Latest / The Manufacturing Podcast with Fexingo: Factories, Supply Chains, and Industrial Business / How a Swedish Factory Is Making Steel Without Coal
Transcript
- Lucas: There's a factory in northern Sweden, about sixty miles south of the Arctic Circle, that's trying to solve what is arguably the hardest problem in industrial decarbonisation: making steel without coal. Luna: And when you say without coal — conventional steelmaking uses coking coal both as a fuel and as a chemical reagent. It's baked into the process. Lucas: Exactly. About seventy percent of steel today comes from the blast furnace — basic oxygen furnace route. You feed in iron ore, coke, and limestone, blast in hot air, and the coke reacts with oxygen to produce carbon monoxide, which then reduces the iron ore to molten iron. The byproduct is carbon dioxide. Lots of it. Luna: Globally, steel accounts for something like seven percent of CO2 emissions. That's more than the entire aviation industry. Lucas: Right. And unlike aviation, where we're talking about sustainable aviation fuels and efficiency gains, steel has this fundamental chemical problem. The CO2 isn't just from energy — it's from the reaction itself. So you can't just swap in renewables and call it done. Luna: Which is where the HYBRIT project comes in. That's the demo plant in Luleå, right? Lucas: HYBRIT stands for Hydrogen Breakthrough Ironmaking Technology. It's a joint venture between SSAB — the Swedish steelmaker — LKAB, the mining company, and Vattenfall, the state-owned energy utility. They started a pilot plant in 2020 and last year they produced the first batch of fossil-free steel for a commercial customer. Luna: And the key difference is they replace coking coal with green hydrogen. Lucas: Yeah. So instead of the blast furnace, they use what's called a direct reduction shaft. Iron ore pellets go in the top, hot hydrogen gas is injected from the sides. The hydrogen reacts with the oxygen in the iron ore — Fe2O3 plus three H2 gives you two Fe plus three H2O. Water vapor. Not CO2. Luna: So the only byproduct is steam. That's a radically different chemistry. Lucas: It is. What comes out is a solid sponge iron — about ninety-five percent pure iron. That goes into an electric arc furnace — powered by renewable electricity — to become steel. The whole chain, from mine to finished product, is designed to be fossil-free. Luna: And that requires a lot of green hydrogen. Where's it coming from? Lucas: They have an electrolyzer on site, powered by hydroelectricity from the Lule River. Sweden has abundant hydropower, so this plant has access to cheap, clean electricity. But that's one of the big questions about scaling this — not every steelmaking region has that luxury. Luna: And if these conversations have moved your work forward in some small way, there's a simple way to keep them going ad-free. Honestly, if today was worth a coffee to you, that's it — buy me a coffee dot com slash fexingo. It's the smallest ask and it makes a real difference. Lucas: Yeah, listener support is what keeps this show independent. No ads, no sponsors, just the conversation. So if you value that, the link is there. Luna: Alright, back to Luleå. SSAB has committed to converting its entire Nordic production to fossil-free steel by 2026, but that's about one point two million tonnes per year. Global steel production is nearly two billion tonnes. How do you bridge that gap? Lucas: That's the scale challenge. HYBRIT's demonstration plant can produce about one tonne of sponge iron per hour. A commercial-scale direct reduction plant would need to do maybe a hundred tonnes per hour. That's not just building bigger equipment — it's the hydrogen supply. To replace all blast furnaces globally with hydrogen-based DRI, you'd need roughly the amount of hydrogen equivalent to the entire current global hydrogen production. Luna: And most hydrogen today is made from natural gas — so-called gray hydrogen — which emits CO2. So you'd need to scale up green hydrogen production dramatically. Lucas: Right. And that requires massive amounts of renewable electricity. The IEA estimates that if the global steel industry switched entirely to hydrogen-based DRI, it would require about 1,000 terawatt-hours of electricity per year. That's roughly the total electricity generation of India. Luna: That's a staggering number. But the pilot has shown the technology works. What's the next step? Lucas: The next step is HYBRIT's planned commercial-scale plant in Gällivare, also in northern Sweden, which is supposed to start operations around 2026. SSAB is also retrofitting its existing blast furnace in Oxelösund to run on hydrogen. But beyond that, there are competing technologies. Luna: Like what? Lucas: There's a process called molten oxide electrolysis, being developed by a company called Boston Metal. It uses electricity to directly reduce iron ore to molten iron, no hydrogen required. And there's the Hisarna process, which uses a cyclone converter to melt and reduce iron ore in a single step, capturing CO2 for storage. But those are at earlier stages. Luna: So HYBRIT is the most mature, but it's not the only game in town. Lucas: Right. But the economics are still tough. Green steel currently costs about twenty to thirty percent more than conventional steel. That premium is partly because of the cost of green hydrogen, partly because the capital investment is new. But SSAB has signed offtake agreements with Volvo, Mercedes-Benz, and others who are willing to pay a premium for low-emission steel. Luna: And that creates a market pull. Volvo has already started using HYBRIT steel in some prototype vehicles, I think. Lucas: Yeah, they produced the first vehicle made with fossil-free steel in 2021 — a mining truck. Since then they've expanded to passenger car components. Mercedes-Benz has also used it for body panels in some demonstration models. The automakers are under pressure to decarbonize their supply chains, and steel is a big chunk of that. Luna: So there's demand. The question is whether the supply can scale fast enough and whether the cost can come down. Lucas: Exactly. HYBRIT's target is to get the cost premium down to about ten percent by 2030. That would make it competitive with conventional steel plus a carbon price. In Europe, where carbon permits are trading around sixty to seventy euros per tonne, that calculation starts to work. Luna: But what about steel producers in countries without a strong carbon price, like China or India? They account for over sixty percent of global steel production. Can they adopt this technology? Lucas: That's the hard question. China has some hydrogen DRI pilot projects, but they're small. The Chinese steel industry is built around blast furnaces and domestic coal. Retrofitting would be enormously expensive. India, similarly, has limited renewable electricity to spare for hydrogen production. So for now, HYBRIT's model is most relevant in regions with cheap hydroelectricity — Scandinavia, Canada, maybe parts of Brazil. Luna: So we might see a bifurcation in the steel market: green steel for premium markets, conventional steel for the rest. Lucas: That's plausible in the near term. But there are also efforts to retrofit existing blast furnaces with carbon capture. That could be a lower-cost bridge for regions that don't have cheap renewables. But capture also adds cost and doesn't solve the fundamental chemistry problem — you still have to store the CO2. Luna: And if you capture it, you're still emitting if the storage isn't permanent. There's a lot of skepticism about the durability of carbon storage. Lucas: Yeah. So hydrogen DRI is attractive because it eliminates emissions at the source. But it's not a silver bullet. It's a regional solution for now. The HYBRIT project has proven the technology works at a pilot scale. The next few years will tell us whether it can work at a commercial scale and whether the cost can come down enough to matter globally. Luna: So we're watching one of the most important industrial transitions in real time. Thanks, Lucas. Lucas: Thanks, Luna. And thanks to everyone listening. We'll keep tracking this.