Volvo Group says launches world's first fossil-free steel vehicle

(Changes in headline to Volvo Group from Volvo Trucks)

STOCKHOLM (Reuters) -Truck maker AB Volvo said on Wednesday it had produced a prototype of what it said would be the world's first vehicles made of fossil-free steel.

Volvo and steel-maker SSAB announced in April an agreement to produce the vehicles and start the production of prototypes this year.

Volvo, which aims to be climate-neutral by 2040, said the first concept machine was a load carrier for use in mining and quarrying.

"This initiative with SSAB sets the benchmark for a fossil-free future," Volvo CEO Martin Lundstedt said in a statement.

Volvo added that smaller-scale series production was planned by 2022, with mass production to follow.

SSAB, state-owned utility Vattenfall and miner LKAB said in August that fossil-free steel had been delivered to Volvo as a trial run before their green steel venture HYBRIT starts full commercial production in 2026.

Volvo Cars, owned by China's Geely Holding which also has a stake in AB Volvo, aims to be fully electric by 2030 and is also working with SSAB to explore the use of fossil-free steel in the automotive industry.

A 'green' shift in the transport sector, which generates roughly a quarter of global carbon dioxide emissions, is widely seen as important to help align with global climate goals.

(Reporting by Helena Soderpalm; Editing by Simon Johnson and Johan Ahlander)