Major European players invest $105m in Swedish green steel startup

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A number of Europe's leading companies, foundations and funds have invested in a Swedish green steel start-up that aims to build the world's first large-scale zero-emissions steel plant.

An Ikea foundation, Mercedes-Benz and Scania, as well as the Agnelli, Maersk and Wallenberg families and Spotify CEO Daniel Ek, have all invested in H2 Green Steel (H2GS), helping it to raise $105 million (€86.1 million) its first round of financing.

Read more: World’s first large-scale fossil-free steel plant

Other companies, investors and foundations involved in the Series A funding round include Italian steelmaker Marcegaglia, Swedish entrepreneur Cristina Stenbeck, the Angelli-owned Exor, and the Wallenbergs' FAM.

H2GS is planning to begin production in 2024 at a site in Boden-Luleå, Norrbotten, just south of the Arctic Circle. The company aims to produce five million tonnes of emissions-free steel by the end of the decade by using green hydrogen - hydrogen produced with renewable energy - instead of the traditional method of burning coke.

Henrik Henriksson, H2GS CEO, and former chief of truckmaker Scania, told the FT: "It’s the perfect mix of investors that we want to have.

"There is a willingness to help this industry transform and an understanding that this is urgent. We can’t wait until 2050, we need to act now."

Read more: Hybrit hailed one of UN Climate Summit's most ambitious initiatives

H2GS is one of two major green steel projects in the Scandinavian country, its main competition being the Hybrit project, which is a partnership between iron ore miner LKAB, steelmaker SSAB and energy company Vattenfall. It has been estimated that Hybrit alone will require the energy equivalent of around one-third of Sweden's current supply.

The two Swedish projects are seen as the vanguard in the steel industry's green transition. One of the so-called harder-to-abate sectors, at present, steel production accounts for 7-9% of total global direct fossil fuel emissions.

Similar projects are also being developed by ArcelorMittal and Austria's Voestalpine, though the two Swedish projects are further ahead. A number of other companies are developing technology to produce the alloy from molten oxides using electricity. These are also at an earlier stage.

"There will be enough power," said Henriksson, who said that Sweden had a current overcapacity, a host of new wind farms, and will soon end energy exports to neighbouring Finland when its recently completed nuclear plant comes on line.

Read more: After long delays Europe's largest nuclear reactor gets go-ahead in Finland

Other investors in H2GS's Series A funding include the family behind shipping giant Maersk, Ikea's Imas Foundation, Spotify CEO Daniel Ek and Swedish investment group Vargas.

Henriksson stressed the importance of making an immediate start on cleaning up the steel industry, though both H2GS and Hybrit have a long way to go to reach traditional production levels. In 2019, 158 million tonnes of the alloy was produced in Europe, according to industry figures.

Both the green steelmakers are planning to use the direct reduction method for production. This method makes use of electric arc furnaces rather than coke-blast ones.

Some analysts have said that blast furnaces will still account for 50% of steel production in 2050 - the EU's goal for carbon neutrality. The slow turnaround is due to problems with accessing cheap renewable energy, as well as the young age of many steel plants in China and India.

Read more: Operations begin at Sweden's HYBRIT fossil-free steel plant

Hybrit is aiming to produce 2.7 million tonnes of fossil-free iron, which will be used by SSAB and other steelmakers by 2030. The group opened a pilot plant in August 2020 and aim to provide green steel for machines and vehicles from Volvo Group as early as this year.

H2GS aims to raise €2.5 billion in its Series B funding round over the next 12 months, with some €1.8 billion of that coming from debt and the remainder in equity.

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