The steel industry, a cornerstone of modern infrastructure, has long been synonymous with high carbon emissions. However, as we face the growing urgency of climate change, a quiet revolution is brewing: green steel production powered by renewable energy, particularly green hydrogen. This innovation isn’t just an environmental necessity—it’s a bold leap into a sustainable future.
Let’s dive into why green steel is critical, how it works, and what it means for the global supply chain.
The Problem: Steel’s Carbon Footprint
Steel production is responsible for about 7-9% of global CO₂ emissions CO₂ emissions in the energy sector, mainly due to the use of coal in traditional blast furnaces. While this share is significant, it should be considered in the broader context of global emissions.
With nearly two billion tons of steel produced each year, the environmental impact is staggering. The demand for greener alternatives has never been more pressing. Businesses and governments worldwide are recognizing that the path to net-zero emissions runs directly through cleaner steel production.
Enter Green Steel: What Is It?
Green steel refers to steel produced without using fossil fuels, primarily through processes that rely on renewable energy. One of the most promising methods involves green hydrogen, which is created through electrolysis powered by renewable energy sources such as wind, solar, or hydropower. When used as a reducing agent in steelmaking, green hydrogen replaces coal, significantly reducing or even eliminating CO2 emissions.
This approach could fundamentally transform the industry, offering a cleaner, more sustainable pathway while addressing the growing demand for environmentally friendly materials.
Figure 1: How green hydrogen is produced (source: Engineering Wind)
How It Works: The Green Hydrogen Pathway
Traditional steel production typically involves a blast furnace, where iron ore is reduced using carbon from coal to produce molten iron. The process releases vast amounts of CO2.
Green steel production, by contrast, employs a Direct Reduction Iron (DRI) process, where hydrogen reacts with iron ore to produce iron and water vapor—a clean byproduct. Here’s how the process looks:
- Hydrogen Production: Green hydrogen is produced through electrolysis, powered by renewable energy.
- Iron Ore Reduction: The hydrogen is used to reduce iron ore in a DRI plant.
- Steel Production: The resulting sponge iron is melted in an electric arc furnace (EAF), powered by green electricity, to produce steel.
This method eliminates the reliance on coal and dramatically reduces carbon emissions.
The Role of Renewable Energy
Renewable energy is key to green steel production, with hydropower playing a crucial role due to its reliability and scalability. Countries like Norway, Sweden, and Canada are leveraging their renewable resources to make steel more sustainable.
Wind and solar power are also gaining importance, while green hydrogen is being explored as a carbon-free alternative in direct reduction processes. By integrating renewable energy, the steel industry can significantly reduce emissions and create a more sustainable supply chain.
The Supply Chain Impact
Raw Materials and Logistics
Green steel demands a fundamental shift in supply chain logistics. The sourcing of renewable energy and green hydrogen adds new complexities, as steel producers must ensure a stable and long-term supply of these resources. Countries with abundant renewable energy potential are poised to become key hubs for green steel production, altering traditional trade routes.
However, transporting hydrogen over long distances presents a major challenge. Since hydrogen must be liquefied at extremely low temperatures or converted into carriers like ammonia for efficient transport, infrastructure and cost considerations play a crucial role in determining where and how green steel can be produced at scale. These logistical hurdles may lead to more localized production, further reshaping global supply chains.
Collaboration Across Industries
Producing green steel isn’t just the responsibility of steel manufacturers—it requires collaboration across the energy, technology, and logistics sectors. Companies like the Swedish steel producer SSAB and the multinational steel giant ArcelorMittal are already pioneering joint efforts. They are working closely with renewable energy providers and hydrogen technology firms to develop and scale green steel production, highlighting the importance of cross-industry partnerships in making the transition successful.
Adoption by Buyers
The green steel movement is also reshaping demand. Automotive giants like Volvo and BMW have begun integrating green steel into their production lines, driven by consumer demand for sustainable products. This trend underscores the importance of green steel in building resilient supply chains.
Challenges and Opportunities
While the potential of green steel is immense, the transition is not without hurdles.
Challenges:
- Cost: Green steel production is currently more expensive than conventional methods, primarily due to the high cost of green hydrogen.
- Infrastructure: Scaling renewable energy production and building hydrogen distribution networks require significant investment.
- Supply Chain Complexity: Ensuring a steady supply of renewable energy and green hydrogen adds new layers to supply chain management.
Opportunities:
- First-Mover Advantage: Companies that adopt green steel early can gain a competitive edge as regulatory pressure and consumer demand for sustainability increase.
- Innovation: The shift to green steel fosters technological advancements in renewable energy, hydrogen production, and steelmaking processes.
- Global Collaboration: The transition encourages partnerships across borders, industries, and sectors, creating a more interconnected and resilient global economy.
A Case Study: HYBRIT Project
One of the most prominent initiatives in green steel production is the HYBRIT (Hydrogen Breakthrough Ironmaking Technology) project, a collaboration between Swedish Steel AB (SSAB), Luossavaara-Kiirunavaara AB (LKAB) and Vattenfall in Sweden. HYBRIT aims to replace coking coal with green hydrogen in steel production, potentially reducing Sweden’s total CO2 emissions by 10%.
The project recently delivered its first batch of green steel to Volvo, marking a significant milestone in sustainable manufacturing. HYBRIT demonstrates the feasibility of green steel production and serves as a blueprint for similar initiatives worldwide.
The Road Ahead
As the steel industry transitions toward sustainability, green steel production powered by renewable energy will play a pivotal role. While challenges remain, the benefits—from reduced emissions to enhanced resilience—make this shift an imperative rather than an option.
For supply chain professionals, the green steel revolution offers an opportunity to rethink strategies, embrace innovation, and align with broader sustainability goals. By investing in green steel, businesses can future-proof their operations and contribute to a more sustainable world.
So, as we look toward the future, one thing is clear: the era of green steel is not just on the horizon—it’s already here.
