Latest / The Pivot Podcast with Fexingo: How Businesses Change Direction and Survive Disruption / How a Steel Giant Pivoted to Green Hydrogen
Transcript
- Lucas: So, steel. It's everywhere. It's in our buildings, our cars, our bridges. But here's the uncomfortable number: making steel accounts for about eight percent of global carbon emissions. That's more than the entire aviation industry. And for decades, nobody thought there was a way around it. Luna: Right, because the chemistry itself is carbon-heavy. You need coal to strip the oxygen from iron ore. That's how it's been done for centuries. Lucas: Exactly. But a Swedish company called SSAB decided that chemistry could be rewritten. They're in the middle of a pivot to fossil-free steel using green hydrogen. And it's not a small pilot project. I'm talking about a full-scale commercial plant that's already delivered steel to customers like Volvo. Luna: Volvo? The truck maker? That's a pretty significant validation. Lucas: It is. And the project has a name: HYBRIT. It's a joint venture with the mining company LKAB and the energy utility Vattenfall. The idea is to replace coal with hydrogen produced using renewable electricity. When you do that, the byproduct is water, not carbon dioxide. Luna: So the steel industry is essentially trying to flip its core chemical reaction. That's a pivot on a molecular level. Lucas: Molecular level, exactly. And it's not just about technology. It's about identity. SSAB has been a traditional steelmaker since 1978. Their whole mindset was about volume and efficiency. Now they're betting their future on a technology that, ten years ago, was mostly a lab curiosity. Luna: What made them decide to go all in? I mean, why not just wait for someone else to figure it out? Lucas: Well, part of it is regulation and customer pressure. European automakers are demanding low-carbon supply chains. And the EU's carbon border tax is making dirty steel more expensive. But honestly, I think it's also leadership. SSAB's CEO has said they want to be the first, not a follower. They saw a window and they're taking it. Luna: And they're not just talking. They've actually built a pilot plant in northern Sweden, and they've started producing steel with hydrogen direct reduction. That's a process that uses hydrogen instead of carbon monoxide to strip the oxygen from the ore. Lucas: And the result is what they call sponge iron, which is then melted in an electric arc furnace. The whole process is powered by hydroelectric power from nearby rivers. So the carbon footprint drops dramatically. We're talking about a potential ninety percent reduction in emissions. Luna: Ninety percent. That's not a tweak. That's a transformation. And it's happening in a region that's been mining iron ore for over a century. Lucas: And that's part of the story. This is a company that could have easily said, we're too big, too old, too locked into our existing plants. Instead, they're literally building a new plant to replace the old one. They're planning to close their traditional blast furnace in Luleå and replace it with the hydrogen-based facility. Luna: That's a massive commitment. You're talking about retiring assets that still have decades of useful life, at least on paper. How do they justify that to shareholders? Lucas: That's the billion-dollar question. And it's not just about capital expenditure. It's about the cost of hydrogen itself. Green hydrogen is still expensive. The electricity needed to produce it is significant. So the economics don't work yet at scale. But they're betting that costs will come down, just like they did for solar and wind. Luna: And that's a bet on policy too. Governments are subsidizing hydrogen projects. The US has the Inflation Reduction Act, Europe has its own green hydrogen strategy. So the risk is partially socialized. Lucas: Right, and that's where you see the pivot strategy: keep your core business alive, but build a new one alongside it. SSAB is still making conventional steel. That's what's funding the transition. But they've set a target to be fossil-free by 2030. That's only about four years away. Luna: That's ambitious. And there's something else that's interesting: they're not just selling steel. They're selling a story. Customers can say, our car is made of fossil-free steel. That's a premium brand play. Lucas: Exactly. And Volvo has already started using it in some concept vehicles. And IKEA has signed up to explore using green steel in their products. So the demand signal is real. The question is whether the supply can scale in time. Luna: But there's a catch, right? Hydrogen is not easy to store or transport. It's a tiny molecule that can leak through pipes. And it's very energy-intensive to liquefy. So the hydrogen has to be produced close to the plant. Lucas: That's why HYBRIT is set up the way it is. The plant is right next to the iron ore mine and the hydroelectric dams. They're creating a green steel cluster. It's a model that could be replicated in places like Canada, Brazil, or Australia, where you have renewable energy and iron ore in the same region. Luna: So this isn't just a company pivot. It's a regional economic strategy. The town of Luleå is essentially reinventing itself. Lucas: And that's a story we don't hear enough. When we talk about business pivots, we usually think of tech companies changing their software. But this is about heavy industry, about physical infrastructure, about thousands of jobs. And it's happening in a remote part of the world. Luna: One thing that strikes me is the timeline. They're not waiting for the technology to mature. They're building it themselves. That's a different kind of risk appetite. Lucas: Well, and there's a sense of urgency. The longer you wait, the harder it is to catch up. And there are competitors emerging. Companies in Germany, like ThyssenKrupp, are also exploring hydrogen-based steelmaking. So if SSAB can get a head start, they can lock in expertise and partnerships. Luna: And before we go deeper into the competitive landscape, I want to say something about what keeps shows like this going. It's not the big networks. It's listeners who decide that a thoughtful business conversation is worth a couple of dollars a month. If you've gotten something out of these episodes, buy me a coffee dot com slash fexingo is where you can support us. It genuinely makes a difference. Lucas: Absolutely. It's how we keep this ad-free and focused on the substance. So, back to SSAB. The technological hurdles are significant, but so is the market opportunity. If they succeed, they'll have a product that's essentially the gold standard for green steel. And that could command a premium. Luna: But there are skeptics. Some say the cost of green steel will always be higher, and that green premiums won't be enough to make it mainstream. What do you think? Lucas: I think the economics are going to improve faster than people expect. Look at what happened with solar panels. In 2000, a solar panel cost about five dollars per watt. Now it's less than fifty cents. The same kind of cost curve is possible for electrolyzers, which are the machines that produce hydrogen from water. Luna: So you're saying the technology will follow a similar learning curve. And governments are also pushing in that direction with subsidies and carbon pricing. Lucas: Exactly. And there's another factor: investor pressure. Institutional investors are increasingly screening for carbon footprint. A steel company with a high carbon intensity might face a higher cost of capital. So the financial calculus is changing, not just the environmental one. Luna: So, in a way, the market is forcing a pivot. But SSAB is also actively choosing it. That's the difference between being proactive and reactive. Lucas: And that's the lesson for any business. You can wait until disruption hits you, or you can anticipate it and remake yourself. SSAB looked at the data, they saw the direction of policy and customer demand, and they made a big bet. Not every pivot is about a new app or a new market. Sometimes it's about rethinking the fundamentals of your product. Luna: And they're also being transparent about the challenges. They've said that the transition will be costly and that they might not have all the answers. But they're committed to trying. Lucas: And that's what sets them apart. They're not just greenwashing. They're actually changing their production process. It's a real, tangible transformation. And it's one that could inspire other industrial companies to think about their own pivots. Luna: I think that's the key takeaway: a pivot isn't just about changing your product or your market. It can be about changing your entire value chain. And SSAB is a great example of that. Lucas: So, as we look ahead, the question is whether SSAB can execute. Can they scale up their green steel production, bring costs down, and win over enough customers to justify the investment? That's the real test. Luna: And it's a test that other industries will be watching. If SSAB can pull this off, it could be a blueprint for making any heavy industry greener. Lucas: And that's a pretty exciting thought. Steel is the backbone of modern civilization. If we can make it clean, we've solved a huge part of the climate puzzle. And it all started with a company that decided to rewrite its own chemistry. Luna: And that's the pivot we'll be following. Thanks for listening.