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Investors pour money into green steel

H2 Green Steel's planned factory in Boden, Sweden

H2 Green Steel's planned factory in Boden, Sweden. Photo: Courtesy of H2 Green Steel

Banks, investors and governments are funneling money into major players with plans to produce low-carbon steel.

Why it matters: Steel production is a major contributor to carbon emissions and is one of the most widely used construction materials.

Driving the news: Swedish low-carbon steel maker H2 Green Steel said it's raised €4.75 billion ($5.2 billion) in a combination of project financing debt, equity and a grant to build its plant in the northern Swedish city of Boden.

  • The €4.2 billion in debt was provided by 20 lenders including the European Investment Bank, BNP Paribas, ING, and Societe Generale.
  • The €300 million in equity included new investors Microsoft Climate Innovation Fund and Siemens Financial Service.
  • The €250 million grant was from the EU Innovation Fund.

State of play: H2 Green Steel is the largest low-carbon steel player ramping up in Europe.

  • In the U.S., startup Boston Metal has been amassing its own war chest, closing $262 million in equity in September and $120 million a year ago.
  • Norwegian company Blastr Green Steel is planning a €4 billion low-carbon steel factory in Finland.
  • Major steel makers are also cleaning up, and last year the European Union approved €2.85 billion to help ArcelorMittal and Thyssenkrupp decarbonize steel production.

Of note: Microsoft Climate Innovation Fund has now backed both Boston Steel and H2 Green Steel, highlighting how the corporate tech VC is leaning into hard-to-abate sectors.

Meanwhile, Northern Sweden is quickly emerging as a major player in Europe's climate tech industry as H2 Green Steel and battery maker Northvolt build plants there.

How it works: H2 Green Steel makes hydrogen using clean electricity and uses the hydrogen to make green steel for customers like Mercedes-Benz.

  • Boston Metal uses clean electricity for a process called "molten oxide electrolysis" to break down iron and make steel.
  • Traditionally carbon-intensive steel making uses high-heat blast furnaces to break down iron ore using coke (a form of coal).

Big picture: Global investors and governments have woken up to the energy transformation required and the market potential of cleaning up steel production.

What's next: Over the next two years these new green steel facilities will begin to produce low-carbon steel commercially and will need to overcome the hurdles of scaling up production.

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