FILE PHOTO: A steel worker in heat protection gear is silhouetted against the fire of a furnace at the steel plant of ThyssenKrupp in Duisburg, Germany, July 26, 2023. REUTERS/Wolfgang Rattay//File Photo
Berlin: Carmakers and steelmakers are sealing deals for green steel, and using them to tout their environmental credentials. The trouble is, the steel is still being forged using fossil-fuels and it’s not clear how soon that can change.
German steelmakers Thyssenkrupp AG and Salzgitter AG are finding buyers prepared to pay a premium for green steel, including Mercedes-Benz Group AG, Volkswagen AG, BMW AG and Ford Motor Co. But without large-scale supplies of green hydrogen, much of that steel will initially be made with natural gas.
European steelmakers are looking to a combination of electric-arc furnaces and hydrogen to transform an industry that still burns billions of tonnes of coal, generating about 7% of the world’s carbon dioxide emissions.
With output of the green fuel falling far short of demand for years to come, automakers acknowledge that it will only be a gradual transition.
There needs to be a labelling system to show the emissions performance of different products, as using natural gas is just a first step in transforming the steel sector, according to Oliver Sartor a senior adviser at think tank Agora Industry.
“Steel made with natural gas is not climate-neutral steel and that is what ultimately matters,” he said.
To prevent greenwashing, the German Steel Federation is proposing just such a labelling system, under which only primary steel produced with 100% green hydrogen can be designated as “near zero”.
There will be a number of different levels of steel, depending on how much carbon dioxide is released in the manufacturing process, according to Thyssenkrupp.
After making its first sales to Mercedes-Benz two years ago, Salzgitter aims to produce 1.9 million tonnes of low-carbon steel from 2026. Customers are prepared to pay a three-digit euro premium per tonne, compared with steel from a conventional blast furnace, according to Salzgitter chairman Gunnar Groebler.
“People are willing to pay a premium for it because they have understood that they can also be pioneers with green steel,” Groebler said.
The company’s direct reduction plant will initially be fired by natural gas, which will curb carbon emissions by 60% compared with coal-fired steelmaking.
The proportion of hydrogen will be progressively increased until the steel is almost emissions-free by 2033.
VW and BMW have already secured future volumes, according to company statements.
“I conclude contracts where I can tell the customers very precisely what the carbon dioxide footprint of the steel will be,” Groebler said.
Mercedes-Benz declined to say what kind of premium it was prepared to pay for green steel. As the automaker works toward using steel produced with hydrogen instead of gas or coking coal, it has invested in start-up H2 Green Steel and partnered with Sweden’s SSAB AB.
BMW has also struck deals with low-carbon steelmakers, and said it’s encouraging suppliers to switch from coal-based production to the use of hydrogen.
Ford Motor Co said it has pledged that at least 10% of its primary steel purchases will have near-zero carbon emissions by 2030. It also declined to say what kind of premium it would pay.
However, it’s too early to conclude hydrogen purchase agreements, given that most projects are at an early stage and the supporting infrastructure is only on the drawing board, Salzgitter’s Groebler said. — Bloomberg
