Steelmaker SHS Group signs contracts for new DR plant, two EAFs

German steel producer SHS Stahl-Holding-Saar Group (SHS Group), a major shareholder in the Dillinger, Saarstahl and Rogesa steelmaking companies, has signed contracts for the construction of a new direct-reduction iron plant and two new electric-arc furnaces, the company said on Friday October 11.

The direct-reduction (DR) plant and the two electric-arc furnaces (EAFs) will have capacity for 3.5 million tonnes per year of crude steel. The SHS Group will thus convert 70% of its total capacity to CO2-reduced production, the company said.

Commissioning of the new facilities was scheduled for 2028/29, it added.

After commissioning, the DR plant will supply iron pellet to the group production sites in Dillingen and Völklingen. The plant will have capacity for 2 million tpy of DR iron and will be based on a technology that allows it to work with different ratios of natural gas and hydrogen fuel.

The EAFs will produce CO2-reduced steel from the iron pellet produced in the DR plant and steel scrap.

The new facilities will be built as part of the SHS Group’s Power4Steel project, which will help the company to transition to green steel production and reduce its CO2 emissions by 55% by the early 2030s, the steelmaker said. This would correspond to a reduction of 4.8 million tpy of CO2.

The total investment in the DR plant and the two EAFs will reach €4.6 billion ($5 billion), with €2.6 billion of this coming from federal and state funding, SHS Group added. The rest of the sum will be provided by companies within the SHS Group.

Plant construction firms Midrex Technologies, Primetals Technologies and DSD Steel Group were awarded the contract for the construction of the DR plant, which will be at the Dillingen site.

Primetals and DSD were also selected to build one of the EAFs, which will be operated by heavy-plate producer Dillinger.

The second EAF, which will be for rebar and wire rod manufacturer Saarstahl, will be built by SMS Group.

State funding for local green steel projects
In 2023-24, Germany approved significant amounts of funding to finance green steel projects.

For example, ArcelorMittal Bremen and ArcelorMittal Eisenhüttenstadt have been granted €1.3 billion as part of the German Recovery and Resilience Plan.

Thyssenkrupp has obtained €2 billion in German state funding for its green steel transformation project.

And Salzgitter, Germany’s second-largest steelmaker, has received nearly €1 billion in government funding for its hydrogen-based steelmaking project.

According to Fastmarkets’ estimates, in the past year, more than €10 billion of public funding in the EU and the UK have been granted to the steel industry to support decarbonization

The demand for hydrogen fuel in Germany was expected to grow.

The transition toward more environmentally friendly production includes the replacement of BF-BOF capacities with electric-arc furnaces (EAFs) and hydrogen-fueled direct-reduced iron (DRI) modules.

This was expected to increase the demand for hydrogen.

Thus, the steel industry was expected to be Germany’s main consumer of imported hydrogen in the next two decades, according to the hydrogen import strategy approved by the country’s Federal Cabinet.

According to this document, the demand for hydrogen and hydrogen derivatives in Germany will amount to 95-130TWh in 2030.

Around 50-70% of this (45-90TWh) will have to be imported. The Federal Cabinet calculations showed that the share provided by imports would continue to increase after 2030.

Published by: Julia BolotovaDarina Kahramanova

fastmarkets.com