Germany to increase funding for Salzgitter low-carbon steel project

The German government has confirmed additional funding of €322 million for Salzgitter’s plans to produce steel based on green hydrogen. This was announced in a statement by the country’s Federal Ministry for Economic Affairs and Energy (BMWE).

The ministry approved the increase in funding for the company’s Salcos project after the European Commission gave its approval for the additional funds on February 6.

The new amount is in addition to the €1 billion initially allocated in 2022 under the Important Projects of Common European Interest (IPCEI) scheme.

«At the time of approval of this first major hydrogen-based primary steel project under the IPCEI, it was assumed that the aid could be combined with other instruments, but this proved impossible. The increase in funding now approved additionally ensures the timely implementation of the initiative,» the ministry said in a statement.

As noted, thanks to this additional funding, BMWE is providing a key future project of the German steel industry with the necessary financial security for further implementation, strengthening competitiveness, and creating industrial value in the country.

The Salcos project involves a gradual transition from traditional blast furnace steel production to a direct reduction plant with increased use of hydrogen in combination with an electric arc furnace. It received state aid approval in October 2022, and the decision at the national level was made in April 2023. State funding is provided 70% by the federal government and 30% by the state of Lower Saxony.

It should be recalled that in September last year, Salzgitter announced its decision to postpone the next stages of the large-scale Salcos green project for three years. The total cost of the project is around €2.5 billion, of which €1 billion (at that time) is state grants. The first phase, which is already underway, involves the launch of a 100 MW electrolyzer, the construction of a direct reduction plant, and an electric arc furnace. This will reduce carbon emissions by approximately 30% in the production of about 2 million tons of steel starting in 2027.