Swedish steel company SSAB positions itself as a pioneer in the transformation toward fossil-free steel production. Yet while media reports speak of "small green steel dots," the construction machinery industry faces a central question: How serious is decarbonization really – and what impact does it have on OEM strategies between competitive pressure, sustainability promises, and cost calculations?
SSAB Transformation: From Blast Furnace to Hydrogen Direct Reduction
SSAB is pursuing a radical approach with the HYBRIT project (Hydrogen Breakthrough Ironmaking Technology): The traditional blast furnace route using coke as a reducing agent is replaced by a direct reduction plant that processes iron ore with green hydrogen into sponge iron. This is then melted into steel in electric arc furnaces. The process theoretically eliminates the process-related CO₂ emissions from steel production, which account for approximately 70 percent of total emissions.
The first commercial deliveries of fossil-free steel have already been made to automotive manufacturers such as Volvo Cars and to Volvo Construction Equipment. For construction machinery OEMs, this is a signal: Green steel is no longer a future vision but is becoming available in small, but growing quantities. The question is no longer whether, but when and at what conditions.
Sustainability as a Competitive Factor: Which OEMs Are Banking on Green Steel?
Volvo Construction Equipment (www.volvoce.com) has already publicly communicated that it is using SSAB steel for prototypes of electric articulated dump trucks and wheel loaders. The company plans to gradually increase the proportion of fossil-free steel and aims to use significant quantities in series production by 2030. This fits into the overarching strategy of decarbonizing the entire value chain – from material procurement through production to the use phase.
Liebherr (www.liebherr.com) communicates more cautiously but has announced in sustainability reports that it will analyze the CO₂ balance of materials used and prefer suppliers with lower emission values. For mobile cranes and crawler cranes, where high-strength steel plays a central role, a switch to green steel would be a significant lever for emission reduction.
Caterpillar (www.caterpillar.com) and Komatsu (www.komatsu.com) have not yet communicated specific agreements with SSAB or other green steel producers but are pursuing Scope 3 reduction targets that also include the upstream and downstream value chains. For large hydraulic excavators and dump trucks, whose steel content is several dozen tons, substitution effects could be significant.
Cost Risks and Competitive Pressure: Who Bears the Premium for Green Steel?
Green steel is currently significantly more expensive than conventionally produced steel. Estimates suggest a premium between 20 and 40 percent, depending on product quality and order volume. For a heavy crawler excavator with a weight of 50 tons, of which approximately 40 tons is steel, this would mean additional costs in the five-digit euro range.
The crucial question is: Who bears these costs? Construction companies, increasingly under pressure to meet sustainability targets, may be willing to pay a premium – particularly in public tenders that evaluate CO₂ footprints. However, in price-sensitive markets, such as earthmoving or smaller civil engineering companies, acceptance is likely to be low.
OEMs face a dilemma: Those who use green steel without being able to pass on costs lose margin points. Those who don't risk reputation loss and exclusion from sustainability-oriented tenders. A classic prisoner's dilemma that could only be resolved through industry-wide standards or regulatory requirements.
Supply Chain Risks: Is SSAB Scalable Enough?
SSAB plans to build production capacity of approximately 1.3 million tons of fossil-free steel by 2026. That sounds like a lot but is only a fraction of the global steel demand of the construction machinery industry. For comparison: Caterpillar alone likely requires several million tons of steel annually for machines and components.
The availability of green steel thus remains a bottleneck factor. OEMs that secure long-term supply contracts early gain a competitive advantage – not only in sustainability communication but also in supply security. Those who come too late could face closed doors in five years.
Material Properties: Is Green Steel Technically Equivalent?
A frequently underestimated topic is the question of mechanical properties. High-strength steels, as used for booms on mobile cranes or booms on heavy excavators, must withstand extreme loads. SSAB has demonstrated that fossil-free steel can achieve the same strength classes, but long-term experience is lacking.
For safety-critical components such as slewing rings, hook blocks, or load-bearing frame structures, this is a relevant consideration. OEMs will need to undergo extensive material testing and certification before green steel is used in these areas. This further delays widespread adoption.
Regulatory Pressure: EU Taxonomy and Carbon Border Adjustment Mechanism
The regulatory framework is tightening. The EU Taxonomy defines criteria for sustainable economic activities, and the planned Carbon Border Adjustment Mechanism (CBAM) will levy duties on imports of steel and other emission-intensive materials. This changes the competitive situation: steel from regions with low environmental standards becomes more expensive, while green steel from Europe becomes relatively cheaper.
For construction machinery OEMs, this means: Those who invest in green supply chains today protect themselves against future regulatory costs. Those who wait pay twice – once for later entry and once for CBAM duties on conventional steel.
Practical Relevance: Where Does Green Steel Play the Biggest Role?
Not every machine class is equally affected. For compact equipment such as mini-excavators or vibrating plates, the steel content is relatively low; here other cost blocks such as drive technology and hydraulics dominate. The situation is different for heavy earth-moving machinery, cranes, and large equipment: Here steel makes up a significant proportion of material and CO₂ balance.
Green steel is particularly relevant for manufacturers positioned in the premium segment who use sustainability as a sales argument. Liebherr, Volvo CE, and Caterpillar could lead here, while Asian manufacturers such as SANY or XCMG are likely to initially focus on cost leadership.
Conclusion: Green Steel as a Strategic Differentiator
The decarbonization of steel production through companies like SSAB is more than a technological gimmick. It becomes a strategic factor for construction machinery OEMs who must position themselves between sustainability promises, cost management, and supply chain security. Those who adopt green steel early gain credibility and secure access to scarce resources. Those who hesitate risk competitive disadvantages in a market increasingly shaped by regulatory requirements and customer demand for climate-neutral solutions.
The coming years will show which manufacturers take the transformation seriously – and which merely print green dots on their marketing materials. For operators and purchasers, the question of material origin will become as important as fuel consumption and maintenance costs in the future. Green steel is no longer a niche topic but a competitive factor that will sustainably change the industry.
