German steel industry to become major green hydrogen offtaker
Europe’s steel industry is set to be a significant consumer of renewable hydrogen and German steelmakers in particular have some of the most advanced plans in the region to tap the new green energy source.
Potential future demand from the German steel sectorcould amount to 850,000 metric tons per year by 2030, according to German steel association WV Stahl, with producers planning to connect to a national hydrogen pipeline network now under construction, as well as producing their own green hydrogen from electrolyzers onsite, saving 28 t of CO2 per metric ton of hydrogen.
The German government expects total hydrogen demand of 95-130 TWh (2.85 million-3.90 million t/y) by 2030, with 40-75 TWh from new demand.
Carbon-accounted hot-rolled coil steel commanded a $120/t premium to the Platts conventional HRC assessment of $615/t ex-Ruhr on Aug. 7.
Platts, part of S&P Global Commodity Insights, assessed the cost of green hydrogen production via alkaline electrolysis in Germany, backed by renewable power purchase agreements, at an average of Eur7.98/kg ($8.71/kg) in July.
“The steel industry offers one of the most encouraging new use cases for low-carbon hydrogen due to the amount of CO2 that can be abated per kilogram of hydrogen,” Commodity Insights senior hydrogen analyst Matthew Hodgkinson said. “However, switching to low-carbon steel production is expensive, with ETS prices of at least Eur150-200/t required to make it comparable to current production methods.”
Platts assessed nearest December EU ETS prices at Eur71.04/t Aug. 7.
Complete decarbonization of EU crude steel production would require around 6 million to 8 million t/y of low-carbon hydrogen, comparable with current total hydrogen demand, Hodgkinson said.
German steel producers, backed by national and EU government policies, aim for climate neutrality by 2045, targeting a 30-50% reduction in greenhouse gas emissions by 2030.
Greening steel
Steel production accounts for around 5% of European CO2 emissions, and 8% globally. Germany is Europe’s largest steel producer and seventh biggest in the world, and the sector accounts for around 30% of the country’s industrial emissions.
Steel is produced through two main production routes that both emit CO2 — the blast furnace/basic oxygen furnace (BF/BOF), and the direct reduction iron/electric arc furnace (DRI/EAF) routes.
The predominant BF/BOF route removes oxygen from iron ore using a carbon reducing agent, such as coking coal, leading to around 1.6-2 t of CO2 emissions per metric ton of crude steel produced. The basic oxygen furnace then converts molten iron from the BF into steel.
Meanwhile, DRI plants can use natural gas, hydrogen or a mixture to remove oxygen from iron ore. Using only renewable hydrogen produces zero greenhouse gases. The EAF melts scrap steel or DRI to produce steel using electric arcs.
Around 60% of European steel production is via BF and around 40% via EAF, according to industry association Eurofer. Germany produced about 35.4 million metric tons of steel in 2023, down 4% year on year, of which 9.8 MMt was produced via EAF and 25.63 MMt via BF.
Steelmakers plan to replace BFs with hydrogen-based DRI, with most DRI plants in Germany to be paired with an EAF (see map).
Salzgitter, Stahl-Holding-Saar and Thyssenkrupp have all issued tenders to source large volumes of low-carbon hydrogen for their steel production from later in the decade.
These companies, along with ArcelorMittal, received state funding commitments in 2023 and 2024 under the EU’s Important Projects of Common European Interest program on hydrogen and low-carbon technologies.
Powering up
The switch will see a huge leap in renewable power demand.
The German steel industry’s current electricity demand from the grid is 12 TWh, according to WV Stahl. This could double by 2030 to 24 TWh, with crude steel production estimated around 42 MMt/y. Further green electricity will be required to power electrolysis, of around 28-29 TWh.
While being a large increase, those figures are a relatively small fraction of German power demand of around 500 TWh in 2023, forecast to rise to 649 TWh in 2030, according to Commodity Insights data.
European steelmakers are already marketing low-carbon steel products. Platts launched its daily carbon-accounted steel premium assessment in May 2023, which reflects any differential achieved for spot sales of hot-rolled coil on an ex-works basis, with total accounted carbon emissions of 2.1 t of CO2, or less, for every metric ton of steel produced.
Sunfire installs 20-MW electrolysis plant in Finland
German electrolyser manufacturer Sunfire says it has installed Finland’s first industrial-scale electrolysis plant in Harjavalta, with green hydrogen production anticipated to start later this year.
The 20-megawatt pressurised alkaline electrolyser is installed at Finnish green hydrogen developer P2X Solution’s hydrogen plant in western Finland. The project started construction a year ago. At full capacity, the plant will produce 400 kilograms/hour of green hydrogen using wind energy. It will be commissioned in the coming months, according to Sunfire.
The project also has a methanisation plant, which will produce “renewable synthetic methane” from carbon dioxide and green hydrogen, Kallanish learns from a statement.
P2X signed an offtake agreement with Danisco Sweeteners, a unit of US-based International Flavors & Fragrances, for green hydrogen produced from the plant last November. The company will use the green hydrogen at its plant in Kotka, Finland, to reduce carbon emissions during the production of xylitol, a synthesised sugar alternative used in the food industry.
P2X is targeting a total capacity of 1 gigawatt for green hydrogen production by 2031.
“Green hydrogen will play a crucial role in the transformation of the chemical sector,” says Sunfire ceo, Nils Aldag. “We feel privileged to be part of this pioneering project with P2X Solutions, where our pressurised alkaline electrolyser will be operated on an industrial scale. I am especially pleased that our ‘Made in Europe’ electrolysis technology will contribute to Finnish energy history.”
The project has an estimated total investment of €70 million ($75.4m). Of this, €36m was provided by the Finnish government’s Ministry of Economic Affairs and Employment and the Finnish Climate Fund.
Based in Dresden, Germany, Sunfire develops and manufactures electrolysers based on solid oxide electrolyser cell (SOEC) and alkaline technologies. Last September, German energy developer RWE produced the first green hydrogen at its gas-fired power plant in Emsland, Germany, using a 250-kilowatt (kW) SOEC supplied by Sunfire.
Early last year, the company also began the series production of alkaline electrolysers at its Solingen site in Germany.
Andritz to supply 100-MW electrolysis plant for Salzgitter green steel in Germany
Germany’s Salzgitter has ordered a 100-MW electrolysis plant from Andritz to produce green hydrogen, replacing coal in the steel production process at the company’s Salzgitter Flachstahl from 2026, the companies said in statements Sept. 20.
The plant will produce around 9,000 mt/year of hydrogen, with HydrogenPro supplying the high-pressure alkaline electrolyzers, using its 5.5-MW cell stacks, it said in a separate statement.
“This order represents a major milestone for our partnership with ANDRITZ, and the first step in our European expansion,” HydrogenPro CEO Jarle Dragvik said in the statement.
The project is part of Salzgitter’s Salcos program, which it will develop in three stages.
In a first phase from 2026, Salzgitter will commission a direct reduction plant, an electric arc furnace, and the 100-MW electrolysis plant.
The DRI unit will have a production capacity of over 2 million mt/year of direct reduced iron, while the EAF will produce 1.9 million mt/year of steel, according to Salzgitter Flachstahl and engineering company Primetal, which will build the EAF.
It aims to convert its operations to “virtually CO2-free steel production” by the end of 2033.
The first stage of Salcos is backed by subsidies from Germany’s federal government and the state of Lower Saxony, as well as by the company’s own funds.
Salzgitter Flachstahl Chairman Ulrich Grethe said the development of hydrogen infrastructure in Germany was key to unlocking industrial decarbonization.
“In order to enable us to reduce the CO2 footprint of our steel production in the future, it is imperative that we connect to the emerging hydrogen infrastructure as quickly as possible,” Grethe said in the statement.
German gas transmission system operators in July published a draft hydrogen pipeline network map, linking hydrogen production and demand centers, storage facilities, power plants and import corridors across the country.
The proposed network is made up of converted existing natural gas pipelines, along with newly constructed dedicated hydrogen pipes.
The core network will include key infrastructure expected to be operational by 2032, with scope to expand the network further in later stages.
Germany is targeting domestic renewable hydrogen production capacity of 10 GW by 2030, and is also eyeing large-scale imports through schemes such as H2Global.
Platts, part of S&P Global Commodity Insights, assessed the cost of producing renewable hydrogen via alkaline electrolysis in Europe at Eur6.15/kg ($6.58/kg) Sept. 19 (Netherlands, including capex), based on month-ahead power prices. Proton exchange membrane electrolysis production was assessed at Eur7.23/kg.
Author: James Burgess
