The unsung power of procurement
Procurement is important in any company’s success. At Stegra, the teams involved in procurement have played a significant role in two of the company’s biggest achievements – securing project financing of €6.5 billion for the Boden plant and negotiating the numerous agreements with technology partners, contractors, and other suppliers needed to actually build the enormous facility.
We’ve had a lot of contracts where, if we were a normal company, not a startup, we wouldn’t have bought these things when we did. There are many cases where our counterparties had probably never seen anything like it before.
Luisa OrreChief Procurement Officer
Luisa Orre, Chief Procurement Officer
The unusual complexity of Stegra’s procurement contracts comes down to one main dynamic. To get the financing needed to build the factory – Europe’s first large, greenfield steel plant in half a century integrated with one of the world’s largest electrolyzer plants and green iron production – the company had to demonstrate that it could line up suppliers first. This created a chicken-or-egg question, where suppliers would have to agree to sell their products and services to a company that will only be able to pay for them once the financing was in place. And that financing could only be secured once the supplier contracts were in place.
When we started negotiations, I think some of our suppliers were quite surprised by the complexity of our contracts. But that has had positive benefits as well, and we learn a lot about companies from the way they approach these discussions.
Henrik HasselLegal counsel
Despite the challenge, Stegra’s procurement team can offer suppliers something unique in the steel industry – an opportunity to significantly reduce their downstream scope 3 emissions (emissions resulting from their products being used).
Iron ore is one example, where we’re dealing with some of the world’s largest iron ore companies, and we are a startup in the north of Sweden. In a lot of cases, we can’t just go to a company’s sales team. It is often top management that has a decarbonization agenda. And the volumes that are being sold to us instead of to a blast furnace steel plant allow them to reduce those scope 3 emissions by up to 95 percent.
Luisa OrreChief Procurement Officer
This process has also given Stegra insight into which suppliers are serious about the green transition. “We really noticed a difference between companies that just said they were taking steps and those that were actually taking measures to decarbonize. The players that take sustainability seriously have set downstream emission targets by now,” says Luisa.
Joining the company just a few months after it was launched, Luisa had a typical scale-up challenge of balancing the need to get the work done while also recruiting a larger team to make sure that the company could keep up with an ever-increasing workload.
“Being part of a scale-up is very fun, because in the early days everyone does everything,” she says. “In the beginning I was doing a lot of the negotiations, for example with electricity providers, which I found super interesting.”
Starting off as a department of one, Luisa’s team has grown to more than four dozen people working with numerous consultants, including the Procurement teams of several EPCM* partners. “It’s kind of bittersweet because sometimes I miss the content of the work,” says Luisa. “But it’s great to see the team grow and develop, and getting the mandate to do what they need to do.”
*Engineering, Procurement and Construction Management