Green steel needs hydrogen price below $2/kg

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

"Calculations show the price needs to fall below $2/kg, closer to $1/kg, to compete with current level steel making price," ArcelorMittal's head of mergers and acquisitions Irina Gorbounova told attendees at Reuters' Hydrogen 2022 conference yesterday.

"I'm positive we will reach this, but things must fall into place," Gorbounova said. "We need technological breakthroughs which is the reason we launched our innovation fund and accelerator programme. We need to incentivise steelmakers to switch to low emission steel, and we need more collaboration".

ArcelorMittal joined Spain's 7.4GW hydrogen hub project which is expected to produce renewable hydrogen at €1.5/kg ($1.58/kg) eventually, Gorbounova said. "We need to accelerate those projects," she added.

Another option to make green steel competitive would be to increase carbon taxes on carbon-intensive steel, Linde Gas chief technology officer Amitabh Gupta said. "With carbon taxes at $90/t, green steel is not cost-competitive. But raising CO2 prices to $120/t would make it competitive," he said.

Industrial gas firm Linde receives around 13-14pc of its $31bn sales from the steel industry.

The first customers for green steel will be sectors such as carmakers, which can absorb the premium for the 1-2t of steel they need without taking a large hit to margins, panellists said.

"Car manufacturers can abate 60pc of their emissions while only increasing the cost of the vehicle by 1-2pc, around €600. [Volkswagen's] ID.3 and ID.4 models are already marketed as carbon neutral," Swedish H2 Green Steel's chief procurement officer Luisa Orre said.

Green hydrogen costs will have to fall markedly in the coming years to move below the $2/kg threshold identified by ArcelorMittal. Argus calculates prevailing costs for hydrogen produced in northwest Europe using a 100MW polymer electrolyte membrane (PEM) electrolyser and drawing on integrated wind electricity supply at $8.07/kg, including capital expenditure. That said, production costs are already much cheaper in other places with more abundant renewable power supply. Costs for hydrogen produced on the US west coast, using integrated wind and solar power, are calculated at $4.19/kg.

Aside from price, the main challenge for green steel is securing vast volumes of hydrogen needed and guaranteeing constant supply to the steel plants, which has so far deterred some steelmakers from making hydrogen commitments.

"To convert the whole 2bn t/yr steel market would require something like doubling current world hydrogen production… the scale is gargantuan," Gupta said.

"We don't want to find out what happens when a glass or steel furnace running for 15 years suddenly stops," he added.