Steelmaking is a critical part of the global economy, but production is very emissions intensive, accounting for about 7% of annual global greenhouse gas emissions, according to the International Energy Agency. However, there are a variety of options for reducing emissions – from recycling scrap to decarbonising primary iron-ore-based steel.

The key decarbonisation route uses purportedly low-carbon ‘blue’ hydrogen (mostly from natural gas) or ideally carbon-less ‘green’ hydrogen (using renewable sources of electricity and water in electrolysers) to produce ‘direct reduced iron’ (DRI).

According to a report by the Energy Transitions Commission (ETC) on Breakthrough Steel Investment, ‘a pipeline of over 60mn t/y of commercial-scale green steel capacity is planned to become operational by 2030’. Unfortunately, this figure falls well short of the 190mn t/y of ‘near-zero’ production capacity emissions required to keep the steel industry aligned with the 1.5°C pathway to net zero under the Paris Agreement.

Only three major projects worldwide are underway after securing final investment decisions (FID), although many more are in the pipeline. The 5mn t/y H2Green Steel plant in Boden, Sweden, plans to start production at the end of 2025. Construction is also underway on Salzgitter’s 2mn t/y Flachstahl plant in Germany and ArcelorMittal’s 2.5mn t/y Dolfasco plant in Hamilton, Canada.

The ETC maintains there is a viable investment case for green iron and steel, ‘driven by good renewable energy resource availability and supply chains, in combination with favourable policy developments and government support’. Key initiatives include subsidies for renewable energy production under the Inflation Reduction Act in the US and the forthcoming European Union (EU) carbon border adjustment mechanism.

Only three major [green steel] projects worldwide are underway after securing final investment decisions, although many more are in the pipeline.  

Multiple options
There are multiple options for decarbonising steel. 

• The simplest route is to increase scrap recycling. But this commonly relies on using coking coal and has an inherent limit.
• Carbon emissions can be captured and stored (CCS) or CO₂ used in long-lived products.
• But the prime focus should be on developing and deploying steelmaking technologies with near-zero emissions, such as using green hydrogen DRI or electrolytic steelmaking processes.

Experts agree that more research is required to develop technologies to achieve high carbon capture rates of up to 90–95% for green steel making. Currently, there is only one steel plant using CCS at scale, the Al Reyadah project in Abu Dhabi, where the carbon capture rate is less than 50%. What’s more, there are no projects where CCS is used at a commercial scale on basic blast furnace production.

Breakthrough technologies
The front-runner is DRI using low-carbon hydrogen (H2-DRI). This is a well-established technology, and 120mn tonnes of steel was produced using DRI with fossil fuel feedstocks (mainly natural gas) in 2021. Multiple H2-DRI projects have been announced worldwide, according to Green Steel Tracker, which have reached full prototype at scale. H2-DRI projects are underway in Australia; Canada; across Europe in Austria, Belgium, Finland, France, Germany, Netherlands, Norway, Spain and Sweden; in China; South Korea and Oman.

However, few projects have received FID and the window for scale-up to meet net zero targets by 2030 is narrowing. Indeed, the ETC notes that ‘the reinvestment cycles which revolve around the relining (renovation) of blast furnaces span 20 years on average’. Moreover, it continues: ‘With a large share of blast furnaces around the world due for relining in the present decade, failing to transform existing sites with decarbonised alternatives risks locking them in to emissions-intensive production methods for years to come.’

Fortunately, there is some light on the horizon.

A raft of projects underway
In Boden, Sweden, H2Green Steel (a spin-off from battery maker Northvolt) will start producing Europe’s first commercial-scale green steel using green hydrogen in 2025. The steel will be produced using a direct reduction reactor to produce 5mn t/y of green steel (sponge iron) by 2030. H2GS has just raised €1.5bn in equity from an investor group led by Altor, GIC, Hy24 and Just Climate. Mercedes-Benz has signed an agreement with H2GS for green steel supply and has also agreed to receive green steel products from ThyssenKrupp from the second half of 2026.

Swedish steel firm Ovako inaugurated a 20 MW electrolysis system in Hofors in early September, to produce green hydrogen for steelmaking. Ovako plans to use its green hydrogen for industrial heat of scrap metal, rather than using DRI to extract iron from iron ore.

The HYBRIT (Hydrogen Breakthrough Ironmaking Technology) demonstration project plans to replace coal-based blast furnace technology with DRI using fossil-free hydrogen. The Swedish plant will produce about 1.2mn t/y of green steel by 2026, using a 500 MW electrolyser powered by fossil-free electricity, located at Gällivare. The plant is a joint venture of mining operator LKAB, Nordic steel company SSAB and Vattenfall, and will replace two SSAB blast furnaces in Oxelösund. A small pilot HYBRIT plant has run from Luleå since 2021.

Europe’s largest steelmaker, ArcelorMittal, produced its first green steel in 2020, scaling up production from 30,000 t/y to 600,000 t/y in 2022 and is aiming to reduce carbon intensity by 25–30% by 2030 and achieve net zero by 2050. The strategy is centred around using hydrogen in DRI-EAF (direct reduction iron-electric arc furnace) blast furnaces; and expanding its smart carbon route, which also utilises hydrogen. The company successfully tested the use of green hydrogen in production of DRI at its Contrecoeur steel plant in Quebec in May 2022.

Teams at ArcelorMittal in Bremen, Germany, have been developing the first large-scale deployment of green hydrogen using electrolysers to be deployed in the blast furnace tuyeres (the tube, nozzle or pipe through which air is blown into a furnace) and DRI-EAF route.

At ArcelorMittal Dunkirk in France, the company is developing a hybrid DRI process, which uses DRI gas injection in the blast furnace shaft as well as gas injection in the blast furnace tuyeres, with plasma technology to create a reducing gas. In due course this will enable green hydrogen to be injected into the blast furnace.

ArcelorMittal has also teamed up with John Cockerill to build an industrial-scale plant using an innovative electrochemical process to transform iron oxide into iron plates in a carbon-free iron electrolysis plant at low temperature. The iron plates are then processed into steel in an EAF. The Volteron plant is targeted to start up in 2027.

In the US, Boston Metal, a spin-off from the Massachusetts Institute of Technology, is developing a process for direct electrolysis of iron ore, using a similar process to that used for aluminium production.

Plans have also been announced for ArcelorMittal to partner with the Spanish government to invest in a DRI plant in northern Spain. Iberdrola is in discussion with industrial partners including Boston Metal, H2GS and others through the CEO Alliance. Iberdrola is working with Cummins to install an electrolyser plant in Spain to speed up the hydrogen value chain.

The GravitHy consortium plans to build a €2.2bn DRI plant in Fos sur Mer, France, supported by the European Institute of Innovation & Technology, to begin production of 2mn t/y green iron and steel by 2027. This will be the first commercial scale DRI plant in France. Construction begins in 2024.

HyIron in Lower Saxony has commissioned a DRI plant on the site of RWE’s Elmsland gas-fired plant. Project partners in the €3mn plant include HyIron, RWE and Benteler Steel. Testing of the sponge iron is due to start in 2024.

In Japan, Nippon Steel has plans for a green steel plant using DRI. Currently the company uses natural gas to produce reduced iron, but is considering joining an iron ore project which has its own hydrogen plant capable of producing the gas from green electricity.

Supporting Europe’s green ambitions
Creation of a sustainable iron and steel sector will support Europe’s ‘Fit for 55’ package ambitions to decarbonise hard-to-abate industries. Meanwhile, the EU is finalising a new strategy called the Border Adjustment Mechanism, which is designed to make it more expensive for European countries to import cheaper, non-green steel from other parts of the world.

The European green steel market was valued at $47.36mn in 2022 and is expected to reach $1,272mn by 2028, according to analysis by Research & Markets. This market is projected to grow at a CAGR (compound annual growth rate) of 75.2% in this period. Demand is being driven by two key drivers – Scope 3 emission targets and end-consumer demand – say the analysts.

UK lags behind Europe
Meanwhile, the UK lags behind the rest of Europe. According to analysis by the Energy and Climate Intelligence Unit, only one green steel plant was planned in the UK, compared to 38 in the EU in 2021 – where 10 plants have begun to produce green steel.

The single UK project is at British Steel’s Scunthorpe plant, which is part of the Zero Humber initiative. The plan is to use blue hydrogen initially, produced from natural gas by steam methane reforming combined with CCS to catch some of the emissions. Whereas the EU projects mostly plan to use green hydrogen made through electrolysis using renewable electricity, producing no emissions.

In March 2023, the UK government was reported to be ready to provide £600mn to help Britain’s two largest steelmakers switch away from coal-fired blast furnaces. However, ‘the country remains a laggard in green steel circles’, according to Chris McDonald, Chief Executive of the Materials Processing Institute.

Members of the Steel Zero initiative have made a public commitment to buy and use 50% low-emission steel by 2030, setting a pathway to using 100% net zero steel by 2050. Members of the initiative include wind giant Ørsted and Volvo, which aims to sell only electric cars by 2030. Meanwhile, Ford has signed a deal with Tata Steel’s Dutch arm to supply green steel.

Although automakers are an important source of green steel demand, they are only a small fraction of steel demand. BloombergNEF (BNEF) estimates that transport companies account for about 20% of steel consumption, similar to that of heavy and electrical equipment manufacturing, but far smaller than the construction sector which accounts for over 50% of demand.

On average, BNEF estimates that green steel costs 40% more than unabated (emissions) production today. However, its analysis suggests that the costs could fall by 2050, to a level where green steel costs could be 5% less than fossil-based routes, through economies of scale, falling development costs and demand growth. 

However, it’s still early days for the steel sector to truly go green.