Analyst Insight: Potential Green Hydrogen in Steel Manufacturing

Green hydrogen produced from renewable electricity is critical to the replacement of fossil fuels in hard-to-decarbonize industries such as steelmaking. Ambitious deployment targets over the next ten years mean that green hydrogen projects are attracting significant investment, especially in Europe. However, greater efforts to promote green hydrogen use in the steel industry are necessary, particularly in regions where industrial decarbonization initiatives are currently under-developed.

The decarbonization of steelmaking will be imperative for meeting global climate targets, as the sector accounts for approximately 7% of global CO₂ emissions. Currently, 70% of steel is produced via the carbon intensive blast furnace-basic oxygen furnace (BF-BOF) route, which uses metallurgical coal and coke for heating applications and reducing iron ore. Approximately 23% of steel is produced from scrap in electric arc furnaces (EAFs). The remaining 7% is largely obtained from natural gas-based direct reduced iron (DRI) production in combination with EAF. The primary methods for decarbonizing steelmaking are equipping BF-BOF plants with carbon capture and storage or using green hydrogen and electricity from renewable energy sources for DRI-EAF. 

This third iteration of Guidehouse Insights’ Hydrogen Electrolyzer Tracker’s Analyst Insight summarizes the key findings of the tracker, outlines important market trends, provides a rundown of carbon reduction pathways, examines the top five steel producing nations, and delivers recommendations for industry stakeholders to increase green hydrogen adoption in steelmaking.