Mercedes signs 'green steel' agreement for Europe, North America

Mercedes-Benz has signed an agreement with H2 Green Steel, a Swedish start-up, to provide 50,000 tons of low-carbon dioxide steel for the automaker’s assembly plants in Europe and North America.

Mercedes took an equity stake in H2 Green Steel in 2021, and the new agreement expands the strategic partnership with the aim of establishing a North American supply chain for “almost CO2-free” steel. Vehicle production using the steel is set to start in 2025.

"Based on our initial investment into H2 Green Steel, we now have a finalized, relevant supply agreement for Europe and are now looking at establishing a sustainable steel supply in North America," Gunnar Güthenke, head of procurement and supplier quality at Mercedes-Benz Cars, said in a statement on Wednesday.

So-called green steel uses hydrogen and renewable energy in the production process. Instead of CO2, the process emits water vapor. 

Steel using a conventional blast furnace using coking coal is one of the highest-emitting industrial processes. Mercedes says it can produce more than two tons of CO2 per ton of steel produced, while H2’s process has emissions of about 0.4 tons of CO2 per ton produced.

The automaker has set a target of 2039 to decarbonize its supply chain. Other automakers are also seeking to reduce their carbon footprint by examining their supply chains, a process that can yield huge gains but also requires strict oversight and mutal buy-in. 

H2 Green Steel was founded in 2020 and is based in Stockholm. It is developing its first plant in Boden, northern Sweden.