Steelmakers face costly transition away from metallurgical coal

CALGARY — Steelmakers will continue to be reliant on metallurgical coal longer than many expect due to the cost of hydrogen and the difficulty of securing high-grade iron ore and affordable low-emissions electricity, according to former Northback CEO Mike Young.Young, whose former company is behind the proposed Grassy Mountain metallurgical — steelmaking — coal mine in Alberta’s Eastern Slopes, told the Western Standard that the transition to “green steel” requires changes throughout the production process, and any steelmaker looking to replace coal currently faces an extremely expensive decision.In a conventional blast furnace, coke made from coal supplies heat, helps strip oxygen from iron ore and bears the weight of the material stacked above it.“You cannot replace coke in a blast furnace with hydrogen,” Young said.“The coke is a multifunction product. So it serves to create energy, it serves to create the reducing conditions, and it serves to hold the whole thing up in the blast furnace. Hydrogen cannot do that. And so hydrogen will never, ever replace coal in a blast furnace. 70% of the world's steel is made using blast furnaces. It's a well-known science. Everyone says, ‘Oh, it's yesterday's science.’ Well, so is the wheel.”.Hydrogen can, however, strip oxygen from iron ore in a different type of plant, with the resulting material, known as sponge iron, then being melted in an electric-arc furnace to make steel.Swedish steelmaker SSAB demonstrated the process in 2021 when it delivered a trial batch of steel made with hydrogen-reduced iron to Volvo Group.However, Young’s concerns about costs are supported by research from the International Energy Agency (IEA) and decisions by steelmakers to delay or abandon proposed investments.The IEA’s 2025 Breakthrough Agenda Report estimated that production costs at early commercial facilities using fully hydrogen-based direct reduction could be 50%–140% higher than those of conventional blast-furnace steelmaking, depending on the region.Also, in June 2025, ArcelorMittal, a multinational steel and mining corporation, announced it could not proceed with its planned direct-reduction and electric-furnace projects at its Bremen and Eisenhüttenstadt sites in Germany due to market conditions and the economics of lower-emissions steelmaking.ArcelorMittal had previously warned in November 2024 that the conditions needed to support its European investments had not materialized.“Green hydrogen is evolving very slowly towards being a viable fuel source,” the company said, adding that natural-gas-based direct reduction was not yet competitive in Europe as an interim solution.Producing hydrogen with low-emissions electricity is a major contributor to those costs..Heather Exner-Pirot, director of energy, natural resources and environment at the Macdonald-Laurier Institute, has estimated a worldwide switch to hydrogen-based steelmaking would require several thousand terawatt-hours (TWh) of electricity (Canada uses roughly 620 TWh annually).“Steelmaking with hydrogen in Direct Reduced Iron (DRI) shaft furnaces as an alternative would reduce carbon emissions, and is technically feasible, but has not reached scale and comprises less than 1% of global steelmaking,” Exner-Pirot said.“That is owing to its high costs and enormous electricity needs.”In 2025, Global Energy Monitor found that electric-arc furnaces accounted for half of global steelmaking capacity in development.Mills can use those furnaces to melt scrap, and the IEA found many proposed plants designed to use hydrogen planned to begin by processing iron ore with natural gas.Both routes could reduce coal demand while hydrogen remains expensive.However, Young said some deposits would need additional processing to supply ore suitable for hydrogen-based production.The Organisation for Economic Co-operation and Development (OECD) found in its 2025 Steel Outlook that the availability of high-grade ore was a constraint, adding ironmaking could shift toward places where mills could secure both the right ore and inexpensive renewable energy.“Proponents of green steel imagine that you're going to take this high-grade iron ore, of which there is very little in the world, you're going to take green hydrogen, which is very expensive to produce and there's very little in the world and you're going to combine them and put that into an electric arc furnace and that's going to give you green steel,” Young said..Feds abandoned thermal coal export ban without public notice.“But the people who are trying to build that at the moment, Stegra, over in Sweden, are behind schedule and over budget. It's really expensive. It's going to produce really expensive steel. Green hydrogen is also very expensive to produce because you have to use the electrolysis of water. Prices are not coming down. Green steel is just a buzzword that people throw out there.”Stegra pushed back the start of steel production at its Boden plant in northern Sweden in 2025.Then, in September 2026 — three months after raising €1.4 billion — the company said it needed more money to finish construction on the plant, citing inflation and the cost of ramping work back up.Young expects steelmakers in Japan and South Korea to prioritize reducing emissions from existing facilities before switching production methods.“They are not going to replace their blast furnaces with electric arc furnaces using green steel. That's just not going to happen for lots of reasons. There's not enough iron ore in the world. They've sunk all this capital into these steel mills. They're just not going to pivot,” Young said.“They're looking at using good quality metallurgical coal, which you can get from [Canada], and they're just looking at ways of reducing emissions.”Young also expects metallurgical coal demand to outstrip supply in the near future.“When you start looking at future supply of metallurgical coal, and you look at future demand, there is a gap coming,” he said.“And it happens in the 2030s.”

Steelmakers face costly transition away from metallurgical coal

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