Salzgitter AG takes a green direction, focusing on environmentally friendly steel production.
The German steel producer, Salzgitter Group, is spearheading the green steel revolution with its ambitious SALCOS® program. Scheduled for completion in 2033, this groundbreaking initiative is expected to reduce Salzgitter's CO2 emissions by an impressive 95% for its full production capacity of 4.7 million tonnes per annum.
To kickstart Phase 1 of this transformative journey, Salzgitter Group has allocated €2.3bn. The iron and steel sector, responsible for 11% of global carbon emissions and 20-25% of industrial CO2 emissions in the European Union (EU), is set to witness a significant shift.
At the heart of SALCOS® is the replacement of blast furnaces with direct reduction plants and electric arc furnaces. To power this transition, Salzgitter Group requires 150,000 tonnes of hydrogen annually. While 9,000 tonnes will be produced on-site, the remaining 141,000 tonnes will be sourced from external suppliers.
Recognising the importance of optimising iron ore supplies for direct reduction, Salzgitter Group has joined forces with mining firms. The company has also partnered with suppliers to secure access to raw materials and engineering capacity for green steel manufacturing.
The demand for low- or net-zero-emission steel is growing, particularly from the construction sector, automotive industry, and mechanical engineering firms. In response, Salzgitter Group has signed contracts with several customers who will purchase low-emission steel as of 2026, including the Volkswagen Group.
The European Commission has shown its support for Salzgitter Group's endeavours, approving SALCOS® as an Important Project of Common European Interest (IPCEI), providing €1bn in public support funding.
In April 2023, Salzgitter Group contracted a consortium to build a direct reduction plant (DRP) on the site of Salzgitter Flachstahl GmbH. The company's first phase of CO2-reduced steel production is planned to start by mid-2027, but further expansions have been postponed to 2028/29, following the securing of additional funding for this initial stage.
The International Energy Agency (IEA) emphasises the need for accelerated efforts in the iron and steel sector to meet the Net Zero Emissions by 2050 (NZE) Scenario. To this end, Salzgitter Group has sealed several long-term power purchase agreements (PPA) for fossil-free electricity with Iberdrola Germany, Vattenfall, and EnBW.
Moreover, the EU will gradually end free Emissions Trading System (ETS) allowances for steel producers to address carbon leakage. In October 2023, the EU introduced its Carbon Border Adjustment Mechanism (CBAM), which will gradually impose a levy on steel imports from countries without equivalent carbon price mechanisms from 2026 to 2034.
To further bolster its green initiatives, Salzgitter Group signed two export credit agency- (ECA) covered green loan financings in April 2023 to support the decarbonisation of its steel manufacturing operations. In September 2023, the company ordered a 100MW green hydrogen plant from technology provider Andritz Group.
As Salzgitter Group continues to lead the way in green steel production, other steel companies, such as Thyssenkrupp and Jindal Steel International, are also shifting towards this sustainable future. The global demand for steel is forecast to rise, driven by population and economic expansion in emerging markets, making the need for green steel more pressing than ever.
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