Latest / The Manufacturing Podcast with Fexingo: Factories, Supply Chains, and Industrial Business / How a Swedish Factory Is Making Steel from Hydrogen
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- Lucas: Last month, SSAB shipped its first commercial batch of fossil-free steel to a European automaker. The steel was made not with coal, but with hydrogen. Luna: I know the HYBRIT project has been in pilots for years, but a real commercial shipment — that feels like a milestone. Lucas: It is. HYBRIT — that's Hydrogen Breakthrough Ironmaking Technology — started in 2016, and they delivered the first test batch in 2021. But this latest delivery was a proper purchase order, not an R&D sample. The automaker hasn't named themselves publicly yet, but they're using it in body panels for a limited-run electric model. Luna: So walk me through how hydrogen actually makes steel. I get that coal is normally used to strip oxygen from iron ore — how does hydrogen replace that? Lucas: Exactly right. In a conventional blast furnace, you feed in iron ore, coke, and limestone, and the coke — which is nearly pure carbon — reacts with the oxygen in the ore to produce CO2. HYBRIT replaces the coke with green hydrogen. The hydrogen reacts with the oxygen to form water vapor instead. So the direct reduction step itself has an emissions reduction of about 90 percent. Luna: And where is the green hydrogen coming from? Electrolysis using renewable electricity? Lucas: Yes. The HYBRIT demo plant in Luleå, Sweden, gets its hydrogen from an electrolyzer powered by Swedish hydropower and wind. That's key — the hydrogen has to be green for the whole lifecycle to be low-carbon. If you used hydrogen from natural gas, you'd just shift the emissions upstream. Luna: So the steel itself becomes nearly carbon-free. What's the catch? Cost? Lucas: Cost is the big one. Green steel today costs about 20 to 30 percent more than conventional steel, depending on the price of electricity and electrolyzers. SSAB isn't disclosing the exact price in this commercial deal, but analysts estimate it's a premium of several hundred euros per ton. For a mass-market car, that's significant — about 50 to 100 euros per vehicle. Luna: That's not nothing, but for a premium automaker or a company trying to meet net-zero targets, it might be acceptable. Is the auto industry the main buyer? Lucas: Initially, yes. Volvo and Mercedes have both signed letters of intent. But HYBRIT is also eyeing construction and heavy machinery. The steel industry globally produces about 1.9 billion tons per year and accounts for around seven to nine percent of global CO2 emissions. If you can decarbonize even a slice of that, the impact is enormous. Luna: Right — and the EU's Carbon Border Adjustment Mechanism is going to make imported steel more expensive if it's carbon-intensive. That gives European producers like SSAB an advantage if they can scale fast enough. Lucas: Exactly. The first commercial plant, which is supposed to be operational by 2029, aims to produce 2.7 million tons of fossil-free steel per year — that's about a third of SSAB's current output. But to get there, they need about 700 megawatts of electrolysis capacity just for that one plant. That's a massive amount of green hydrogen infrastructure. Luna: Where does that hydrogen come from? Building dedicated offshore wind just to power one steel plant? Lucas: There are plans for a large-scale electrolyzer plant in northern Sweden that would be powered by new wind farms. The Swedish government has also designated the region as a 'green industrial hub' and is fast-tracking grid connections. But it's not just Sweden — other projects are emerging in Germany, Austria, and even China. The steel giant ArcelorMittal is piloting a similar process in Hamburg. Luna: So we're seeing the beginning of a major technological shift. But there's also a challenge with the existing steelmaking assets — you can't just retrofit a blast furnace to run on hydrogen, right? Lucas: Correct. The HYBRIT process uses a direct reduction shaft furnace, which is different from a blast furnace. So you basically need to build new plants or replace the core reactor. That's very capital-intensive. SSAB is planning to shut down its blast furnaces in Oxelösund and Luleå by the early 2030s and replace them with the new technology. But other steelmakers with younger blast furnaces might hesitate. Luna: I wonder if the first movers will end up with a cost advantage once the carbon pricing really bites. The EU ETS price is already around 80 euros per ton of CO2, and it's supposed to rise. That directly closes the gap with green steel. Lucas: That's the bet SSAB is making. By the time their commercial plant comes online, they expect the carbon cost to make green steel directly competitive. And from a marketing perspective, automakers and construction firms can use fossil-free steel as a differentiator — 'this car was built with hydrogen steel.' Luna: I find that fascinating. What about other industrial sectors that rely on high heat or have process emissions — cement, glass, chemicals? Could hydrogen play a role there too? Lucas: Hydrogen is being explored for cement clinker production and glass melting, but those processes are trickier because the emissions come from the chemical reaction itself, not just the fuel. Still, the steel case is the furthest along, and it's a template for how you replace a fossil feedstock with a clean one. If HYBRIT succeeds, it will prove that even the heaviest industries can decarbonize. Luna: You know, episodes like this remind me why we keep this show free and without ads. The shift to green steel is exactly the kind of structural story that deserves a deep dive, without commercial breaks. Lucas: I'm glad you said that. We deliberately don't run ads on these conversations. If you want to support that choice, the link is buy me a coffee dot com slash fexingo. It's a simple way to help us keep digging into industrial transformations like this one. Luna: Yeah, it's listener support that makes this possible. So if you've gotten value from the show, consider that. And with that, back to steel — Lucas, do you think we'll see a second HYBRIT plant announced this year? Lucas: There's been speculation that SSAB will announce a joint venture with a European energy company to build a hydrogen production facility specifically for the steel plant. I wouldn't be surprised if we see a formal partnership by Q4. The momentum is building. Luna: And what about the downstream? The steel still needs to be rolled and coated — does the green process affect those steps? Lucas: Not significantly. The rolling and finishing are standard electric-arc or gas-heated processes. They still emit some CO2, but SSAB estimates the total lifecycle emissions of HYBRIT steel are less than 100 kilograms of CO2 per ton, versus about 2 tons for conventional blast furnace steel. That's a 95 percent reduction. Luna: That is incredible. So the technology exists, the economics are improving, and the policy tailwinds are strong. What could derail it? Lucas: The biggest risk is if green hydrogen does not become available in sufficient quantity and at low enough cost. If renewable electricity is diverted to other uses, or if hydrogen infrastructure lags, these plants could end up stranded. Also, if the global carbon price collapses or if protectionist policies shield high-carbon imports, the business case weakens. But right now, the trajectory looks positive. Luna: And the automotive shipment was a concrete proof point. It's no longer just a prototype — it's a product. Lucas: Exactly. There's a before and after in industrial history here. I think in twenty years, we'll look back at the HYBRIT shipments as the moment steelmaking turned a corner.