Steel production is one of the most emission-intensive industrial sectors worldwide. For construction machinery manufacturers that process thousands of tons of steel annually for excavators, wheel loaders and cranes, the topic of green steel is moving into focus as a strategic decision. Swedish steel conglomerate SSAB is driving the transformation with hydrogen-based production and promises a reduction in CO2 emissions of up to 95 percent. The question is no longer whether this technology will come, but how quickly the construction machinery industry can respond.
Hydrogen instead of coke: Technological paradigm shift
Traditional steel production is based on the blast furnace process, in which iron ore is reduced with coke. This process releases large amounts of CO2. SSAB is pursuing a different approach: the company is relying on hydrogen-based direct reduction, in which hydrogen replaces carbon as the reducing agent. The by-product is water vapor instead of carbon dioxide. The announced 95 percent reduction refers to the entire value chain of steel production.
For the construction machinery industry, this development is of strategic importance. Tightened EU regulations such as the Carbon Border Adjustment Mechanism (CBAM) and the Corporate Sustainability Reporting Directive (CSRD) are forcing manufacturers to document transparently the CO2 balance of their products. Anyone who wants to sell wheel loaders or crawler excavators in the future must be able to prove where the steel used comes from and what its carbon footprint is.
Impact on OEMs: Between product advantage and cost risk
Original Equipment Manufacturers (OEMs) in the construction machinery industry face a dilemma. Green steel offers considerable marketing advantages and increasingly meets regulatory requirements. At the same time, the price of hydrogen-based steel is currently significantly higher than conventional alternatives. Industry experts estimate the price premium at 20 to 40 percent, depending on production volume and energy prices.
The challenge for German manufacturers lies in timing. Those who switch to expensive green steel too early risk competitive disadvantages compared to competitors from Asia who continue to rely on cost-effective standard grades. Those who react too late lose orders from customers who already need to implement sustainable procurement criteria today. In particular, major customers from the public sector and internationally operating construction companies are increasingly demanding detailed sustainability evidence.
Material properties in focus
SSAB specializes in high-performance steels, particularly wear-resistant grades under the Hardox brand as well as high-strength steels in the Strenx series. These materials are preferably used in heavily loaded components: excavator buckets, bucket teeth, frame constructions of crushing plants and booms of mobile cranes. The crucial point for OEMs is that hydrogen-based production does not impair the mechanical properties of the steel. Tensile strength, toughness and weldability remain identical.
This technical continuity greatly simplifies integration. Manufacturers do not need to change designs, qualify new welding processes or conduct additional tests. Switching to green steel is therefore primarily a procurement decision, not a development task. This reduces risks and accelerates potential market entry.
Competitive dynamics: Germany in international comparison
The German construction machinery industry is characterized by mid-sized manufacturers and global corporations with production facilities in Europe. For both groups, competition is intensifying from two directions. On one hand, Scandinavian manufacturers are increasingly focusing on sustainability arguments and can draw on regionally available green steel. On the other hand, Asian providers are pushing into European markets with aggressive pricing.
The strategic question is: Will green steel become a differentiating feature in the premium segment or a minimum requirement for all market participants? The answer depends largely on the speed at which production capacity for hydrogen-based steel is ramped up. SSAB is planning the gradual conversion of its plants, but full capacity will only be reached in the coming years. Other European steel producers are pursuing similar strategies, but are at different stages of development.
Supply chains under adjustment pressure
The availability of green steel will initially remain limited. This forces construction machinery manufacturers to adopt selective procurement strategies. Which product lines receive priority access to sustainable steel? Are premium models preferred or volume machines to achieve the greatest absolute CO2 impact? These decisions have direct effects on marketing, pricing and market positioning.
In addition, new dependencies are emerging. Those who conclude long-term supply contracts for green steel secure planning certainty, but also tie up capital and flexibility. Those who wait risk supply bottlenecks if demand rises faster than production capacity. Especially for manufacturers in the earthmoving and road construction sectors, who process large quantities of structural steel, supply chain management becomes a critical competency.
Cost drivers and financing questions
The price premium for hydrogen-based steel results from several factors. The investment costs for new production facilities are considerable. SSAB and other steel producers must invest billions in the conversion of their plants. In addition, there are operating costs for green hydrogen, the price of which is heavily dependent on the availability of renewable energy. In Scandinavia, with its high share of hydropower and wind energy, conditions are more favorable than in other European regions.
For construction machinery manufacturers, the question of cost pass-through arises. A 20 percent increase in steel prices increases the overall costs of a machine significantly less, since steel is an essential but not the only cost factor. Motors, hydraulics, electronics and assembly account for considerable shares. Nevertheless, the additional costs quickly add up to six-figure amounts with large production volumes.
Government support programs and CO2 pricing could improve profitability. If conventional steel becomes more expensive due to rising CO2 prices, while green steel is supported, the price difference narrows. However, the political framework conditions remain uncertain and differ between member states.
Recommendations for action for German manufacturers
The transformation to sustainable steel procurement requires strategic foresight. Construction machinery manufacturers should seek early dialogue with steel suppliers and initiate pilot projects. Individual machine models or product lines can serve as test cases to explore market acceptance and internal processes. This is not just about procurement, but also about marketing, sales and customer communication.
Documentation of the CO2 balance becomes a mandatory task. Manufacturers need systems to prove the origin and carbon footprint of each steel batch. This data must be incorporated into product datasheets, bid documents and sustainability reports. Building the IT infrastructure for such processes takes time. Those who start today will have an advantage tomorrow.
Collaborations with steel producers like SSAB can create strategic advantages. Joint development projects, preferential supply terms or exclusive material variants differentiate in competition. At the same time, long-term partnerships reduce uncertainty regarding availability and pricing.
Outlook: From niche to standard
Hydrogen-based steel will change the construction machinery industry. The question is not if, but when and how quickly. The 95 percent reduction that SSAB is striving for sets a benchmark by which competitors and customers will orient themselves. For German manufacturers, this means both opportunities and risks.
Those who actively shape the transformation can position themselves as sustainability leaders and tap into new customer groups. Those who hesitate risk regulatory problems and loss of market share. The coming years will show which companies find the right balance between innovation and profitability. Green steel is more than a technical detail – it is becoming a strategic success factor in an industry that must reinvent itself.
