Steel production utilising green hydrogen could be the cheapest production method by 2050 and could capture 30-35% of the global market. The cost of green hydrogen production is expected to fall by 60% between 2020 and 2030.

Competitive steel production with green hydrogen could be achieved with availability of green hydrogen at less than US$2/kg. This is estimated to keep the rise in overall steel production cost within 14-18%.

Decarbonising the steel industry could require 60Mtpa of green hydrogen, requiring development of electrolyser capacity of 600-650GW by 2050. This is a more than 450-fold increase in global installed electrolysers, which sits 1,400MW in 2022. For the operation of these electrolysers, up to 1,850GW of renewable energy is required to produce green hydrogen.

48-56kWh is required to produce 1kg of hydrogen, and 50-52kg of hydrogen is currently required to produce 1t of steel. In the case of Germany (the EU's largest steel producer), it would require ~102TWh of renewable energy to fully decarbonise the country’s annual production of 43Mt of steel. This 102TWh of additional electricity demand would correspond to a 18-22% increase in the total demand for electricity in Germany.

Demand for low carbon steel is expected to increase by 240% by 2030 from 83Mt in 2021.

Demonstrating the demand for low-carbon steel, Ford in Europe has signed a MOU with Salzgitter Flachstahl GmbH, ThyssenKrupp Steel Europe AG and Tata Steel Nederland B.V. to secure supply of low carbon steel. Ford targets to use low carbon steel in its all-new, medium-sized crossover to be built at the Cologne Electrification Center in Germany starting from 2023.

Ford previously committed to a 10% use of carbon neutral steel by 2030 by joining the First Movers Coalition earlier this year. The First Movers Coalition is a global initiative harnessing the purchasing power of companies to decarbonize industrial sectors that currently account for 30% of global emissions.

The BMW group has signed an agreement with Salzgitter AG for delivery of low-CO2 steel, BMW plans to use the steel in the Group’s European plants from 2026 onwards. The group has also signed a delivery contract with H2 Green Steel for CO2-reduced steel.

The Green Steel Tracker gathers public announcements on low-carbon investments in the steel industry. The Tracker currently presents 47 projects across 17 countries across a range of different decarbonisation technologies. About two thirds of the projects are in Europe where the largest investments are occurring.

Swedish companies have announced the largest share of investment across 6 projects (US$37bn), followed by a South Korean company (US$8.8bn) and 11 projects announced by German firms (US$0.8bn). The five largest steel producing companies (ArcelorMittal, Baowu, Nippon, HBIS and POSCO) have at least one project on the Tracker’s list.

Swedish companies have announced the largest share of investment across 6 projects (US$37bn), followed by a South Korean company (US$8.8bn) and 11 projects announced by German firms (US$0.8bn). The five largest steel producing companies (ArcelorMittal, Baowu, Nippon, HBIS and POSCO) have at least one project on the Tracker’s list.

Sweden

H2 Green Steel is leading Swedish green steel manufacturing. It has signed a 14TWh power purchase agreement (PPA) with Norwegian Statkraft, for an 800MW electrolyser at its Boden site in Sweden. The PPA will provide 2TWhpa of renewable electricity from 2026 to 2032. 2TWhpa is 30% of the 800MW electrolyser’s power requirements.

The electrolyser will provide hydrogen for steelmaking. The Boden plant will produce 2.5Mtpa of green steel from 2024 and 5Mtpa by 2030. The company targets a production process with up to 95% less CO2 emissions than traditional blast furnace steelmaking.

Demonstrating interest in hydrogen-based Green Steel developments, H2 Green closed its series A equity round of US$84m in May 2021 and announced the first close of its series B round of US$184.7m in August 2022. The final close of the series B round added US$68.4m from Hitachi Energy, Kobe Steel and Kinnevik.

H2 Green Steel also announced that it has received support from leading European financial institutions for its US$3.46bn debt financing.  It has completed conditional commitment letters for US$3.26bn in senior debt with AB Svensk Exportkredit (SEK) and commercial banks BNP Paribas, ING, UniCredit, Societe Generale and KfW IPEX-Bank.

European Investment Bank has provided board’s approval for US$740.41m of senior debt funding for the project. Export credit agencies, including Euler Hermes and the Swedish National Debt Office have also issued letters of intent to provide export credit-linked guarantees of US$1.48bn and a green credit guarantee of US$0.99bn respectively for H2 Green Steel’s senior debt.

Germany

German conglomerate Thyssenkrupp is investing over US$2bn to accelerate its green transformation. The company will construct a hydrogen-powered direct reduction plant in Duisburg, Germany. The hydrogen-powered plants will replace coal-based blast furnaces.

The DRI plant will have a production capacity of 2.5Mt. Iron will be directly reduced with hydrogen. The plant will avoid up to 3.5Mt of CO2 emissions. Awarding of the contract for the construction of the DRI plant is expected by the end of 2022. Production of DRI will start in 2026.

Salzgitter, a steel manufacturer based in Germany, received approval for US$990m from the European Commission for its SALCOS program. Salzgitter will receive US$691m from the German federal government and US$296m from the Federal State of Lower Saxony. Along with this, Salzgitter already approved US$714m for the first stage development.

The company’s SALCOS program is focussed on steel production in three stages until 2033. The first stage of steel production will start with a capacity of 1.9Mtpa by the end of 2025. Two direct reduction plants and three electric arc furnaces will sequentially substitute the blast furnaces and converters. The hydrogen-based path will replace the existing coal-based steel production. In the process around 95% of current carbon emissions, 8Mtpa, will be eliminated.

Additionally, Salzgitter and Sunfire successfully completed the EU-funded ‘GrlnHy2.0’ project by producing 100t of green hydrogen to produce green steel. Since 2019, the project partners have been operating a high-temperature electrolyser with an electrical connected load of 720kW on the premises of Salzgitter Flachstahl. The green hydrogen produced is fed directly to the hydrogen grid of Salzgitter Flachstahl.

South Korea

POSCO Holding has announced its plan to invest US$14bn in green steel technologies. POSCO plans to produce 2Mtpa green hydrogen by 2040 and 5Mtpa by 2050. POSCO aims to achieve green hydrogen sales of KRW30tn (US$23.1bn) by 2050.

POSCO plans to build two electric arc furnaces in 2025 and 2027. Hydrogen-based steel making is expected to start with a demonstration plant of 1tpa capacity by 2028.