe by 2030,” the company predicts.
Despite this, ArcelorMittal is developing low-carbon steel supplies for customers willing to play green premiums. Here, the EU emissions trading system — involving the phased retirement of existing carbon emission permits and tougher carbon taxes — will be key to further conversion to green steel in the bloc and beyond.
According to ArcelorMittal, more must also be done to ensure that the EU’s Carbon Border Adjustment Mechanism prevents pricier, greener steel and other products in Europe from being undercut by importers, when it comes into effect in 2026.
Henriksson expects the ramping up of carbon taxes and emission regulations to encourage cleaner production across the EU, levelling the playing field and raising the price of brown steel.
As the cost of brown steel increases, he predicts, “the green steel price will follow that”.