Ireland-based building materials firm Kingspan has signed a supply agreement with Hydnum Steel for green steel as part of its push to lower emissions across its operations and products.
The deal, set out in a memorandum of understanding, will see the company source low-emission steel from Hydnum’s forthcoming plant in Puertollano, Spain. The facility will use renewable energy and green hydrogen instead of coal in a bid to cut carbon from the steelmaking process.
The partnership forms part of Kingspan’s sustainability push, which aims to reduce Scope 3 emissions by securing lower-carbon raw materials.
Steelmaking accounts for 7% to 9% of global energy-related CO2 emissions, according to the International Energy Agency, largely due to its reliance on coal-fired blast furnaces. Green steel production typically uses electric arc furnaces powered by renewables, and hydrogen in place of coke for iron reduction.
Coal-fired blast furnaces are a major source of greenhouse gas emissions in steelmaking.
Next to this, construction is among the biggest sources of emissions globally, responsible for an estimated 39% of total emissions including those embedded in materials. Decarbonising inputs such as steel is seen as key to meeting sector-wide climate targets.
Mark Broderick, Procurement Director at Kingspan, said the deal was “an important step forward” as the company works to scale up green steel procurement and reduce the footprint of its supply chain.
Hydnum’s €1.65bn ($1.86bn) plant is expected to be the first of its kind on the Iberian peninsula. Backed by EU recovery funds, it aims to operate with zero direct CO2 emissions and no discharge into aquifers, using treated grey water. The agreement with Kingspan also includes plans for circular logistics involving ferrous scrap recovery.
Green steel remains a small fraction of the overall market, but demand is growing. Some forecasts suggest the market could exceed $500bn by 2050 as regulations tighten and demand for low-emission materials increases.
Challenges in scaling green steel
Despite its potential, green steel currently faces major challenges. Producing steel using green hydrogen remains far more expensive than conventional methods, with costs averaging 20% to 60% higher, primarily due to the high cost of green hydrogen and the need for continuous, low-cost renewable electricity supplies, according to BloombergNEF.
These challenges are acknowledged in a separate report by McKinsey & Co, which states that the availability of high-quality iron ore suitable for direct reduction processes is also limited, potentially constraining the scalability of green steel.
However, as technologies mature, economies of scale are achieved, and supportive policies are implemented, the cost gap between green and conventional steel is expected to narrow.
