Thyssenkrupp Steel and carmaker Volkswagen Group have signed a Memorandum of Understanding (MoU) for the supply of carbon-reduced steel from Thyssenkrupp’s future direct-reduction (DR) plant in Duisburg, thus dispelling rumors about a cancellation of the green steel project, the German steelmaker announced on Tuesday October 22.
The new DR plant was scheduled to go into operation in 2027, with the supplies to Volkswagen expected to start in 2028, Thyssenkrupp said in a press release seen by Fastmarkets.
The steelmaker did not give more details on what volumes of carbon-reduced steel would be delivered under the MoU, or the period of the arrangement, but added that the supplies would be gradually expanded.
The MoU was expected to help Volkswagen Group to decarbonize its supply chain and become carbon-neutral by 2050. Currently, 15-20% of an electric vehicle’s lifetime emissions were accounted for by the steel used in its construction, Thyssenkrupp added.
Thyssenkrupp Steel’s Duisburg site has production capacity for around 11.7 million tonnes per year of pig iron from four blast furnaces (BFs), and around 11 million tpy of crude steel. But recorded shipments from these steel assets have not exceeded 9.0-9.5 million tpy in recent years.
The site produces hot-rolled coil, cold-rolled coil, hot-dipped galvanized coil, and pre-painted coil, according to Fastmarkets’ information.
Thyssenkrupp already had plans to replace one of the four blast furnaces at its Duisburg site with a direct-reduction plant and two downstream smelters in 2027. This would allow the company to make its first steps toward carbon-neutral steel production.
The other three BFs will gradually be replaced with climate-friendly alternative technologies by 2045.
The new DR plant will have capacity for 2.5 million tpy. The company also planned to be able to produce around 5 million tpy of low-carbon steel by 2030.
Thyssenkrupp has been awarded €2 billion ($2.2 billion) in German state funding for its green steel transformation project.
The DR plant at Duisburg will be powered by green hydrogen, which is seen as a strategic renewable fuel in Europe. This will allow the company to significantly reduce its carbon footprint compared with conventional steel production, Thyssenkrupp said.
The company added that production from the plant would initially be ramped-up using natural gas as a reducing agent but that it would gradually be converted to hydrogen.
The carbon-reduced steel produced by the Duisburg plant will be marketed under the company’s Bluemint brand.
Cost increases expected with new DR plant
Construction of the Duisburg DR plant could cost more than initially expected, Fastmarkets understands.
“The executive board of Thyssenkrupp Steel Europe AG has informed the supervisory board… about expected cost increases. The situation is currently being reviewed, based on this information,” a spokesperson told Fastmarkets.
Despite this, the company was assuming that the DR plant project would go ahead under the given framework conditions, the spokesperson added.
At the beginning of October, German media sources claimed that Thyssenkrupp was considering the project’s cancellation.
“[But] Thyssenkrupp remains committed to its green transformation and climate-neutral steel production,” the spokesperson said. “There is no way around the decarbonization of CO2-intensive steel production in the long term.”
Potential cost increases for the DR plant would have no effect on the confirmed federal and state subsidies, the spokesperson added.
Demand for green steel sluggish in Europe
Demand for flat steel products was still limited across Europe, and this was influencing the green steel market, Fastmarkets understands.
Demand for carbon-reduced and green steel was heard mainly on a project-by-project basis from automotive or construction companies, which need to meet requirements for decreased CO2 emissions in their products, industry sources have told Fastmarkets.
“The green steel market is just evolving in Europe, and trade volumes are small, but we expect [demand] to surge in the coming years, driven by legislation,” a mill source in Northern Europe said.
There was no common standard or official definition for “green steel” in Europe yet.
Fastmarkets’ own methodology, however, defines European green steel as: “Steel produced with Scope 1, 2 & 3 emissions of a maximum 0.8 tonnes of CO2 per tonne of steel.”
Fastmarkets’ latest weekly assessment of its green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe, remained at €100-200 ($108-217) per tonne on October 17, unchanged since September 5.
Published by: Julia Bolotova, Darina Kahramanova
