🌱 The Future of Metal Fabrication: Embracing the Green Steel Transition
As industries across the globe race toward carbon neutrality, the steel manufacturing sector is undergoing a revolutionary shift — the Green Steel Transition. At Lux Metal, we believe that sustainability and innovation must go hand in hand. That’s why we’re actively following and adapting to the green steel movement to help create a cleaner, more responsible future.
🌍 What is Green Steel?
Green steel refers to steel produced with minimal or zero carbon emissions, using environmentally friendly processes instead of conventional coal-based blast furnace methods.
Traditionally, steel is made using coking coal in blast furnaces — a method that accounts for up to 7–9% of global CO₂ emissions. In contrast, green steel aims to replace or reduce these emissions by switching to low-carbon or carbon-free technologies.
⚙️ How is Green Steel Made? — Key Methods
Here are the primary green steel production methods:
1. Hydrogen-Based Direct Reduction (H-DRI)
- Replaces coal with green hydrogen (produced from renewable energy).
- Hydrogen reacts with iron ore, producing water vapor instead of CO₂.
- Seen as one of the most promising methods for zero-emission steelmaking.
2. Electric Arc Furnace (EAF) Using Renewable Energy
- Melts scrap steel using electricity from solar, wind, or hydro power.
- Ideal for recycling steel with much lower emissions.
3. Carbon Capture and Storage (CCS)
- Captures CO₂ from traditional processes and stores it underground or reuses it.
- Helps reduce emissions in existing plants while transitioning to cleaner options.
✅ Benefits of Green Steel
Transitioning to green steel brings wide-ranging advantages for the industry and the environment:
- ♻️ Reduces carbon emissions significantly.
- 🔋 Boosts energy efficiency through the use of renewable sources.
- 🌿 Supports global climate goals such as the Paris Agreement and Net Zero targets.
- 💼 Enhances brand reputation by aligning with sustainability commitments.
- 📈 Meets growing demand from eco-conscious clients in automotive, construction, and infrastructure sectors.
A New Wave of Smart Steel Startups
Several steel startups are seizing the opportunity to lead the green transition from the ground up. By integrating smart manufacturing tools such as sensors, AI, and real-time data analytics, these companies are reshaping the traditional steel landscape. As Fredrik Axby of Sweco Sweden puts it:
“Heavy industry is changing radically. It is a reset on a completely different level… Many old companies are at risk when new players come in.”
This new wave is not just a trend — it’s a revolution.
The Power—and Challenge—of Green Hydrogen
One of the biggest innovations behind green steel is the use of green hydrogen for Direct Reduced Iron (DRI) production. However, this process demands massive amounts of fossil-free electricity, which remains a major obstacle. For example, Thyssenkrupp’s planned green steel mill in Germany will need energy equivalent to 500 wind turbines.
In Northern Sweden, where many steel operations are being relocated, electricity usage could double in the coming years. Without sufficient and affordable green electricity, the pace of transition will slow.
“Will there be enough green electricity at the right price?” asks Björn Nykvist from SEI. “That said, the steel sector is large, so there is probably room for the use of different technologies.”
The MENA Advantage
Regions like the Middle East and North Africa (MENA), with abundant solar resources and high-grade iron ore, are poised to become leaders in green steel production. According to the Institute for Energy Economics and Financial Analysis (IEEFA), MENA could emerge as a major supplier to both Europe and India through DRI-based green hydrogen steelmaking.
Surging Demand for Raw Materials
Achieving net-zero by 2050 will dramatically increase the demand for essential raw materials. To build clean energy infrastructure, the world will require up to six times more raw materials than today. However, sourcing these materials responsibly is vital to avoid ecological degradation.
Partnerships and Offtake Agreements
Green transformation on this scale demands collaboration. Projects like Sweden’s Hybrit (a joint venture by SSAB, LKAB, and Vattenfall) demonstrate the success of multi-stakeholder partnerships. Offtake agreements, where buyers commit in advance to purchasing green steel, provide financial assurance for project developers and help secure bank loans.
Why Recycled Steel Matters
A major breakthrough in sustainable construction comes from recycled steel. A recent pilot project by Sweco, Tibnor, and DEKRA proved that using recycled steel can cut emissions by 97% compared to new steel — without increasing costs.
“We’ve added an important puzzle piece to move towards a circular economy,” says Emma Danielsson, Sustainability Manager at Sweco Sweden.
At Lux Metal, we proudly support this circular approach. Our facilities are equipped to handle precision fabrication using recycled and sustainable materials, helping reduce environmental impact while maintaining high performance and quality.
The Promise of Hydrogen-Based Steelmaking
In theory, the pathway to carbon-neutral steel was clear:
- R-EAF (Renewable-Electric Arc Furnace) using scrap metal.
- H2-DRI (Hydrogen-Based Direct Reduced Iron) followed by EAF smelting.
- Electrolysis of Molten Iron Oxide (MOE)—a still-developing technology.
European steelmakers, like ArcelorMittal and Thyssenkrupp, bet heavily on hydrogen-based DRI, viewing it as a full replacement for carbon-intensive blast furnace methods. These plans were backed by billion-euro investments, like the €1 billion green steel plant in Gijón, Spain, and another 2.5 million ton-per-year H2-DRI plant in Duisburg, Germany.
Yet by the end of 2024, both projects were indefinitely postponed.
The reasons? Sky-high green hydrogen costs, lack of infrastructure, and limited consumer willingness to pay a premium for green steel.
The Harsh Reality of Green Hydrogen
At its peak, the cost of producing green hydrogen via electrolysis in Germany was €14.5/kg—far above viable industrial levels. Even with recent reductions to €9.35/kg, steel plants like the one in Duisburg, which would consume over 151,000 tons of hydrogen in 10 years, find the economics unworkable.
As Thyssenkrupp put it: “Hydrogen will return to the agenda when it becomes economically feasible.”
Scrap-Based Electric Arc Furnaces: A Short-Term Solution?
With hydrogen on hold, scrap-based R-EAF processes have become the fallback solution. But this path is also limited by global scrap metal supply, which is not sufficient to meet growing demand.
Even more critically, these furnaces rely heavily on affordable electricity—a luxury that has become scarce in Europe.
Consumers Aren’t Ready to Pay the Green Premium
Despite public promises from major automotive brands to use 100% carbon-free steel by 2050, the market isn’t ready to bear the cost. In 2024, ArcelorMittal doubled its sales of XCarb green steel to 400,000 tons. But compared to total demand, that’s a fraction.
Green steel sells at a €200-300/ton premium, but most buyers are only willing to pay €100-150. With producers only willing to offer €20-30/ton in discounts, the gap is simply too wide.
Electricity: The Decarbonization Bottleneck
Steelmakers aren’t just struggling with hydrogen—they’re also grappling with electricity prices. According to ArcelorMittal Germany, €50-55/MWh would make EAF-based steelmaking viable. But the current market offers no such prices, and governments have been slow to intervene.
Even after securing billions in green subsidies—€1.3B from Germany, €850M from France, €460M from Spain, and others—ArcelorMittal says it’s not enough. They estimate $40 billion is needed to decarbonize their European operations. Government support so far? Less than 10%.
Lessons for Emerging Markets: Ukraine and Beyond
Ukraine presents a different case. With abundant high-grade iron ore and operating nuclear power plants, the country could pursue a DRI-EAF strategy using natural gas and later transition to nuclear-powered low-carbon steel. But like Europe, this would require massive subsidies and affordable energy—neither of which are currently guaranteed.
As Stanislav Zinchenko, CEO of GMK Center, puts it:
“Without affordable and cheap electricity, the steel industry in Europe and Ukraine has no future.”
What It Means for LUX METAL and Malaysia’s Steel Sector
For Malaysian manufacturers and fabricators like LUX METAL, these developments are both cautionary and insightful:
- Green transition is technically possible—but not without strong infrastructure and policy support.
- Scrap-based solutions are limited in capacity and depend on stable electricity costs.
- Hydrogen is promising, but not yet affordable or scalable.
- Customers want green steel—but few are ready to pay the premium today.
That’s why LUX METAL focuses on practical sustainability. We prioritize:
✅ Efficient manufacturing
✅ Local sourcing and recycling initiatives
✅ Precision fabrication to reduce waste
✅ Investments in cleaner processes at realistic scales
We remain open to green technologies, but grounded in economic and operational realities.
Conclusion
The transition to green steel is not just a trend — it’s a necessity. Governments, corporations, and manufacturers are coming together to redefine how steel is produced and used. At Lux Metal, we’re proud to be part of this movement by combining cutting-edge fabrication services with a forward-thinking mindset.
Europe’s experience shows that ambition alone cannot drive a green steel transition. Without affordable energy, scalable hydrogen infrastructure, and real consumer commitment, the road to sustainable steel remains rocky.
But as materials, technologies, and policies evolve, the vision remains alive—and we at LUX METAL are watching closely, ready to adapt and lead in our region when the time is right. 👉 To learn more about how Lux Metal can support your sustainable project needs, visit us at www.luxmetalgroup.com or contact our team today.
🌐 About LUX METAL
At LUX METAL, we specialize in customized steel and metal fabrication solutions tailored to diverse industry needs. With state-of-the-art machinery—including laser cutting, CNC bending, precision welding, and rolling machines—we deliver high-quality, sustainable, and innovative metal works across Malaysia and beyond.
Our services support clients looking for stronger, smarter, and more sustainable metal solutions, and we’re committed to staying at the forefront of steel innovation, including green manufacturing practices.
👉 Visit us at www.luxmetalgroup.com to explore our capabilities and how we can support your projects.