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    How Sustainable is Fossil-Free Steel?

    Stockholm (NordSIP) – According to the Worldsteel Association, the global steel industry represents between 7% and 9% of direct emissions from the global use of fossil fuel. The trade association estimates that 1.85 tonnes of CO2 were emitted for every tonne of steel produced on average in 2018. Decarbonising the steel industry thus represents one of the crucial steps in achieving the 2015 Paris Agreement goals.

    To this end, SSAB announced it had successfully produced the world’s first fossil-free steel and delivered it to a customer, on Wednesday, August 18th. The trial delivery is an important step on the way to a completely fossil-free value chain for iron- and steelmaking and a milestone in the HYBRIT partnership between SSAB, LKAB and Vattenfall.

    “The first fossil-free steel in the world is not only a breakthrough for SSAB, it represents proof that it’s possible to make the transition and significantly reduce the global carbon footprint of the steel industry. We hope that this will inspire others to also want to speed up the green transition,” says Martin Lindqvist, President and CEO of SSAB.

    HYBRIT

    HYBRIT aims to decarbonise the steel production process by replacing coking coal (traditionally used in steel production to convert iron ore to iron) with hydrogen made from fossil-free electricity (primarily wind power) and water. A process called direct reduction will replace the current blast furnace process. Instead of producing pollution, the by-product will be water, which in turn can be recovered for the production of hydrogen gas.

    SSAB, LKAB and Vattenfall created HYBRIT, Hydrogen Breakthrough Ironmaking Technology, in 2016, with the aim of developing a technology for fossil-free iron- and steelmaking. In June 2021, the three companies were able to showcase the world’s first hydrogen-reduced sponge iron produced at HYBRIT’s pilot plant in Luleå. This first sponge iron has since been used to produce the first steel made with this breakthrough technology.

    The goal is to deliver fossil-free steel to the market and demonstrate the technology on an industrial scale as early as 2026. Using HYBRIT technology, SSAB has the potential to reduce Sweden’s total carbon dioxide emissions by approximately ten per cent and Finland’s by approximately seven per cent.

    “We’ll be converting to electric arc furnace in Oxelösund as early as 2025. This is the first production site within SSAB to make the transition, and it means that we’ll already be cutting large amounts of carbon dioxide emissions then. This is a major responsibility, one that we’re proud to shoulder, and it brings great opportunities to the region,” Johnny Sjöström, Head of SSAB Special Steels Division, adds.

    The delivery of the first fossil fuel-free steel was welcomed by Jan Moström, President and CEO of LKAB. “It’s a crucial milestone and an important step towards creating a completely fossil-free value chain from mine to finished steel. We’ve now shown together that it’s possible, and the journey continues. By industrializing this technology in the future and making the transition to the production of sponge iron on an industrial scale, we will enable the steel industry to make the transition. This is the greatest thing we can do together for the climate,” Moström says.

    “It’s very pleasing that the HYBRIT partnership is once more taking an important step forward and that SSAB can now produce the first fossil-free steel and deliver to the customer. This shows how partnerships and collaboration can contribute to reducing emissions and building competitiveness for industries. Electrification is contributing to making fossil-free living possible within one generation,” says Anna Borg, President and CEO of Vattenfall.

    Where is the  Electricity Coming From?

    “Industry and especially the steel industry create large emissions but are also an important part of the solution. To drive the transition and become the world’s first fossil-free welfare state, collaboration between business, universities and the public sector is crucial. The work done by SSAB, LKAB and Vattenfall within the framework of HYBRIT drives the development of the entire industry and is an international model”, Ibrahim Baylan, Minister of Trade and Industry of Sweden commented on this occasion.

    Although this is a momentous occasion, it is also important to not lose track of the details. According to HYBRIT’s own estimates, its approach will decrease steel production’s carbon emissions from 1.6 Tons of CO2 to 25Kg of CO2, for every ton of steel produced. However, the decrease in CO2 emissions will require increased electricity consumption. Indeed, HYBRIT’s steel production is estimated to consume 3,488kWh, over ten times the 235KWh consumption of the traditional approach.

    Vattenfall reports that the majority of electricity consumed by HYBRIT comes from wind power. According to official estimates, Sweden’s wind power production totalled 27.6 TWh in 2020. That means that HYBRIT alone would consume over 12% of the existing wind power produced in Sweden. Even if the capacity exists, the added burden created by the new steel-making process cannot avoid straining the grid. As McKinsey noted in a 2020 report on decarbonisation of the steel industry shifting to electric arc furnace (EAF)-based steel production “requires the future supply of renewable electricity to be commercially available.”

    This issue is not the only potential hurdle to the adoption of fossil fuel-free steel. By its own admission, HYBRIT recognises that its steel will cost 20%-30% more than the going market rate.

    Fossil fuel-free steel is an important part of the green revolution. However, while HYBRIT’s progress is encouraging, it is important to make sure that all costs are taken into account and that society be aware of the added electricity costs and the burden it may impose on the grid. Given Swedish hopes to decrease its dependence on nuclear energy, it would be a pity if Sweden needed to import electricity from German coal plants to sustain electricity demand once HYBRIT’s operation scale up. Its steel could hardly be called fossil fuel-free in that case.

    Image courtesy of SSAB

    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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