Automotive manufacturer Mercedes-Benz announced today new agreements with Swedish startup H2 Green Steel to supply low-carbon steel for use in vehicles in Europe, and to aim to establish a green steel supply chain in North America.

Founded in 2020, H2 Green Steel is building the world’s first large-scale fossil-free steel plant in Boden, Sweden, with the project including a giga-scale green hydrogen plant as an integrated part of the steel production facility. The company employs hydrogen produced using green power to remove the oxygen from iron oxide, avoiding most of the CO2 emissions normally produced, and uses electricity from 100% renewable sources for the energy requirements generated in the manufacturing process. H2 Green Steel aims to begin production in 2025, with plans to produce 5 million tons of nearly fossil-free steel by 2030.

Mercedes-Benz purchased an equity stake in H2 Green Steel in 2021, as part of the steelmaker’s $105 million Series A financing round.

H2 Green Steel CEO Henrik Henriksson said:

“H2 Green Steel exists because pioneering companies in the automotive industry, like Mercedes-Benz, signaled the transition in the steel industry was too slow for them to meet their climate targets. Working side-by-side with Mercedes Benz, we have a partner with whom we can raise the bar when it comes to supply chain emissions, circularity and social sustainability.”

Demand for fossil-free steel is expected to increase significantly, over the next several years, as manufacturers globally aim to decarbonize their supply chains. Steelmaking is one of the biggest emitters of CO2 globally, and one of the more challenging sectors to abate, with total greenhouse gas emissions (GHG) from the sector accounting for 7% – 9% of direct emissions from the global use of fossil fuels.

Under the new agreement, H2 Green Steel will supply Mercedes-Benz’ European press shop with approximately 50,000 tonnes of almost CO₂-free steel per year. The companies also announced an MoU aimed at establishing a sustainable steel supply chain in North America.

Mercedes-Benz stated earlier this year that it is pursuing a goal to achieve a green steel supply chain from 2039 at the latest, as part of a series of ESG-related goals and initiatives announced by the company at its ESG Conference to investors and analysts, which also included a target to achieve an 80% reduction in CO2 emissions from production by 2030.

Dr. Gunnar Güthenke, Head of Procurement and Supplier Quality, Mercedes-Benz Cars, said:

“Together with our strategic partner H2 Green Steel we’ve achieved the next milestone of our local for local strategy in procurement. Based on our initial investment into H2 Green Steel we now have a finalized relevant supply agreement for Europe and are looking at establishing a sustainable steel supply with H2 Green Steel in North America.”