San Francisco, Berlin The European steel market is still on the move: while the manufacturers undercut each other with their dates for the market launch of green steel, some buyers are already securing the first quantities from the hydrogen-based production that has yet to be built up – and for years in advance.
Klöckner boss Guido Kerkhoff told the Handelsblatt that with this step the steel trader wanted to secure its customers secure access to the initially scarce raw material from 2025. “Not only large customers such as the automotive industry, but also smaller consumers such as manufacturers of furniture or household appliances have an urgent need for climate-neutral materials.”
95 percent fewer emissions
For example, the production of the flat steel that H2GS intends to manufacture in a completely new plant in Lulea, Sweden from 2025 should cause 95 percent fewer CO2 emissions than previous processes. To do this, the company relies on hydrogen produced with the help of green electricity. The remaining emissions arise during ore mining and transport.
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Overall, the planned plant is designed for a total capacity of five million tons. In perspective, five percent of this will go to Klöckner. “We have the sales structures to bring green steel widely into the market,” says Kerkhoff. The steel is primarily to be processed in the SDax Group’s service centers.
The customers will probably first have to adjust to higher prices. Neither Klöckner nor H2GS want to provide precise information on any additional costs. However, experts reckon that a ton of steel could become more expensive by switching to hydrogen by between 100 and 300 euros.
However, Kerkhoff points out: “Even the recent doubling of the steel price has not made the end products much more expensive.”
Costs are approaching
In an interview with the Handelsblatt, the CEO of H2GS and former head of the truck manufacturer Scania, Henrik Henriksson, was also convinced that the cost of hydrogen production will continue to approach the classic processes. “An important factor here is the development of the CO2 price,” says the manager.
Because the European emissions trading system will make steel produced in the blast furnace much more expensive in the foreseeable future. At present, steel manufacturers still receive around 80 percent of the certificates they need free of charge. But the allowance will continuously decrease to zero until 2045, while the prices for the certificates rise.
The two Swedish manufacturers SSAB and H2GS have an advantage over many German producers. Because the country already covers the vast majority of its electricity needs from climate-neutral energy sources – while the steel industry in Germany is still facing a considerable supply problem here.
If the German manufacturers all wanted to switch their production from coal to hydrogen, they would need more than 12,000 additional wind turbines in the five-megawatt class. Both SSAB and H2GS, on the other hand, rely on hydropower. Sufficient quantities of this are available, at least in northern Sweden.
Many different definitions
As a relatively young company, H2GS in particular receives a lot of support from the established industry. In addition to Klöckner, the partners also include the steelworks supplier SMS, the car manufacturer Volvo, the automotive supplier Bilstein and Mercedes-Benz. In a first round of financing, H2GS raised around 105 million US dollars in the summer.
Of all European manufacturers, the Swedes have so far pursued the most ambitious plans for decarbonised production. Numerous competitors, on the other hand, initially only want to reduce their emissions gradually – and then convert the savings to specific quantities of steel, which are then declared as climate-neutral.
Many experts see this as currently the most practicable way to quickly get started with green steel in the market. However, it is questionable to what extent the market will accept this calculation. Klöckner boss Kerkhoff hopes for clear regulation: “Here the legislature must ensure a uniform definition.”
More: Clever climate offenders: The steel industry has also protected itself against the CO2 price rally