Sweden’s steel industry produced 4.4 Mt of crude steel (3.4 Mt of finished steel) by 2020, which corresponds to 3.2% of the crude steel production (2.5% of the total finished steel production) in the EU-27 and the United Kingdom.

Despite its modest share of the region’s steel production, Sweden has made headlines by being a pioneer in the global race to produce fossil fuel-free steel on a commercial scale. At least two initiatives by HYBRIT and H2 Green Steel, separately, have been launched with the goal of producing 10Mt crude steel annually by 2030.

Sohaib Malik, Wood Mackenzie’s chief analyst, commented: “Sweden’s investment in carbon dioxide emissions in the steel industry signals a significant cost reduction potential for green steel in the coming decades, mainly due to the declining costs of renewable energy sources and green hydrogen and rising coal prices.

“The country boasts Europe’s largest iron ore reserves and excellent renewable energy resources – two primary conditions for the production of green hydrogen and carbon-free crude steel.”

At an equalized electricity cost of USD 30 per megawatt hour (MWh), wind power is a very economical source of electricity production in Sweden today. Further cost reductions are expected with better financing structures for onshore wind power, lower capex for onshore and offshore installations, technical optimization for asset management and government support for offshore grid infrastructure.

Alkaline electrolysis technology will most likely play a key role in the production of green hydrogen, which is crucial for Sweden’s green steel production. Compared to electrolysis of proton exchange membranes, it has a lower capex of 925 USD per kW today and it is expected to be halved by 2030, which enables an equalized cost of 1 USD per kilogram of green hydrogen with land-based wind power.

Senior research director Mingming Zhang said: “We find that a combination of hydrogen from alkaline electrolysis and renewable energy from land-based wind power will produce the most cost-effective green crude steel in Sweden.”

Assuming a carbon price of $ 100 / ton, green steel producers could benefit from $ 85 / ton of carbon credits. Better financing models for onshore wind power and 48% lower capex for alkaline technology in 2025 result in a steel cost of 360-390 USD / tonne in coal price scenarios ranging between 50 USD / tonne and 150 USD / tonne.

Zhang added: “Producing green steel with cost parity to conventional steel in the 2020s is entirely possible if we use natural gas-based direct reduction iron and the electric arc furnace’s steel production as a base.”

Although the HYBRIT and H2 Green Steel projects are backed by industrial heavyweights, some critical parts of the proposed value chain rely on technical solutions that have not yet been tested on an industrial scale, which poses major challenges that must be overcome to meet promises. It is noteworthy that both companies have not yet found solutions for safe and economical storage of hydrogen and demonstrated the commercial success of their technology.

Malik said: “Global steel demand will reach 1.87 billion tonnes / year by 2030, 6.4% higher than 2020. The background to green steel will grow stronger as costs fall. In addition, the success of green hydrogen will produce green steel on a commercial scale to justify the enthusiasm for its ability to accelerate decarburization. “