German steel producer Thyssenkrupp has put its tender to buy green hydrogen for its Duisburg direct reduction iron plant on hold, as early price indications from bidders are “significantly higher” than the company expected.
Thyssenkrupp Steel launched the tender in February 2024 to purchase up to 151,000 mt/year of renewable and low-carbon hydrogen under 10-year contracts for pipeline delivery to its Duisburg steelworks in Germany, but higher-than-expected prices and slow market development have forced the company to reconsider.
“Our tender for hydrogen procurement is currently on hold because it is becoming clear that the offered prices will be significantly higher than assumed and that other framework parameters of the hydrogen economy, which is developing more slowly than expected, will change considerably,” Thyssenkrupp Steel told Platts, part of S&P Global Commodity Insights, by email March 24.
Platts assessed the cost of green hydrogen production via alkaline electrolysis in Germany, backed by renewable power purchase agreements, at Eur9.35/kg ($10.18/kg) on March 21, down from a peak of over Eur14.50/kg in mid-December.
The assessment reflects one possible pathway for producing EU Renewable Energy Directive-compliant green hydrogen.
“We will continue to use hydrogen as soon as it is technically and economically feasible and possible to do so.”
The company said the development did not affect its plans to construct the DRI plant.
“The construction and operation of the direct reduction plant in Duisburg are not directly affected by these issues because the plant can also be operated with natural gas,” a spokesperson said.
The company said that natural gas-fed DRI would avoid 50% of the CO2 emissions of conventional blast furnace operations.
Green hydrogen delays
Thyssenkrupp originally planned to use natural gas when the DRI plant is commissioned, as sufficient green hydrogen would not be available, with blue hydrogen acting as a bridge before renewable production ramps up.
However, the rollout of the green hydrogen economy in Europe has been pushed back multiple times as developers grapple with first-of-a-kind projects and a lack of existing infrastructure for the renewable energy carrier.
German gas grid operator Gascade is using conventional fossil-derived “gray” hydrogen to fill the first section of its “Flow – Making hydrogen happen” pipeline network under construction, the company told Platts.
Thyssenkrupp will discuss the insights from its tender regarding prices, quantities and conditions with the tender funding agency, the German government and the European Commission, it said.
“We will then intensify our efforts on the procurement concept and contact with suppliers” to take into account possible delays in the hydrogen ramp-up, Thyssenkrupp said.
The steelmaker had originally envisaged ordering 104,000 mt of hydrogen in 2028, rising to 143,000 mt/year over 2029-35 before reaching 151,000 mt/year over 2036-37 as it seeks to decarbonize the plant.
The tendered volumes were to meet the EU’s Renewable Energy Directive requirements for renewable hydrogen and low-carbon hydrogen under current provisions on CO2 emissions reductions.
The company planned to connect its Duisburg steel plant to Germany’s national hydrogen pipeline network at an early stage. The first sections of the national pipeline are under construction.
Thyssenkrupp is to construct a 2.5 million mt/year DRI plant to replace the four blast furnaces at Duisburg, with the first production to start from the end of 2026.
The DRI plant could avoid 3.5 million mt/year of CO2 emissions, Thyssenkrupp said previously. The company aims to complete a transition to carbon-neutral steel production by 2045 at the latest.
German steel decarbonization
The steel industry is one of the most effective applications of clean hydrogen for deep decarbonization.
The EU is targeting 10 million mt/year of domestic green hydrogen production by 2030, which could decarbonize 11% of global steel demand, according to S&P Global Commodity Insights analysts, saving 340 million mt/year of CO2 emissions.
Several other steel companies in Germany have launched tenders to buy green hydrogen volumes to decarbonize operations.
Salzgitter opened a tender to source up to 120,000 mt/year of green hydrogen for its Salcos low-carbon steel production in June, seeking supplies from 2027, subject to connection to the planned German hydrogen pipeline network.
And Stahl-Holding-Saar launched a tender in March 2024 to buy up to 50,000 mt of locally produced renewable hydrogen for its Dillinger and Saarstahl plants in Saarland.
Meanwhile in the refining sector, TotalEnergies has signed a hydrogen supply agreement with German power producer RWE to decarbonize its Leuna refinery in Germany.
