The steel industry is facing the largest transformation since industrialization. Swedish steel conglomerate SSAB is pursuing a radical decarbonization strategy and positioning itself as a pioneer with CO₂-free steel. For the construction machinery industry, this is far more than a technical footnote: green steel is becoming a strategic factor in the supply chain – with significant implications for procurement costs, supplier relationships, and product development.
CO₂-free steel: Technology and production process
SSAB is pursuing a fundamentally different approach with its HYBRIT project than the conventional blast furnace route. Instead of coal, hydrogen is used to reduce iron ore to sponge iron. This process eliminates virtually all CO₂ emissions that arise in traditional steel production through the use of coke. The resulting steel quality meets the usual strength classes required, for example, for booms of hydraulic excavators or components of mobile cranes.
The technical feasibility has been proven, and the pilot plant in Luleå is already producing commercial batches. However, the central question is: When will production reach a scale that is relevant for industrial large-scale customers such as Volvo Construction Equipment or Liebherr? SSAB plans to gradually convert its production facilities by 2030, but the investment amounts are enormous and the dependence on affordable green energy is massive.
Construction machinery manufacturers between sustainability pressure and cost reality
OEMs in the construction machinery industry are facing increasing pressure to reduce their Scope 3 emissions – those greenhouse gases generated in the upstream supply chain. Steel accounts for the lion's share of the carbon footprint in manufacturing a typical crawler excavator or wheel loader. Manufacturers such as Caterpillar (https://www.caterpillar.com) or Komatsu (https://www.komatsu.com) are already communicating ambitious sustainability goals that are hardly achievable without green steel.
However, the cost question remains unresolved. Green steel will be significantly more expensive than conventional steel during the ramp-up phase – estimates speak of a surcharge of between 20 and 40 percent. For a 20-ton excavator with around four tons of steel content, this potentially means several thousand euros in additional production costs. Whether and how quickly this surcharge can be distributed throughout the entire value chain to the end customer remains open. Operators of construction and earthmoving machinery calculate strictly according to total cost of ownership – a noticeable price surcharge without an immediate performance benefit is difficult to justify.
Rethinking strategic supplier relationships
The dependence on individual steel suppliers is being reassessed through decarbonization. Those who conclude long-term contracts with SSAB or other green steel producers today secure access to a scarce commodity – but also risk higher costs and possible delivery delays during the ramp-up phase. The alternative of relying on conventional steel and using compensation mechanisms will lose acceptance in the medium term, particularly in markets with strict regulations such as the EU.
Manufacturers with high steel requirements in heavy machinery segments – such as demolition excavators, crawler cranes, or articulated dump trucks – must fundamentally rethink their procurement strategies. The option of switching to alternative materials such as high-strength lightweight alloys or composite materials remains technically limited or uneconomical in many applications.
Timeline realism: When will green steel become the norm?
SSAB communicates 2030 as the target year for the complete conversion of its European production to CO₂-free steel. That is ambitious but not unrealistic – provided that the availability of green hydrogen and renewable energy is expanded as planned. Other steel conglomerates such as ThyssenKrupp or ArcelorMittal are pursuing similar timelines, although their technological approaches vary.
For construction machinery manufacturers, this means: The years 2025 to 2028 will become a critical transition phase. During this time, product development cycles, supplier audits, and sustainability reports must be aligned with the new reality. Whoever brings a new excavator or wheel loader to market in 2030 will increasingly face justification pressure if it is not at least partially manufactured from green steel.
Regulatory tailwind and market pressure
The EU Taxonomy and increasingly also public procurement procedures demand evidence of the carbon footprint of construction machinery. Manufacturers who embrace green steel early can gain competitive advantages here – for example, in infrastructure projects with strict sustainability criteria. At the same time, market pressure is being created by competitors who use their green positioning as a sales argument.
Comparable developments can be seen in other segments of the industry, such as Holcim's decarbonization in the cement sector or the electrification of dumper fleets at Volvo CE. The entire value chain is being geared toward decarbonization – green steel is just one piece of the puzzle, but a central one.
Impact on product development and design
Green steel is material-scientifically identical to conventional steel of the same grade. However, indirect effects on design result: as steel becomes more expensive, the incentive for material-efficient designs increases. Topology optimization, finite element simulations, and the targeted use of higher-strength grades are gaining in importance. This particularly affects highly stressed components such as booms, slewing rings, or undercarriages.
Additionally, shifts in supply chains could result from the geographic concentration of green steel production in Northern Europe. Production facilities near SSAB plants could gain attractiveness, while Asian supply chains – which traditionally rely on cheap coal-based steel – come under pressure.
Opportunities for first movers and risks for laggards
Manufacturers that enter into partnerships with SSAB or other green steel producers early on potentially secure access to limited capacity and can substantiate their sustainability communications credibly. Companies such as Volvo CE (https://www.volvoce.com) have already publicly announced plans to integrate green steel into their production – a signal to customers and investors alike.
On the other hand are manufacturers who wait and hope for falling prices or mature mass markets. This strategy carries the risk of falling behind in tenders or with sustainability-conscious customers. Particularly in segments with long product life cycles – such as tower cranes or heavy crawler excavators – such positioning disadvantages can have long-term effects.
Conclusion: Green steel as a strategic lever
SSAB's decarbonization strategy sends a strong signal, but success depends on numerous factors: energy costs, scaling speed, regulatory framework, and not least the willingness of end customers to pay. For construction machinery manufacturers, green steel is not an isolated procurement issue but a strategic lever in the transformation toward more sustainable products. Those who set the course now can secure competitive advantages – those who hesitate risk disadvantages in a market increasingly focused on sustainability.
The coming years will show whether SSAB and other green steel producers will achieve their ambitious goals. For the construction machinery industry, this means: supply chain management becomes a strategic question, and material decisions increasingly have commercial and reputational consequences. Green steel is here to stay – the question is only how quickly and at what price.
