A recent agreement between the Swedish start-up H2 Green Steel (H2GS) and the German auto parts supplier Kirchhoff Automotive has established the framework for the procurement of “near-zero-emission steel” over a period of seven years. Valued at $130m, the deal will result in Kirchhoff Automotive receiving green steel produced using green hydrogen and renewables-powered electric arc furnaces beginning in 2027.
H2GS plans to annually produce five million tonnes of green steel by 2030 from a purpose-built facility in Boden, northern Sweden, which is slated for completion next year. The company also intends to produce its own green hydrogen through approximately 1GW of electrolysers, having previously ordered over 700MW of alkaline machines from the German manufacturer Thyssenkrupp Nucera in May of last year.
Michael Rank, the Global Executive Vice-President for Procurement at Kirchhoff Automotive, underscored the demand from customers for products with lower CO2 footprints. He noted that the cost of replacing traditional grey steel with the more eco-friendly green steel would amount to about €300 ($326) per car, a price increase that can be absorbed by customers who are already investing five figures in new vehicles.
In addition to the supply agreement, Kirchhoff and H2GS have committed to ensuring that at least 30% of their steel scrap volumes will be returned to Boden for recycling. Stephan Flapper, H2GS’s Head of Commercial, commended Kirchhoff Automotive’s proactive approach, highlighting the necessity for suppliers in the automotive industry to align with the ambitious plans of progressive car makers.
H2 Green Steel has also secured binding offtake agreements for green steel with major players such as Mercedes-Benz, Porsche, Scania, Cargill, ZF, Marcegaglia, SPM, and Bilstein Group. The company received €4.55bn in financing from European banks and export credit agencies in October 2022, following an equity raise of €1.5bn in September of the same year.
While groundwork at the Boden site has commenced, H2GS is yet to make a final investment decision on its plant, despite initial expectations for this to be completed by the end of last year. It is important to note that the steel production in northern Sweden will not be entirely emissions-free due to the use of pelletised iron ore imported from Brazil and Canada, resulting in embedded emissions of about 40-50kg of CO2 per tonne of steel produced. However, H2GS has pointed out that this will be more than offset by the 1,800-1,900kg of CO2 emissions per tonne of steel avoided by its process.
Kirchhoff Automotive operates 27 plants across 11 countries, with a global presence including the US, China, Canada, Mexico, Germany, Poland, Hungary, Romania, Spain, Portugal, and Ireland. This recent partnership with H2GS marks a proactive stance towards sustainable steel production, supporting the shift towards environmentally-friendly practices in the automotive industry.
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