Latest / The Manufacturing Podcast with Fexingo: Factories, Supply Chains, and Industrial Business / How a German Factory Makes Steel with Hydrogen
Transcript
- Lucas: So, Luna, you know how we've talked a lot about factories turning waste into fuel, or using wind power to make ammonia. But today I want to look at something that's arguably the biggest industrial challenge of our time: making steel without coal. Luna: Right, because steel is everywhere, but it's also a massive carbon emitter. I think it's responsible for something like seven to eight percent of global CO2 emissions. Lucas: Exactly. And the traditional process, the blast furnace, uses coke — which is basically purified coal — both as a fuel and as a chemical agent to strip oxygen from iron ore. That reaction is what produces molten iron, but it also produces a ton of CO2. Luna: So what's the alternative? Is there a way to do it without coal? Lucas: There is, and it's called direct reduction. Instead of a blast furnace, you use a shaft reactor where you feed in iron ore pellets and a reducing gas — usually a mix of hydrogen and carbon monoxide from natural gas. But if you use pure hydrogen, the only byproduct is water vapor. Luna: So you're swapping coal for hydrogen. That sounds clean, but I imagine it's not that simple. Lucas: No, it's not. First, you need a lot of green hydrogen, which is made by splitting water using renewable electricity. That's expensive. And second, you need to redesign the entire plant. It's not just a retrofit; it's a fundamental shift. Luna: And that's exactly what's happening in Germany, right? I remember reading about a big steelmaker there. Lucas: Yeah, ThyssenKrupp is one of them. They're building a direct reduction plant at their site in Duisburg, which is the largest steel site in Europe. They aim to start producing green steel by 2026, and eventually ramp up to 2.5 million tonnes a year. Luna: Two and a half million tonnes — that's a lot, but isn't that still a fraction of their total capacity? Lucas: It is. ThyssenKrupp's steel division produces around 11 million tonnes a year. So this is a start, but it's not the whole picture. But it's a huge step because it proves the technology works at scale. Luna: So how does the hydrogen actually work in the direct reduction process? Can you break that down for us? Lucas: Sure. In a direct reduction plant, you have a shaft furnace, maybe a hundred meters tall. You feed iron ore pellets from the top, and they trickle down while hot hydrogen gas is blown in from the sides. At around 600 to 800 degrees Celsius, the hydrogen reacts with the oxygen in the iron ore to form water vapor, leaving behind sponge iron — a solid, porous form of iron. Luna: Sponge iron. I've heard that term before. So it's not molten like in a blast furnace? Lucas: Right, it's solid. Then you take that sponge iron and melt it in an electric arc furnace, which uses electricity to melt it down with other additives to make steel. So you're replacing the coal-based blast furnace with a cleaner, more electric-focused process. Luna: And the electricity for that arc furnace — where does it come from? If it's from coal, you're just shifting the emissions. Lucas: Exactly, that's the key. That's why the whole thing only makes sense if the electricity and the hydrogen come from renewable sources. In Germany, they're planning to use offshore wind power to produce hydrogen via electrolysis, and the arc furnaces will also run on renewables. So it's a whole system, not just a single switch. Luna: It sounds like a massive infrastructure project. How much is this costing? Lucas: ThyssenKrupp has said it'll cost around two billion euros, and they've received substantial government support — something like 2 billion euros in subsidies from the German federal government and the state of North Rhine-Westphalia. Luna: Woah, so it's basically a state-funded bet on the future. Lucas: Yes, and it's not just ThyssenKrupp. Salzgitter, another major German steel company, has a project called SALCOS — Salzgitter Low CO2 Steelmaking. They're also building a direct reduction plant and expect to produce green steel by 2026 as well. Luna: So we have two of Germany's biggest steelmakers going green. But what about the rest of the world? Is anyone else doing this? Lucas: Sweden's HYBRIT project is probably the pioneer. They ran a pilot plant at Luleå and produced the world's first fossil-free steel in 2021, delivered to Volvo. And in the U.S., there are some startups like Boston Metal that are working on molten oxide electrolysis, which is a totally different approach using electricity to directly reduce iron ore. Luna: So there are multiple paths. But the German approach seems to be the most concrete at scale. Lucas: Absolutely. And Germany is interesting because they have a huge industrial base, and they're under pressure to decarbonize. Plus, they have the engineering know-how and the financial muscle to pull off this kind of transition. Luna: I have to say, Lucas, this is exactly the kind of episode that makes the show valuable. It's not just about a factory making a cool product; it's about the future of an entire industry. Lucas: Yeah, and if that's something you appreciate, we want to keep these conversations ad-free and accessible to everyone. The way we do that is through listener support. So if today's episode gave you a new perspective, you can help by buying us a coffee at buy me a coffee dot com slash fexingo. It's a small gesture that goes a long way. Luna: It really does. And honestly, we love doing this, but it does take time and research. So if you find value in what we do, consider supporting us. Lucas: Okay, so back to the steel. One of the big challenges with hydrogen steel is the cost. Green hydrogen is currently about three to five times more expensive than gray hydrogen, which is made from natural gas without capturing the carbon. Luna: So how are they going to make this economically viable? Lucas: There are a few levers. One is that the cost of renewable electricity is dropping, which is the main driver of green hydrogen cost. Another is carbon pricing — if the EU's emissions trading system makes polluting more expensive, that helps bridge the gap. And then there are subsidies, as we mentioned, which de-risk the initial investment. Luna: But even with all that, is the final product going to cost more? Are we going to see more expensive cars and buildings? Lucas: Probably, at least initially. Estimates suggest green steel could cost twenty to thirty percent more than conventional steel. But automakers like BMW and Mercedes have already signed letters of intent to buy green steel, because their customers are demanding lower carbon footprints. So the premium might be absorbed in the final product, but it's still a barrier. Luna: So it's a classic chicken and egg problem: you need demand to scale up production, but you need production to bring down costs. Lucas: Exactly. And that's why projects like ThyssenKrupp's are so important. They're creating the supply that will hopefully trigger a virtuous cycle. Once they prove it works and costs come down, other companies will follow. Luna: What about the existing infrastructure? I know you mentioned retrofitting is hard. But can they at least use some of the old equipment? Lucas: Some of it, maybe. The blast furnaces themselves become obsolete, but things like the casting and rolling lines, the finishing mills, those can be reused. But the core reduction step is entirely new. So it's not a simple swap; it's a major overhaul. Luna: And what about the workers? If you're replacing a blast furnace with a different process, do they need new skills? Lucas: Absolutely. The workforce is going to change. You'll need more people with expertise in hydrogen systems, electrolyzers, and electric arc furnaces. ThyssenKrupp has actually started training programs to retrain their existing workforce. It's a huge social challenge, because you don't want to leave communities behind. Luna: That's a good point. It's not just about technology; it's about people and places. Lucas: Yeah, and that's something policymakers are very aware of. The German government has promised support for the region, but it's tricky. You have towns that have been built around the steel plant for a hundred years, and suddenly the core process changes. It's a delicate transition. Luna: So what's the timeline? When can we realistically see green steel being produced in large quantities? Lucas: ThyssenKrupp plans to have their first direct reduction plant operational by 2026, with an initial capacity of around 1.1 million tonnes. By 2030, they aim to have 2.5 million tonnes. Salzgitter is similar. But realistically, the whole German steel industry might not be fully green until the 2040s. Luna: That's a long way off, but given how fundamental steel is, it's good to know the wheels are turning. Lucas: And it's not just Germany. The EU has set a target of net-zero by 2050, and steel is a major focus. So we're going to see more projects like this across Europe and beyond. Luna: It feels like we're witnessing a historic shift in one of the oldest industries. Lucas: We are. And the interesting thing is that this is happening now, in 2026, not in some distant future. The decisions being made today in Duisburg and Salzgitter will shape what the steel industry looks like for the rest of the century. Luna: I guess the question is whether the rest of the world is watching and learning. Lucas: That's the big one. If Germany succeeds, it becomes a blueprint. If it fails, it'll be a cautionary tale. Either way, it's a fascinating experiment in industrial transformation.