Green steel production requires hydrogen price below $2/kg

The price of renewable hydrogen needs to fall below $2/kg to make green steel cost-competitive with conventional products, global steelmaker ArcelorMittal says.

“Calculations show that the price has to fall below $2/kg, closer to $1/kg, to compete with current steel production prices,” said Irina Gorbunova, head of M&A at ArcelorMittal, who attended the Reuters Hydrogen 2022 conference yesterday.

“I am sure that we will achieve this, but everything should fall into place,” Gorbunova said. “We need technological breakthroughs, which is why we launched our innovation fund and acceleration program. We need to incentivize steelmakers to switch to low emission steel and we need more collaboration.”

ArcelorMittal has joined Spain's 7.4 GW hydrogen hub project, which is expected to eventually produce renewable hydrogen at a cost of €1.5/kg ($1.58/kg), Gorbunov said. “We need to speed up these projects,” she added.

Another option to make green steel competitive could be to raise carbon taxes on carbon-intensive steel, Linde Gas CTO Amitabh Gupta said. “With carbon taxes of $90 a ton, raw steel is not cost competitive. But raising CO2 prices to $120 per ton will make it competitive,” he said.

Industrial gas company Linde gets about 13-14% of its $31 billion sales from the steel industry.

The first buyers of green steel, panellists said, would be sectors such as the automotive industry, which could get a premium for the 1-2 tons of steel they need without hitting margins too hard.

“Car manufacturers can cut their emissions by 60 percent while increasing the cost of a car by just 1-2 percent, about 600 euros. Models ID.3 and ID.4 [Volkswagen] are already positioned as carbon neutral,” said the head of the Swedish company H2 Green Steel. said purchasing officer Louise Orre.

Green hydrogen costs will need to drop markedly in the coming years to fall below the $2/kg threshold set by ArcelorMittal. Argus calculates that the prevailing cost for hydrogen produced in NW Europe using a 100 MW polymer electrolyte membrane (PEM) cell and integrated wind power is $8.07/kg, including capital costs. However, production costs are already much cheaper elsewhere with more abundant renewable energy sources. The cost of hydrogen produced on the US West Coast using combined wind and solar power is $4.19 per kg.

Aside from price, the main challenge for green steel is securing the huge volumes of hydrogen needed and ensuring a steady supply to steel mills, which has so far kept some steelmakers from committing to hydrogen.

“It would take something like doubling the current global production of hydrogen to transform the entire 2 billion tonne steel market… the scale is colossal,” Gupta said.

“We don’t want to find out what happens when a glass or steel furnace that has been running for 15 years suddenly stops,” he added.