Salzgitter delays Salcos hydrogen steel project by three years

Salzgitter, Germany's second-largest steelmaker, said Sept. 22 in an emailed statement to Platts that it is delaying the expansion stages of the Salcos project by approximately three years, citing worsening market conditions and the lack of regulatory support from the federal government.

The decision was taken by the company's supervisory board on Sept. 18, according to the emailed statement.

"Since 2022, the economic and political-regulatory conditions have significantly deteriorated," it said, adding that the company is still awaiting the regulatory changes promised by the federal government.

Salzgitter added that the federal government must act to support the German steel industry by providing a sustainable, secure, and affordable energy supply; accelerating the ramp-up of the hydrogen market; supporting the adoption of carbon-accounted steel products; and advocating for consistent trade protection at the EU level.

The delay comes as European steelmakers grapple with weak demand, high energy costs, and competition from imports, particularly from China.

Revised project timeline

While Phase One, involving the construction of a direct reduction unit, an electric arc furnace, and an electrolysis plant, remains on track to launch in 2027, Salzgitter will now postpone an investment decision on Phases Two and Three until 2028/29, instead of 2026 as previously planned.

Similar projects by companies like ThyssenKrupp and ArcelorMittal have also faced challenges related to funding, regulatory support, and market conditions.

The Eur2.5 billion ($2.9 billion) Salcos project was officially launched in 2019 and is part of Salzgitter's broader strategy to reduce CO2 emissions in its steel production processes and transition from traditional blast furnace to hydrogen-based steelmaking processes by 2033, cutting overall CO2 emissions by an estimated 95%.

The company started construction of the 100-MW phase one electrolyzer in February, which is to produce 9,000 mt/year of renewable hydrogen, supporting phase one requirements of 150,000 mt/year for steel production.

The electrolysis plant will be among the largest green hydrogen facilities in Europe to date.

In June 2024, Salzgitter opened a tender to source up to 120,000 mt/year of renewable hydrogen for the Salcos project.

The tender was for supplies from 2027, subject to connection to the planned German hydrogen pipeline network.

Salzgitter previously said it was planning to use up to a total of 150,000 mt/year of hydrogen at its steel production plant, including the 9,000 mt/year produced from its own 100-MW electrolyzer from 2026.

Platts, part of S&P Global Energy, assessed the cost of green hydrogen production via alkaline electrolysis in Germany, backed by renewable power purchase agreements, at Eur7.08/kg ($8.34/kg) on Sept. 19.

The assessment reflects one possible pathway for producing EU Renewable Energy Directive-compliant green hydrogen.