Germany’s ailing steel industry gets €2.6 billion to decarbonise

Germany’s steel production industry is struggling with high electricity prices, the sector confirmed as the European Commission approved a state aid package to further electrify the entire sector.

On Tuesday, the European Commission approved €2.6 billion in state aid to support Germany’s steel industry, partly so that it decarbonises its steel production processes with hydrogen.

“This is outstandingly good news for the industrial transformation in Saarland and throughout Germany,” Germany Economy Minister Robert Habeck said.

According to Germany’s economics ministry, “the companies [in question] want to save around four million tonnes of CO2 emissions per year in the medium term.”

It is planned to replace the existing blast furnaces and oxygen converters with a direct reduction plant and two new electric arc furnaces by 2027. By mainly using low-carbon and renewable hydrogen, the need for natural gas will gradually be phased out of the steel production processes.

“This news is groundbreaking for the Saarland steel industry. [… It] is a victory for climate protection,” said Stefan Rauber, chairman of the Management Board of one of the benefitting steel producers.

Three million tonnes of green steel will be produced annually using 120,000 tonnes of green hydrogen.

This is the third major state aid to fund the decarbonisation of a steel site in Germany as part of the IPCEI hydrogen project. A further project has yet to be approved by the European Commission.

To decarbonise the sector, it is gradually shifting from using fossil fuels to electricity produced from renewable hydrogen.

Sectors in trouble

However, the steel sector in Germany is currently struggling, particularly with high electricity prices.

On Tuesday, the German Steel Association announced that 2023 will be “one of the weakest years in terms of production in the German steel industry”.

Indeed, a 4% decline for the year follows an earlier setback of around 8% in 2022.

Even lower output only came at the height of the financial crisis of 2009, which has been associated with an even lower output of 35.5 million tonnes of crude steel.

“Steel production is currently in free fall. […] Electric steel production in particular is suffering from persistently high electricity prices combined with a persistently weak economy,” said Kerstin Maria Rippel, director General of the German Steel Association.

The production of crude steel from scrap is particularly energy-intensive, and output fell by 11% this year to a historic low of 10.1 million tonnes.

Rippel, therefore, urged that “politicians must continue to face their task of creating affordable electricity prices with great urgency”.

Energy crisis an 'existential threat' to EU metal production, heavy industries

The European Union needs to reduce power costs in the region to prevent the permanent closure of metal producing plants in the region, which would increase reliance on imports with higher carbon footprints, industry association Eurometaux said.

(Kjeld Neubert | Euractiv.de)

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