Carmakers and steelmakers are entering agreements for green steel to bolster their environmental image, but the production of this steel still relies heavily on fossil fuels, primarily natural gas, due to a lack of large-scale green hydrogen supplies. German steel manufacturers Thyssenkrupp AG and Salzgitter AG have secured deals with automakers like Mercedes-Benz Group AG, Volkswagen AG, BMW AG, and Ford Motor Co. for green steel, despite initial reliance on natural gas.
The European steel industry aims to transition from coal-based production to electric-arc furnaces and hydrogen to reduce carbon emissions, but the shift faces challenges due to insufficient green hydrogen output. To address concerns about greenwashing, the German Steel Federation proposes a labeling system, designating steel produced with 100% green hydrogen as “near zero” emissions steel.
Salzgitter, for instance, plans to produce 1.9 million tons of low-carbon steel by 2026, with customers willing to pay a premium for its environmental benefits.
However, significant infrastructure development is required for a full transition to green hydrogen, making large-scale hydrogen purchase agreements a long-term goal for the industry. Germany is planning hydrogen pipelines to support its shift away from fossil fuels and reduce carbon emissions by two-thirds by 2030 compared to 1990 levels.
The transition to greener steel production will necessitate substantial government support, with companies like Salzgitter and Thyssenkrupp receiving around €3 billion in investments to kick-start their initiatives, along with additional subsidies for operational costs.