US places bets on European companies in $6bn effort to clean up its heavy industry

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Swedish steelmaker SSAB is among the European winners of a series of US government investments in an $6bn effort to decarbonise manufacturing, across high polluting sectors such as steel, cement, chemicals and fuel refining.

The $500mn in funding earmarked for an SSAB commercial-scale steel plant using hydrogen in Mississippi is one of 33 deals by a new agency set up under the Department of Energy, as part of the Biden administration’s efforts to steer industrial strategy and stimulate the manufacturing sector.

Of the five largest awards in the portfolio, each worth up to $500mn, three will go to operations with parent companies headquartered in Europe. The companies will match the US government investment, in a cost share.

Since the 2022 passage of the Biden landmark climate legislation known as the Inflation Reduction Act (IRA), European lawmakers have voiced concerns about the incentives-driven pull of green investment to the US.

The SSAB investment in the US comes as European steelmakers struggle to source the hydrogen needed for less carbon-intensive production. Final investment decisions for projects planned in Sweden and Germany have been delayed. In November, SSAB shelved plans for a hydrogen facility at Finland’s Raahe steelworks.

Heavy industry is responsible for about a quarter of US greenhouse gas emissions. The new US agency, known as the Office of Clean Energy Demonstrations within the Department of Energy, also awarded German cement manufacturer Heidelberg Materials up to $500mn to install carbon capture and storage facilities at a plant in Indiana.

The National Cement Company of California, owned by French materials group Vicat, won up to $500mn for a proposal to become “carbon neutral”, including by using carbon capture and replacing some fossil fuels used for energy with “locally sourced biomass from agricultural byproducts such as pistachio shells.”

Copenhagen-listed Ørsted, which last month announced that it would cut as many as 800 jobs and withdraw from key offshore wind markets in Europe, received up to $100mn to produce hydrogen-derived alternative fuels for shipping.

More than $1.6bn of the awards involve hydrogen, and come on top of IRA’s tax credit of up to $3 a kilogramme of clean hydrogen, as well as its subsidies for clean energy production.

In some cases, the projects receiving funding will provide a fillip to sectors that have seen few recent groundbreakings. Century Aluminum, for example, will receive up to $500mn for a plant that the US agency says would be the US’s first aluminium smelter built in 45 years.

Ohio-based Cleveland-Cliffs steel was awarded up to $500mn to replace one of its Middletown blast furnaces to be “hydrogen-ready”, among other measures. The company last year delayed plans to reline its blast furnace, extending the life of that equipment. Instead, the government investment suggests that the company will replace the blast furnace with the direct reduction process which is more energy efficient.

The US’s move to greener steel production has also had the effect of shifting production south, to states with less organised labour. Cleveland Cliffs’ proposal would be the first blast furnace to close and be replaced by cleaner technology, while keeping a local, unionised workforce.

Other funding recipients are set to take advantage of expansive hydrogen subsidies. ExxonMobil was awarded $331.9mn to substitute hydrogen for natural gas at a Baytown, Texas olefins production facility.

Consumer goods companies also received support. Unilever was awarded $20.9mn to make lower-carbon ice cream for brands such as Talenti and Ben & Jerry’s.

Rebecca Dell, a veteran of the Obama-era Department of Energy, who now directs the non-profit ClimateWorks Foundation’s industry program, said the funding catalyses projects that fall between early-stage ventures and loans for proven technologies to achieve commercial scale.

“This portfolio is exactly what I would want DOE to do,” Dell said. “This is great. They are doing all the things.”

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