During the Hanover Trade Fair, Federal Minister of Economics and Vice Chancellor Dr. Robert Habeck and Stephan Weil, Minister President of Lower Saxony, jointly handed over a funding notification for the SALCOS® - Salzgitter Low CO2 Steelmaking transformation program to Salzgitter AG.
Following the signing of an administrative agreement between the Federal Republic of Germany and the State of Lower Saxony on September 15, 2022, committing themselves to the joint funding of SALCOS® and the subsequent approval of the EU Commission under the law on state aid, the final amount of aid, the payment phases and the exact funding conditions are now available in the form of the notification.
With this funding decision, SALCOS® will be supported in its first expansion phase with around € 700 million in federal funds and € 300 million in state funds. Together with the own funds of over € 1 billion already released by Salzgitter AG, this secures the financing of the first expansion stage of SALCOS®, which is to be implemented by the end of 2025.
"I am very pleased to hand over a funding decision of around € 1 billion to Salzgitter AG. With its ambitious project, the company is demonstrating that it is possible with modern technology to decarbonize the steel sector as the largest industrial CO2 emitter. At the same time, this can secure the future of Germany as a steel location and thus also numerous jobs in the long term. Salzgitter can now enter the implementation phase and realize this lighthouse project. This is a decisive step on the transformation path to green steel," says Robert Habeck, Vice Chancellor, and Federal Minister of Economics.
"Today is a good day for Salzgitter and for the whole of Lower Saxony. The subsidies jointly financed by the federal and state governments will secure the future of domestic steel production in the long term. Large quantities of renewable energy and green hydrogen are needed for the new climate-friendly processes. Lower Saxony offers unique locational advantages here as the No. 1 wind energy state, as well as with its seaports for importing green hydrogen. In the field of renewable energies, we are a step ahead of the countries in the south of the republic. However, affordable energy prices will be crucial for the competitiveness of SALCOS® and other energy-intensive production processes in a transitional period. We need clear decisions quickly at the federal level on affordable industrial electricity prices," explains Minister President Stephan Weil.
Industrial electricity prices for competitiveness
In the field of renewable energies, the company says it is a step ahead of the countries in the south of the republic. However, affordable energy prices will also be decisive for the competitiveness of SALCOS® as well as other energy-intensive production processes in the transitional period, for which a quick clear decision at the federal level for an affordable industrial electricity price is necessary.
"We are already well underway with the implementation of green steel production since we made the investment decision last summer and are working flat out in Salzgitter to realize it. With the final decision, we now also have the politicians completely on board and the long-awaited security to promote SALCOS®. We are grateful and proud that the political decision-makers have given us such sustained support for our path to virtually CO2-free steel production with this vote of confidence. Our substantial equity capital coupled with substantial public funding will enable us to continue to pioneer industrial decarbonization in Europe. This decision is an important building block in the implementation of SALCOS® and our 'Salzgitter AG 2030' strategy," said Gunnar Groebler, CEO of Salzgitter AG.
Strategy for low-CO2 steel production
SALCOS® aims to convert steel production in Salzgitter completely to low-CO2 crude steel production in three stages by 2033. The first stage, with a crude steel capacity of 1.9 million tons per year, is scheduled to go into operation as early as the end of 2025. As part of the complete transformation, two direct reduction plants and three electric furnaces are to be built to successively replace the three blast furnaces and converters. This will replace steel production previously based on coking coal with a new hydrogen-based route. This is expected to save around 95% of the annual CO2 emissions of around 8 million tons. This will avoid around 1% of Germany's CO2 emissions.
