The steel industry is one of the most climate-damaging sectors. Now it should go green and the federal government wants to help. Money alone is not enough.
It hums and hums in the Bremen hot rolling mill. Then the bulkheads open, there is a bang and a rattle as a glowing slab whizzes across the conveyor belt. Even from a safe distance, the heat of the twelve-meter-long, 1,000-degree metal can be clearly felt. Then the solid piece is rolled, pressed and cooled until the light block no longer resembles a gold bar, but rather what it really is: a gray steel plate made to be installed in cars and bridges or as an ashtray or cutlery to land in the household.
3.5 million tons of the raw material are produced in Bremen every year. That’s ten percent of total German production – which is extremely harmful to the climate. In the Hanseatic city, half of the CO2 emissions come from the steelworks.
More than a quarter of German emissions come from the sector. The federal government had announced that it wanted to green the German steel industry with around seven billion euros. As early as December 2023, Economics and Climate Minister Robert Habeck promised the Dillinger Hüttenwerke in Saarland a financial injection after the European Commission had approved the funding. The Saarland steel industry will receive around 2.6 billion euros by 2027. The EU Commission had previously granted approval for the steel manufacturers Salzgitter AG and Thyssenkrupp Steel Europe in Duisburg.
Habeck has now also promised funding to Arcelor Mittal’s plants in Bremen and Eisenhüttenstadt. The Minister of Economic Affairs traveled to the Hanseatic city with the decision. “Everything has been clarified,” said the Green politician at a company staff meeting. The final step from Brussels is still missing with the notification, but the workforce can rely on the funding.
Green hydrogen equals green steel
Bremen waited for the decision for more than two years. Plans to convert the plant have been in existence for several years. In 2021, Arcelor Mittal announced that the two blast furnaces would be shut down and replaced by a so-called direct reduction plant (DRI). This system works with environmentally friendly hydrogen. Electrically operated melting furnaces are also expected to replace conventional steel converters. But this requires financial help from Berlin and Brussels.
The United States is currently the international leader in green steel. The industry primarily relies on recycling. A lot of steel scrap is recycled there, says Rainer Quitzow, who researches climate-friendly industries at the Institute for Sustainability at the Helmholtz Center Potsdam. State-owned companies have launched the first green pilot projects in China, the world’s largest steel producer. In Europe, ambitions in Spain are great. The foundations for renewable energies are there, but there is a lack of money to promote the transformation of the steel industry. Things are going better in Sweden, however, where there are enough wind turbines turning to produce CO2-free hydrogen – a challenge that Germany will also have to face in the future.
Because steel only becomes truly green when the hydrogen is also green. For this to happen, all of the electricity needed to produce hydrogen would have to come from wind or solar parks – “and that is not the case at the moment,” says Quitzow. And adds: “If you want to produce credibly, you also have to take this upstream chain into account and ensure that only emission-free hydrogen is used.”
Climate-neutral steel production in this country is therefore still on somewhat shaky ground. Also because the project is expensive. However, 20 years ago this also applied to renewable energies, admits the industrial researcher. “Depending on how the sun is and how the wind is blowing, renewables have now become many times cheaper than electricity from coal and gas. And that’s exactly what we need to do now in the area of hydrogen production.”
Alternatively, the German steel industry could also recycle the scrap. Around 70 percent of the steel is melted in the steel mills, and the remaining 30 percent is recycled, according to the Steel Association. Whether reused or produced with hydrogen: there is no patent recipe for green steel. How producers position themselves depends on the market situation. And also about the product itself, because hydrogen production is not suitable for every form of steel. “The only important thing is that the entire production is decarbonized. Because the alternative is climate change – and from an economic perspective it is significantly more expensive,” emphasizes Quitzow.
Debates about cheap imports and CO2 prices
If manufacturers in this country say goodbye to coke completely, prices could rise – and buyers could abandon it. Federal and state subsidies may not change this much. If the costs are too expensive for you, import cheaper from China. Around half of the metal produced worldwide was produced there in 2020. Given the mass production, economic experts fear a kind of dumping of Chinese steel products. “This is of course also a problem for the competitiveness of green steel,” confirms Quitzow.
To prevent this, then US President Donald Trump imposed tariffs of 25 percent on steel imports in 2018, justifying this with a law from 1962. Accordingly, presidents are allowed to restrict imports if they threaten national security. The World Trade Organization (WTO) declared this unlawful. Tariffs have been withdrawn for European products. They still apply to China and other countries – much to the dismay of the WTO and Beijing. Together with Brussels, Washington is currently struggling to find another solution.
The Europeans recently agreed on a border adjustment mechanism. The instrument is intended to align the carbon price for imports with the prices for CO2 certificates from European steel producers. The measure will be introduced gradually. European trading partners “sometimes see this more as protectionist measures to protect the European steel sector. I wouldn’t see it that way. I think it’s a protection for the steel mills that are really being decarbonized,” says Quitzow.
“But what is even more important is the targeted creation of ‘green demand’, for example quotas for green steel could be introduced in public procurement,” he suggests.
It is currently difficult to say how long the transition to green steel will take in Germany. It depends on political will, measures and money. However, it makes sense to initially “start projects step by step in order to generate learning effects and reduce the costs of the technology. This would be feasible within the next 20 years,” estimates industrial researcher Quitzow. “So that’s exactly the amount of time we have left.”
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Source: Stern
