Swedish mining giant LKAB is the biggest iron-ore producer in Europe, producing about 80pc of the iron ore in the region. Traditionally a supplier of iron-ore pellets, the firm is transitioning to produce direct reduced iron (DRI) using hydrogen, a process it has already demonstrated in the high profile Hybrit project—a collaboration with utility Vattenfall and steelmaker SSAB.

DRI can be fed into an electric arc furnace to produce steel.

Having produced its first shipment of green steel using this process, LKAB hopes to see rising demand for the product from the auto industry.

Hydrogen Economist spoke to the company’s senior vice-president for energy and climate, Stefan Savonen, about how LKAB got involved in the Hybrit joint venture and the company’s targets for scaling up and eventually exporting fossil-free sponge iron.

How did LKAB decide to get involved in the Hybrit project?

Savonen: SSAB is one of our customers. And we have a history of being involved with our customers when it comes to the development of our products. We developed different types of the existing product that we have today—iron-ore pellets—over the years together with our customers.

“There is huge interest around the Hybrit project” Savonen, LKAB

We saw that we could take the next step and do something more radical. It was in 2016 when we began a dialogue with SSAB. We also knew we would need a lot of electricity, and that brought in Vattenfall, the biggest energy company in Sweden, now also part of the joint venture. This is necessary—we need to be able to sell products not only 10-15 years from now but out to 2050 to serve demand for a fossil-free product.

Has Hybrit helped generate interest from new customers?

Savonen: There is huge interest around the Hybrit project. Not just among our customers, but also our customers’ customers. And that is because we do not sell steel, we sell the iron-ore pellets that are used by the steel industry to make the steel. We will still develop and produce the pellet product until we have actually transitioned all our production to low-carbon sponge iron [another term for DRI]. But that transition of the whole of LKAB will take until 2045.

Not everybody believed in the Hybrit project. But now there are lots of projects like this in the steel industry, looking to change the system by using hydrogen (or natural gas) to create steel instead of burning coal.

Can you describe the difference between the iron-ore pellets and the DRI iron?

Savonen: Our iron-ore pellets today are still a very low-carbon product. Since the 1960s, we have lowered the carbon content of the pellets by 84pc. To produce them uses coal, but a very small amount of it.

2045 – LKAB target date for transition to low carbon

The transition we are doing now is to change that process so that in the future we will use bio-oil—which we already use in one plant, and which produced the pellets for the Hybrit project—but also to go further and use hydrogen in the pellets. We will then take those pellets and put them in a direct reduction shaft where we will use hydrogen to make the sponge iron. So the whole value chain before the sponge iron will be fossil-fuel free. The whole of LKAB will eventually transition to decarbonised pellet production, and then make low-carbon sponge iron out of the pellets.

How close are you to exporting sponge iron?

Savonen: We have not sold any yet outside of the Hybrit project, but there is huge interest. We have a pilot plant as part of Hybrit where we have produced a small amount. We will have our first demonstration plant up and running in 2026, and the next one around 2030, adding on plants thereafter. The 2026 output will be provided directly to SSAB. And the actual export of low-carbon sponge iron will happen after 2030. 

Eventually a major portion of our output will be for export, as it is today. By doing this, our customers will not need to use coal anymore, helping them cut emissions by 35mn t /yr.

Can you see demand coming from other customers in the near term?

Savonen: Everything we produce in the near term will be for SSAB. If you look at the cost curve, it is expensive to have a pilot plant. But there is interest in this from the car industry, and if you look at the difference between using low-carbon steel and regular steel, the cost to the customer is about equal to adding metallic paint to the car.

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Author: Gregor Macdonald