Kingspan invests in ‘green’ steel maker to cut its carbon footprint

INSULATION giant Kingspan is to invest  €50m in a €2.5bn steel project that has the potential to reduce the embodied carbon in its insulated panel products by over 45pc. 

The Cavan-based company will be investing in an equity fundraising round that is due to close later this month and in a later funding round as well.

It said in a statement yesterday that it expects 
to be a single-digit minority shareholder in H2 Green Steel (H2GS).

H2GS will replace coke and coal in its production process with green hydrogen so as to achieve an almost a totally CO2-free steel product. The process will reduce CO2 emissions that are associated with traditional blast furnace steelmakers by about 95pc, Kingspan said.

The green hydrogen gas is produced by electrolysis using electricity generated from hydropower and wind power, which is plentiful in the Boden-Lulea region in northern Sweden where H2GS is constructing its steel production site.

The financing for the first phase of the project amounts to around €2.5bn, the majority of which will be financed through green project financing, and the factory will start production in 2024, Kingspan said.

Building and infrastructure are the biggest users of steel in the world and account for 52pc of global demand, a level that is more four times that of the car industry’s 12pc. The steel industry alone accounts for 7pc of global emissions, Kingspan said. 

A complete shift to green steel will take time, and Kingspan said it will continue to buy steel from other current supply chain partners.

Gene Murtagh, CEO of Kingspan, said: “We have set ourselves the challenging target of reducing emissions from the primary raw materials we use in manufacturing by 50pc by 2030, and H2 Green Steel offers a compelling route to achieving this goal.”

The Kingspan move comes amid a renewed push in the battle against climate change. On Thursday, US President Joe Biden kicked off a global summit with a pledge to cut American emissions in half by the end of the decade and the European Union set out its ‘green investment' rules.

Kingspan’s green steel agreement could also help it secure supplies after it said this week that it had made a “strong” start to the year despite shortages of some raw materials that were pushing up its input prices.

Group sales rose 24pc to €1.28bn in the three months to the end of March from a year ago and on an underlying basis sales increased 22pc, prompting Davy stockbrokers to upgrade its profit forecasts.

Kingspan said “significant” raw material inflation is a key feature of the current trading environment and that its associated recovery effort is ongoing and on track with a lag.

Mainland Europe was strongly ahead overall with Germany, France and the Benelux countries “notably positive.”

In the Americas the company has had an “encouraging” start to the year particularly in Latin America, and order intake in North America “significantly outpaced” sales in the period.

In the UK, the business has also been strong year to date with “buoyant sales and order intake activity.”

Sales in Kingspan’s insulated panels division are up 27pc on an underlying basis in the first three months of this year.

Kingspan had net debt of €352m at March 31, after taking account of €167m spending on acquisitions so far this year.

The group has in excess of €2bn of cash on hand and committed undrawn facilities.