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The supervisory board (SB) of German steelmaker Salzgitter has approved a €723 million investment in making steel production more sustainable. Salzgitter is working on hydrogen-based steel production.
The SB’s approval is not yet an investment decision for the sustainability effort. Salzgitter is still waiting for the allocation of requested subsidies, the size of which I will have to withhold from you.
In the Salcos project, Salzgitter has been working for years on a Direct Reduction Iron Ore Plant (DRI) on hydrogen and an electric arc furnace to convert a traditional blast furnace on (metallurgical) coal. The group now single-handedly accounts for roughly 1% of Germany’s CO2 emissions but aims to operate almost completely emission-free by 2033.
The new hydrogen- and electricity-powered steel plant should contribute to this from 2025. “We have set ourselves ambitious goals,” says Gunnar Groebler, CEO of Salzgitter AG. “I am convinced that the timely implementation of Salcos will give us competitive advantages in the market for green steel.” BMW, among others, has already agreed to purchase some of its more sustainable steel from Salzgitter.
Like Tata, dependent on scarce, expensive, fossil natural gas for the time being
With the transition from coal to hydrogen and electricity as the main reagents and energy carriers for steel production, Salzgitter is on the same track as Tata Steel IJmuiden, which in 2021 decided head-on to cancel plans for CO2 capture and storage at its current blast furnaces.
Because sustainable hydrogen and sustainable electricity are not available for the time being in the volumes that a serious steel plant needs, both steel producers will be heavily dependent on (the price of) natural gas for years to come. This applies to both the hydrogen and the electricity, which for the time being is still largely produced from natural gas.
However, extreme prices for natural gas will not result in more extreme prices for BMWs through more sustainable steel production. Doubling the price of steel won’t make a big difference on an entirely new car. Top therefore that car manufacturers drive the sustainability of their main suppliers. In time, this will hopefully make sustainable steel affordable for tin cans, wind turbines and rail.
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