Salzgitter’s SALCOS project to receive extra funds
The German government has approved EUR322 million in additional funding for Salzgitter’s SALCOS decarbonisation project, according to a state press release.
The Federal Ministry for Economic Affairs and Energy (BMWE) approved the funds following the European Commission’s authorisation under EU state aid rules earlier in February.
Salzgitter’s SALCOS – Salzgitter Low CO2 Steelmaking – strategy initially aimed to reduce CO2 emissions by over 95% by the end of 2033, replacing its existing blast furnace-basic oxygen furnace (BF-BOF) route production with direct-reduced iron fed electric-arc furnace (DRI-EAF). The DRI plant would operate on a mix of hydrogen and natural gas, neither of which are very competitive at present in Europe, due to insufficient scale and high costs.
As noted in the German government’s statement, a financing gap was identified at the time of initial state aid approval in 2022, despite the EUR1bn pledged by the German state. Salzgitter’s construction relating to the first stage of SALCOS – the 2.1 mt/y DRI plant, 1.9 mt/y EAF, and 100 MW hydrogen electrolyser – is ongoing, now supported by the additional EUR322m grant, which according to the BMWE “further secures the project’s timely implementation.”
Salzgitter’s leadership stated last year that it expected relevant green steel production to begin in the first half of 2027. The latter stages of the SALCOS project remain on hold until final investment decisions are taken – expected for 2028-2029 – which could see plans to expand the H2 electrolyzer cancelled in preference for external supply.
The German government had previously assumed that additional funding to fill the SALCOS financing gap could be allocated from other state aid initiatives and instruments due to the project’s consumption of hydrogen produced as part of the EU’s Important Projects of Common European Interest (IPCEI) framework, but such an allocation “proved unfeasible,” requiring approval for additional funds.
More information on SALCOS, and other decarbonisation projects in the global steel sector, can be found in McCloskey’s Global Green Steel Profile.
Salzgitter delays Salcos hydrogen steel project by three years
Salzgitter, Germany’s second-largest steelmaker, said Sept. 22 in an emailed statement to Platts that it is delaying the expansion stages of the Salcos project by approximately three years, citing worsening market conditions and the lack of regulatory support from the federal government.
The decision was taken by the company’s supervisory board on Sept. 18, according to the emailed statement.
“Since 2022, the economic and political-regulatory conditions have significantly deteriorated,” it said, adding that the company is still awaiting the regulatory changes promised by the federal government.
Salzgitter added that the federal government must act to support the German steel industry by providing a sustainable, secure, and affordable energy supply; accelerating the ramp-up of the hydrogen market; supporting the adoption of carbon-accounted steel products; and advocating for consistent trade protection at the EU level.
The delay comes as European steelmakers grapple with weak demand, high energy costs, and competition from imports, particularly from China.
Revised project timeline
While Phase One, involving the construction of a direct reduction unit, an electric arc furnace, and an electrolysis plant, remains on track to launch in 2027, Salzgitter will now postpone an investment decision on Phases Two and Three until 2028/29, instead of 2026 as previously planned.
Similar projects by companies like ThyssenKrupp and ArcelorMittal have also faced challenges related to funding, regulatory support, and market conditions.
The Eur2.5 billion ($2.9 billion) Salcos project was officially launched in 2019 and is part of Salzgitter’s broader strategy to reduce CO2 emissions in its steel production processes and transition from traditional blast furnace to hydrogen-based steelmaking processes by 2033, cutting overall CO2 emissions by an estimated 95%.
The company started construction of the 100-MW phase one electrolyzer in February, which is to produce 9,000 mt/year of renewable hydrogen, supporting phase one requirements of 150,000 mt/year for steel production.
The electrolysis plant will be among the largest green hydrogen facilities in Europe to date.
In June 2024, Salzgitter opened a tender to source up to 120,000 mt/year of renewable hydrogen for the Salcos project.
The tender was for supplies from 2027, subject to connection to the planned German hydrogen pipeline network.
Salzgitter previously said it was planning to use up to a total of 150,000 mt/year of hydrogen at its steel production plant, including the 9,000 mt/year produced from its own 100-MW electrolyzer from 2026.
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 Eur7.08/kg ($8.34/kg) on Sept. 19.
The assessment reflects one possible pathway for producing EU Renewable Energy Directive-compliant green hydrogen.
Lindab to source steel from Salzgitter’s Salcos route
Lindab Steel, a subsidiary of ventilation technology group Lindab AB, and Salzgitter Flachstahl GmbH have signed a memorandum of understanding (MoU) for the delivery of CO2-reduced steel from the producers Salcos route.
The ‘green’ steel produced in this way is used primarily for ventilation products such as air ducting systems and profiled construction products such as roof and facade cladding, Salzgitter says.
“Our ambition is to reach net-zero greenhouse gas emissions across the whole value chain by 2050 and we see Salzgitter as a contributing partner on our journey,” says Thommy Psajd, sourcing director at Lindab Steel.
Lindab last year signed a similar deal with Tata Steel Nederland.
Christian Koehl Germany
Salzgitter lays cornerstone for green hydrogen plant
Salzgitter has laid the cornerstone for what it says is one of the largest production plants for green hydrogen in Europe, Kallanish notes.
Starting from 2026, the plant will generate around 9,000 tonnes/year of green hydrogen to be used for the production of carbon-reduced steel. This will mark the start of the industrial use of hydrogen in the company’s SALCOS – Salzgitter Low CO2 Steelmaking – project. The 100 MW electrolysis plant will be supplied by Andritz.
A contract between the two companies was signed in September 2023 (see Kallanish September 2023). The engineering involves partner company HydrogenPro. The partner’s pressurised electrolyser stacks are particularly suited for large-scale industrial application, according to Andritz executive Domenico Iacovelli.
Separately, the steelmaker announces its plate-making subsidiary Ilsenburger Grobblech has signed a contract with wind turbine manufacturer Siemens Gamesa for the delivery of around 25,000t of heavy plate.
These will be used for the construction of 36 wind towers of Siemens Gamesa’s “GreenerTower” type. The special feature of this tower is its CO2eq emissions of less than 700 kg per tonne of steel, Salzgitter notes.
The CO2eq-reduced tower has been part of Siemens Gamesa’s product portfolio since 2024. The first use of the towers will be in the “Thor” offshore wind farm in the Danish North Sea. This is planned to be completed by the end of 2027 and have a capacity of more than 1,000 MW.
Christian Koehl Germany