Latest / The Manufacturing Podcast with Fexingo: Factories, Supply Chains, and Industrial Business / How a Swedish Factory Is Making Steel from Hydrogen
Transcript
- Lucas: Luna, I want to talk about the single most carbon-intensive industrial process on the planet — the one responsible for roughly 7 percent of global carbon dioxide emissions — and what one Swedish factory is doing about it. Luna: You're talking about steelmaking, right? That statistic always gets me — steel is everywhere, but we almost never think about what it costs the atmosphere. Lucas: Exactly. And the traditional process is brutal: you take iron ore, you blast it with coking coal at about 1,100 degrees Celsius, and that chemical reaction — it's one of the hardest things to clean up. But there's a plant in northern Sweden, in a town called Luleå, that's trying a fundamentally different approach. It's called HYBRIT — Hydrogen Breakthrough Ironmaking Technology. Lucas: And before we really dig into this — and I mean this genuinely — if these conversations have moved your work forward in some small way, the whole reason this show stays ad-free and independent is because of listeners who chip in. Honestly, if today was worth a coffee to you, that's the link — buy me a coffee dot com slash fexingo. Luna: Yeah, it's a tiny thing that makes a big difference for us. And honestly, HYBRIT is one of those stories that makes you feel like the future might work after all. Lucas: Alright, so back to HYBRIT. The key innovation is replacing coal with hydrogen. Instead of carbon monoxide stripping the oxygen from iron ore — which creates CO2 — you use hydrogen gas. The only byproduct is water vapor. Simple in theory, incredibly hard in practice. Luna: How hard are we talking? Like, what's the scale of the facility? Lucas: The pilot plant in Luleå has been operating since 2020. It's not a full-scale commercial mill — it produces about one metric ton of fossil-free iron per hour. Compare that to a typical blast furnace, which can produce 10,000 tons per day. So we're talking about a proof of concept that needs to scale by a factor of thousands. Luna: But it's backed by some heavy hitters. SSAB, LKAB, and Vattenfall — that's the steelmaker, the iron ore miner, and one of Sweden's biggest energy companies. They've poured over a billion euros into this. Lucas: Right. SSAB is the steel producer, LKAB provides the iron ore, and Vattenfall supplies the renewable electricity needed to make green hydrogen via electrolysis. In 2024, they delivered the first batch of fossil-free steel to Volvo — for use in an electric truck. That was a landmark moment. Luna: What was Volvo's reaction? I mean, they're paying a premium, right? Lucas: Volvo has said publicly that they intend to use fossil-free steel in all their vehicles eventually. But yes, right now green steel costs about 20 to 30 percent more than conventional steel. The question is whether that gap closes as hydrogen production scales and carbon pricing increases. Luna: And the hydrogen itself — where's it coming from? Because green hydrogen is only as clean as the electricity used to make it. Lucas: Exactly. Vattenfall is supplying hydroelectric power from northern Sweden's rivers. That's key — Sweden has one of the cleanest grids in the world. If you tried this in a region powered by coal, the hydrogen would be 'grey' or 'blue,' and the climate benefit would shrink dramatically. HYBRIT works because of geography and existing clean energy infrastructure. Luna: So this isn't a drop-in solution for, say, a steel mill in China or India — where most of the world's steel is made. Lucas: Not yet, no. But the process itself — direct reduction using hydrogen — can be replicated. The challenge is the green electricity. A single commercial-scale HYBRIT plant would require about 15 terawatt-hours of electricity per year. That's roughly 10 percent of Sweden's total electricity consumption. For one plant. Luna: Whoa. Let me just sit with that. So scaling this globally would mean building a truly staggering amount of renewable generation capacity. Lucas: Exactly. And that's why many analysts think green hydrogen-based steel won't be cost-competitive until at least 2035. But the HYBRIT partners are already planning a full-scale demonstration plant in Gällivare, further north, aiming for commercial production by 2030. Luna: Is anyone else doing this? Or is HYBRIT really the only game in town? Lucas: There are other projects. ArcelorMittal has a pilot in Hamburg using hydrogen. ThyssenKrupp has one in Duisburg. And Boston Metal — a spinout from MIT — is trying an entirely different approach using molten oxide electrolysis, which bypasses hydrogen entirely. But HYBRIT is the furthest along in terms of actually delivering commercial product. Luna: It's interesting — the approach that's winning so far is the least technologically exotic. It's just very, very hard engineering. Lucas: Right. The direct reduction process itself isn't new — it's been used with natural gas for decades. The novelty is swapping natural gas for hydrogen. That means dealing with hydrogen's unique properties: it's the smallest molecule, so it leaks through seals; it's highly flammable; and it embrittles steel pipes. The HYBRIT team had to redesign pretty much every component that touches the gas. Luna: I want to get to the economics again. You mentioned a 20 to 30 percent premium. Is that purely the cost of hydrogen, or are there other factors? Lucas: It's mostly the hydrogen. Currently, green hydrogen costs about 3 to 6 euros per kilogram to produce. To be competitive with coal-based steel, you need that down to around 1.5 euros. That requires cheaper electrolyzers and much cheaper renewable electricity. Some analysts think the learning curve will get us there, but it's not guaranteed. Luna: And then there's the iron ore itself. Does HYBRIT require a higher-grade ore than conventional blast furnaces? Lucas: It does. Direct reduction needs ore with at least 67 percent iron content, ideally higher. LKAB is upgrading their mines to produce that grade. But globally, high-grade reserves are limited. That's another constraint on how fast this can scale. Luna: So we've got cost, ore quality, renewable energy — three bottlenecks. But the European Union is betting big on hydrogen anyway. Is policy going to tip the scales? Lucas: Policy is crucial. The EU's Carbon Border Adjustment Mechanism — the carbon tariff — will make imported steel more expensive if it's produced with coal. That could narrow the price gap significantly. And Sweden has a carbon tax that already makes fossil-based steel more expensive domestically. Luna: Are there any customers besides Volvo who've signed up? Lucas: Yes. Scania, the truck maker, has agreements. And a few automotive suppliers. But it's still very small-scale. The total fossil-free steel produced so far is measured in hundreds of tons, not millions. That's why the Gällivare plant is so critical — it's supposed to produce 1.35 million tons per year by 2030. Luna: Put that in context: global steel production is about 1.9 billion tons per year. So one plant, even a big one, is a drop in the bucket. Lucas: But a catalytic drop. If HYBRIT proves the economics work at scale, it opens the door for dozens of similar plants. And there's a demonstration effect: SSAB has already announced plans to phase out all its blast furnaces in Sweden by 2045. Luna: That's huge. That's a major steel company committing to a full transition. Lucas: It is. And it's made possible by the fact that they have a clear pathway: hydrogen from hydro, high-grade ore from LKAB, and a customer base willing to pay a premium. But the rest of the world doesn't have those advantages. So the question is whether HYBRIT becomes a blueprint or a unique case. Luna: Do you think it's more likely to be a blueprint? Or is this a Scandinavian special? Lucas: I think it's both. The technology itself is transferable. But the enabling conditions — cheap renewable electricity, high-grade iron ore, strong carbon pricing, a culture of industrial collaboration — those are harder to replicate. That said, if the EU carbon tariff is applied aggressively, it creates a powerful incentive for steelmakers elsewhere to find their own version of HYBRIT. Luna: So the next five years are going to tell us a lot. If the Gällivare plant comes online on time and on budget, that changes the conversation globally. Lucas: Exactly. And there's another angle: the hydrogen itself. HYBRIT is also a driver for electrolyzer manufacturing and hydrogen infrastructure. Even if steel doesn't fully decarbonize, the learnings from this plant will accelerate hydrogen deployment in other hard to abate sectors like shipping and chemicals. Luna: It's like the moon shot for industrial decarbonization. And it's happening in a town of 76,000 people in northern Sweden. Lucas: Which is kind of fitting. Some of the most transformative manufacturing stories come from places that just get on with it. No hype, just engineering. Luna: I'd love to revisit this in 2030 to see where we are. Lucas: We will. And by then, maybe the answer to the question 'can we make steel without coal?' will be a definitive yes.