Insulation maker Kingspan has announced an investment in a "green steel" firm, as well as the intention to use it as a long-term supplier of its steel which would cut the company's carbon emissions substantially.
Kingspan is investing in H2 Green Steel (H2GS), a company pioneering new green production methods for steel manufacturing using hydrogen, in a Series A equity fundraising round due to close later this month. Earlier announced investors in the same fundraising round include Scania, the IMAS Foundation, and Vargas.
Kingspan said on Friday it expects to ultimately be a single-digit minority shareholder alongside a similarly minded group of investors who wish to transition to low-carbon steel.
The total financing for the first phase of the project amounts to approximately €2.5 billion, the majority of which will be financed through “green project financing”, and Kingspan will be an early-stage equity investor.
Production will commence in 2024, and by 2030 the plant will be producing 5 million tonnes of green steel annually. Henrik Henriksson, currently chief executive of Scania, will lead the company from May 1st.
Kingspan said its investment also reflects an intention to enter into a long-term agreement with H2GS, to supply a “substantial share” of Kingspan’s future steel requirements.
Kingspan is the first building materials company globally to make a commitment to procure H2 Green Steel at scale.
The building and infrastructure sectors are the biggest users of steel, accounting for 52 per cent of global demand, compared to 12 per cent from the car industry. Steel accounts for 7 per cent of global emissions.
Kingspan said H2GS’s production process replaces coke and coal with green hydrogen to achieve an almost a totally CO2-free steel product.
The process cuts about 95 per cent of the CO2 emissions associated with traditional blast furnace steel makers: one tonne of H2GS steel will emit less than 0.1 tonne of CO2 compared to more than two tonnes of CO2 emitted producing a traditional tonne of steel.
The green hydrogen gas is produced by electrolysis using electricity generated from hydro and wind power which is plentiful in the Boden-Lulea region in northern Sweden where H2GS is constructing the world’s first large-scale green steel production site.
Moving to low emissions steel would see Kingspan reduce embodied carbon in its insulated panel products by about 45 per cent.
Two thirds of Kingspan’s business revenue comes from the sale of insulated panels, which sandwich high-performance insulation between steel panels for use on building facades.
Kingspan chief executive Gene Murtagh said: "The building industry is a major user of steel, and steel production is a major source of carbon emissions.
“It is therefore clear that Kingspan’s Planet Passionate commitment to reduce emissions in its primary supply chain must include a new model of steel production.”
H2GS chairman Carl Erik Lagercrantz said the extent of steel’s contribution to emissions from the building and infrastructure sector “is not well understood, and green steel will be an important component as it seeks to decarbonise”.
“This will be a first investment and long-term supply partnership with a company in this space and reflects the depth of demand we see for the steel we will be producing,” he added.