Most of the largest European steelmakers are planning for the conversion to the use of hydrogen rather than coal. This article looks at the efforts of Salzgitter, the second largest German manufacturer, to decarbonise its production capacity. The rapidly developing plans involve the construction of ‘direct reduction’ furnaces, electric arc furnaces, the supply of hydrogen and the purchase of higher quality iron ore from Canada.

By 2025 Salzgitter intends to have an output of 1.9 million tonnes of steel made using hydrogen. Its total production at the moment is about 7 million tonnes. (World production of steel, mostly in China is just under 2 billion tonnes). Salzgitter’s full conversion to hydrogen and electric arc furnaces is planned by the mid 2030s.

Direct reduction using hydrogen

Most new steel (‘primary’ steel, not scrap metal recycled in an electric arc furnace) is made in blast furnaces in which iron ore is mixed with coking coal. The coal both heats the ore and strips it off the oxygen in the ore, leaving raw iron. About two tonne of CO2 emissions result from each tonne of new iron produced, meaning that steel contributes about 8% of total global emissions.

Hydrogen can replace coal, dramatically reducing CO2 output from steel production. The process is called ‘direct reduction’ of iron or DRI. We know DRI is highly likely to work because a very similar process is used in some parts of the world, including India and Iran, that uses syngas (H2 and carbon monoxide) made from natural gas. Almost 40 projects in Europe are now planning to shift to pure hydrogen DRI, which will emit only water. (By the way, there’s been very little progress in the UK compared to the rest of Europe). A DRI plant produces a form of iron, which is then converted to steel in an electric arc furnace.

Salzgitter

Salzgitter makes steel in the town of the same name in Lower Saxony in central Germany, close to Hanover. The business is sited there because of the existence of a local iron ore seam that is no longer mined. The huge furnaces on the site are responsible for about 1% of Germany’s total emissions.

The steel producer began work on low carbon steel making in 2015, testing out hydrogen production made with local renewable electricity. One critical step it took in mid 2022 was to commit over €700 million to the first phase of its full decarbonisation. This commitment was made on the basis that German governmental support would also be forthcoming. The company’s contribution was eventually upped to over €1 billion.

Recent events

The last few weeks and months have seen an extraordinary flurry of announcements from Salzgitter covering funding, electricity and hydrogen supply and iron ore provision. The planning and preparation for the conversion to DRI have taken sudden leaps forward.

· Funding. The German government and the state government of Lower Saxony promised around a billion Euros for the first phase of the project on 18th April 2023. The intention is to convert about 1.9 million tonnes of production capacity to hydrogen DRI by the end of 2025. The total cost for this part of the decarbonisation is expected to be almost 2 billion Euros, or about a billion Euros per million tonnes of yearly steel output. (This is roughly equivalent to the expected investment cost per tonne of steel at H2 Green Steel, the new company using hydrogen in northern Sweden). For this money, the owners will get two direct reduction and three new electric arc furnaces.

· On 20th April Salzgitter and Iberdrola Deutschland announced that the steel company would take the output of 114 MW of Iberdrola’s new offshore wind farm ‘Baltic Eagle’ that is schedule to go online at the end of 2024. The output from these turbines will provide approximately half a terawatt hour of output, which is probably about 7% of the Salzgitter’s first phase needs.

· Salzgitter and gas distribution company VNG said on 17th April that they were jointly investigating the connection of Salzgitter into the planned European hydrogen grid that will allow production in low cost locations to be brought in a pipeline to the DRI plant.

· In February, the steel company and Canadian iron ore producer Baffinland announced plans to work together to deliver iron ore to the DRI plant. DRI requires ore with higher concentrations of iron than are typically currently used in most world steel making. Baffinland, partly owned by competitor steel company ArcelorMittal, has ore that reaches over 66% iron content. The announcement of the cooperation with Baffinland comes after an investigation with the world’s largest ore producer, Rio Tinto, in 2022 that perhaps has concluded that most of its output does not meet the quality required for DRI.

· In early 2022, Salzgitter and German utility company Uniper agreed to supply hydrogen from a proposed new hub at the port of Wilhelmshaven. This will both use electrolysers to make H2 from offshore wind but also convert ammonia shipped into Germany back into hydrogen. Uniper is also planning a hydrogen-making plant in the port of Rotterdam district using offshore wind electricity that will connect into the European gas grid to supply Salzgitter.

The last few weeks have seen much commentary on the withering of ‘hydrogen hype’ as the difficult realities of conversion become clearer across multiple industries. Salzgitter’s growing commitment to full decarbonisation and the development of a full supply chain for iron ore and hydrogen suggests that at least the steel industry is moving ahead rapidly, probably made more confident by the EU’s Carbon Border Adjustment Mechanism.

Steel is likely to be most important single user of H2, with a probable demand of at least 150 million tonnes a year after full decarbonisation. (Most forecasts see a total need for hydrogen of around 500 million tonnes in 2050, although the total amount used for electricity ‘storage’ is still very unclear).

One concern must persist. Salzgitter is not in the best location for either iron ore or cheap hydrogen. My guess is that, as H2 Green Steel In Sweden says, it will be far better to be in an area with either very cheap renewable electricity – which Germany is not – and close to high quality ore. Once again, German locations fall short. Salzgitter’s inland location creates a further disadvantage.

In any event, government support for the transition is probably vital. The German state and Lower Saxony are putting up about 50% of the required capital investment and most other steel producing countries look as though they expect to fund similar amounts across Europe. Those of us who live in Britain should be deeply concerned at the apparent block on grants to UK steel producers to ease the transition to hydrogen.