A new way to make green steel

Colorado-based Electra has begun producing iron plates that can be used to make steel without consuming fuels such as coal, natural gas or hydrogen—an initial step to potentially reducing the industry’s huge carbon footprint. The company dissolves iron ore in a chemical solution, then runs electricity through it to separate pure iron from impurities. The process runs at temperatures around 140 degrees Fahrenheit, a fraction of the 3,000 or so degrees needed for conventional steelmaking.

The breakthrough escalates a potentially lucrative global race to clean up a roughly $1 trillion industry that serves builders who erect everything from apartment buildings to bridges. The main production method used today generates roughly two tons of carbon emissions for every ton of steel, making the sector account for about 10% of global emissions.

Consumers and governments are pressuring automakers to manufacture electric cars with cleaner steel, a trend that is playing out across every industry. That push is forcing steelmakers to accelerate green investments.

“The market is at an inflection point," said Sandeep Nijhawan, Electra’s chief executive. “There is more demand than what is available on the supply side for these green products."

The challenge for Electra and other startups is scaling up enough to make a dent in an industry that churns out about 2 billion metric tons of steel a year globally. After recently opening its pilot plant, Electra hopes to work on its first big factory and produce 1 million tons in the U.S. by the end of the decade.

It is part of a burgeoning category of low-emissions steel methods focused on using renewable electricity and chemistry. Showing the processes can work cost effectively could instill more confidence in the industry—and show that they are worth backing beyond the hundreds of millions of dollars that have already been invested.

Steel is made by treating iron ore that is pulled out of the ground. About 70% of the world’s steel is produced using blast furnaces and a coal product called coke to melt the ore. Oxygen is blown through the molten iron, and other elements are added to get steel.

It is one of the most difficult sectors to decarbonize because handling iron ore typically requires huge amounts of energy to hit temperatures around 3,000 degrees Fahrenheit.

There are three main techniques for making green steel. One of the most promising but early-stage from Electra and others uses electricity and chemistry during production. The other two substitute hydrogen for fossil fuels and trap emissions with carbon capture. These two methods have shown promise but still face significant cost and logistical challenges despite government subsidies.

Electra’s technique for making clean iron begins by dissolving iron ore in an acid-based solution, a step that is similar to putting salt in water. The company runs electricity through the system to separate pure iron from impurities. Another electric current is then used to turn the iron into plates roughly the size of door frames.

Founded in 2020, Electra says its key advantage is that the lower-temperature requirement minimizes the amount of electricity it needs at any one time. The flexibility lets the company increase or decrease power consumption based on the availability of intermittent wind and solar power, the company says.

“That’s really the differentiator between them and other technologies that are similar," said Noah Hanners, executive vice president of raw materials at Nucor. Nucor and others have invested more than $85 million in Electra.

Electra says it can also use much lower grades of iron ore than conventional technologies, an advantage because much of the ore that is extracted currently is too-poor quality to be used in today’s steel industry. Finding uses for those stranded ores could make the sector more efficient and limit the environmental damage and costs of new mining.

The company says its process simultaneously refines other materials such as silica and alumina that can be sold separately. Acid remaining at the end of the process can be used to start it all over again and is contained to minimize contamination risks.

Electra’s approach is somewhat similar to electricity-based technologies being developed by competitors including steel giant ArcelorMittal and startup Boston Metal. Founded over a decade ago, Boston Metal counts Microsoft and Saudi Aramco among the investors that recently put in $282 million. ArcelorMittal is also a Boston Metal investor.

Unlike Electra, Boston Metal still needs high temperatures to produce steel, but it uses electricity instead to reach them. The company runs electricity through a solution containing iron ore at temperatures near 3,000 degrees Fahrenheit to produce pure liquid metal, a process that it believes will be most efficient at large scales.

“The pressure is on us to deliver as soon as we can," said Tadeu Carneiro, Boston Metal’s chief executive. The company hopes to license its technology to steelmakers starting in 2026.

Green steel techniques are also needed to build on emissions reductions that have already been achieved in the sector. Companies such as Nucor have started decarbonizing by using natural gas or other fuels to strip the oxygen from iron ore to get high-purity pellets, a process known as direct iron reduction. The pellets can then be combined with scrap metal and melted to make steel using a furnace that runs on electricity, known as an electric-arc furnace.

After Electra’s process creates iron plates, they can be fed into electric-arc furnaces to make steel.

Analysts say there is urgency for all green steel techniques, particularly with demand rising in Asia and Africa. Companies such as Nucor have big carbon-capture efforts in the works, while the U.S. government recently committed $1 billion to sector giants Cleveland-Cliffs and SSAB for hydrogen substitution in direct iron reduction.

Sweden’s H2 Green Steel, the largest startup in the sector, has seen customers such as BMW and Porsche willing to pay a roughly 25% premium for its product made with hydrogen over conventional steel, Chief Executive Henrik Henriksson said. That allowed the company to recently raise nearly $5 billion and should show competitors that green investments can pan out, he said.

“It can be a transformative force," Henriksson said. “That gives them an opportunity to bring a business case to the board."

Electra’s Nijhawan said discussions with customers have also indicated a willingness to pay more for pure iron without impurities. The company expects to announce its first customers later this year and show the process can be repeated and expanded at larger sizes.

“Once there’s a green product available, everything else is going to be labeled as dirty," said Hilary Lewis, steel director at nonprofit Industrious Labs, which aims to reduce emissions in heavy industries. “That will have a snowball effect on steelmakers."

Write to Amrith Ramkumar at amrith.ramkumar@wsj.com