Three major German steel producers persist in transitioning towards green steel production, despite the recent rejection of ArcelorMittal's bid.
Steelmaking Titans Struggle Towards a Greener Future
In stark contrast to ArcelorMittal, Germany's own steel giants, Thyssenkrupp Steel, Salzgitter, and the Stahl-Holding-Saar (SHS), are doggedly pushing ahead with greener steel production projects. "We ain't backing down; we're in this green game through and through," a Thyssenkrupp Steel spokesperson fired back at Deutsche Presse-Agentur. However, the projects are "hovering at the edge of economic profitability."
Salzgitter aims to swap its coal-powered blast furnaces for ones initially fueled by natural gas, eventually running on green hydrogen. A Salzgitter AG spokesperson confirmed their commitment to this ambitious plan. "We're staying the course on our transformative path to carbon-reduced steel production," they stated. The SHS, including Dillinger Hütte and Saarstahl, shares the same sentiment. "We're in it for the long haul, baby," an SHS spokesperson exclaimed.
Germany's Economic Minister, Katharina Reiche, drew two stark conclusions from this determination. "What we need is lower energy prices," she stated during a stop in Washington, DC. The German steel industry urgently needs to regain its competitive edge, which will demand negotiations with China about "cheap steel dumping," among other things. Furthermore, "the journey to green steel is a long, costly one." Germany must reevaluate its hydrogen laws and usage policies.
Construction on Thyssenkrupp Steel's new plant has already commenced. The company expects to collect approximately two billion euros in funding from the federal government and the state of NRW. By 2030, this plant will replace two blast furnaces, initially running on natural gas and later on hydrogen.
Salzgitter has embarked on a conversion since the end of 2023, with the first plant slated to go online in 2027. They are pouring over two billion euros into the project, with a billion euros coming from both the federal government and the state. Salzgitter aims to transition entirely to green steel by 2033.
The Salzgitter spokesperson viewed ArcelorMittal's temporary halt on conversion plans in Bremen and Eisenhüttenstadt as a clear signal that transformation project conditions need an enhancement. Now, it's time to speed up hydrogen economy growth and slash electricity prices to a competitive level.
In Saarland, a direct reduction plant and electric arc furnaces will be constructed. The direct reduction plant will supply the Dillingen and Volklingen sites with iron pellets, with CO2-reduced steel to be produced in the electric arc furnaces using scrap.
The green steel transition is expected to cost a hefty total of around 4.6 billion euros, with the federal government and the state of Saarland providing 2.6 billion euros. The plant is set to launch in 2028/29.
Union heavyweight IG Metall harshly criticized ArcelorMittal's decision. "This move is strategically myopic, economically erroneous, and incredibly irresponsible in terms of job security and broader societal implications," said Jürgen Kerner, the union's second chairman. The transition to a climate-neutral steel industry is a century-long endeavor. It's about the future of thousands of jobs in Bremen and Eisenhüttenstadt. The employees have agreed to this, politics is handing out billions in funding, and the electricity price is heading in the right direction. "It's only ArcelorMittal's managers who are losing their nerve and wavering," Kerner grumbled. The federal government must spring into action and organize a crisis summit for the steel industry pronto.
Overall:The transition of German steelmakers like Thyssenkrupp Steel, Salzgitter, and the SHS to more climate-friendly steel production is a complex, evolving process, particularly in the face of ArcelorMittal's recent decision to shelve its green steel plans.
Challenges for the Transition
- Competitive Pressure and Market Conditions: ArcelorMittal's decision to pause its climate-neutral steel production plans in Bremen and Eisenhüttenstadt cites challenging market conditions and financial impracticality as factors. This reflects the broader competitive pressures plaguing the German steel market, notably from cheaper steel imports, especially from China, where steel production remains coal-based and thus less costly. Also, less expensive green steel options from Southern Europe benefit from reduced energy costs and easier access to renewable energy and green hydrogen, making Germany's hydrogen-based production less competitive[5][3].
- Energy Expenses and Infrastructure: The shift to hydrogen-based and climate-neutral steel production necessitates affordable, dependable renewable energy and hydrogen infrastructure. Germany's costlier energy and less favorable conditions for green hydrogen production compared to some European competitors stretch the economic feasibility of these projects[5][4].
- Shrinking Domestic Steel Demand and Industrial Decline: The German steel industry has been shrinking for decades, with the workforce dwindling from around 175,000 employees in 1990 to roughly 78,000 today. Steel production has also decreased by 12% recently, driven by industrial crises and broader economic challenges. This low demand context complicates investments in expensive green technologies[4].
Current Progress and Solutions
- Government Support and Financing: Despite some setbacks like ArcelorMittal's withdrawal, the German government remains invested in green steel projects at other companies. Thyssenkrupp Steel Europe, Salzgitter Flachstahl, and the SHS have ongoing projects supported by about €5.6 billion in public funding commitments, with activity already underway at their facilities. This indicates a keen focus on maintaining progress through financial support and regulatory backing[3].
- Policy Measures to Reduce Energy Costs: The new German government has vowed to cut electricity taxes and grid fees to the minimum levels permitted in Europe, with the goal of reducing energy costs for industry and improving the competitiveness of domestic steel production[4].
- Steel Summit and Strategic Dialogue: In the wake of some project cancellations, including ArcelorMittal's, the German Finance Minister has called for a steel summit to discuss the industry's future and potential acceleration of decarbonization efforts. This initiative aims to coordinate efforts among stakeholders and address difficulties in a more coordinated manner[1].
Impact of ArcelorMittal's Decision
ArcelorMittal's discontinuation of its green steel plans presents a formidable setback for Germany's ambitions to decarbonize its steel industry, given the company's size and sway. The decision underscores the harsh economic realities facing the sector and casts doubt on the feasibility of green hydrogen steel production as a quick solution under current market circumstances. The Ministry of Economics expressed regret but emphasized that the decision was a private business decision; crucially, no government funds had been distributed to ArcelorMittal for this purpose.
However, the government's continued investment in projects by Thyssenkrupp, Salzgitter, and the SHS underscores their commitment to the green transition, although it may require more tailored policies, technological innovation, and improved market frameworks to surmount economic hurdles. ArcelorMittal's withdrawal could prompt a rethinking of Germany's steel decarbonization strategy, refocusing more on competitive conditions and support for companies that can make headway in green steel production[3][5].
- Despite ArcelorMittal's decision to halt its green steel plans, Thyssenkrupp Steel, Salzgitter, and the Stahl-Holding-Saar (SHS) are persistently investing in greener steel production projects, with the support of billions in public funding.
- The salvage plants of Thyssenkrupp Steel and Salzgitter, planned for 2028/29 and 2027 respectively, are intended to transition from natural gas to green hydrogen as fuel, with goals to completely transition to green steel by 2030 and 2033, respectively.
- Germany's Economic Minister, Katharina Reiche, emphasizes the need for lower energy prices to regain the German steel industry's competitive edge and mitigate the challenges presented by cheaper steel imports, particularly from China.
- Union heavyweight IG Metall asserts that ArcelorMittal's decision is short-sighted,Job-threatening, and economically irrational, and calls on the federal government to organize a crisis summit for the steel industry to address challenges and accelerate the green transition.
