Due to economic and regulatory conditions, Salzgitter has delayed the later stages of its green steel project.

Salzgitter, Germany's 2nd largest steelmaker, announced on Thursday that it had decided to postpone the expansion of a crucial green steel project for three years. The CEO also noted the deterioration in conditions in recent years.

Salzgitter spends around 2,5 billion euros, including 1 billion euro in grants, for its Salcos project. This will allow it to produce steel from 2027 that emits less CO2 with the aid of hydrogen.

The first phase of the project, consisting of 100 megawatts electrolyser, direct reduction plant, and electric arc furnaces, is proceeding as planned. This will allow Salzgitter, to save 30% on CO2 emissions for around 2,000,000 tonnes of steel.

Gunnar Groebler, who added that the hydrogen market has developed slower than expected, said that later stages will be delayed. These will ultimately reduce emissions related to steel production, one of most polluting industrial processes, to 95%.

"The economic climate is not there. We are also still waiting for regulatory changes, which politicians have promised us for years, but have yet to materialise," he said.

The Salcos second expansion stage will now be evaluated in 2028-2029 as opposed to the previous schedule of 2026.

A person with knowledge of the matter stated that the delay would free up approximately 1 billion euros for capital expenditure.

ArcelorMittal is the second largest steel producer in the world. In June, it dropped plans to convert its two German plants to carbon-neutral manufacturing because Germany's energy prices were too high.

This has cast doubts on the green hydrogen policy launched by Germany’s former government. The government had hoped that subsidies would encourage existing plants to convert furnaces to hydrogen-fired furnaces, which are created using renewable energy. Reporting by Tom Kaeckenhoff and Christoph Steitz. $1 = 0.8493 Euros

(source: Reuters)