Green transition poses risks to European steelmakers

DW (English)

Europe’s largest steel plant is in crisis. ThyssenKrupp plans to cut or outsource over 10,000 jobs. The causes: high energy costs in Germany and a fierce price war with China, which is dumping excess steel on global markets. And if U.S. tariffs block Chinese exports, even more could land in Europe. ThyssenKrupp is also investing in new tech like a direct reduction plant for hydrogen-based steel.

Transcript

00:01Steel is essential to many industries.

00:04Global production now tops 1.8 billion tons a year.

00:08But that comes at a cost.

00:10The sector is undergoing a major technological shift,

00:13while also finding itself at the center of global trade disputes.

00:18China's steel exports have nearly doubled in five years.

00:22In Europe, cheap Chinese steel is threatening thousands of jobs.

00:26Meanwhile, the EU is pushing green steel.

00:29How do these two fit together?

00:34Blast Furnace 1 at Thusenkrupp.

00:36The company produces nearly 25,000 tons of pig iron every day at its Duisburg site.

00:42What you see here in the background is a classical blast furnace, a very modern one.

00:48Modern might be a bit of a stretch.

00:51This furnace was built more than 50 years ago in 1973.

00:55It's been upgraded many times since to reduce environmental damage.

00:59That's the job of Vedinga's team.

01:01But even the best retrofitting can't eliminate the CO2 emissions of such aging furnaces.

01:08We use coal and coke in order to get the reduction process.

01:12And this is where the CO2 comes from, which we want to avoid in the future.

01:17Doing that means shutting down all the company's blast furnaces.

01:21Together, they emit around 20 million tons of CO2 each year.

01:25And that's despite reduced output.

01:28Thusenkrupp has cut production from 11.5 to 9 million tons of steel annually.

01:34It also plans to eliminate or outsource over 10,000 jobs.

01:39The company is in crisis, like much of Germany's steel industry.

01:44The Stahl industry in Germany is confronted with a trias of challenges.

01:51Carsten Rippe represents the German SEAL sector.

01:55She says the problems start with high energy prices and continue with weak demand.

02:00And then, especially in Europe, the steel industry is flooded with cheap imports from the Middle East.

02:08That's also where the world's top producers are.

02:21In 2024, more than half of global steel came from China.

02:25Over one billion tons.

02:27And more and more of it is being exported.

02:34It is sometimes so that in Europe,

02:37Stahlmengen to prices,

02:41that don't even have European production costs.

02:45I think that you should say that a large part of the exports from China

02:51to Europe is on dumping.

02:55Dumping or not.

02:56That's now up to the World Trade Organization to decide.

02:59The EU has accused China of subsidizing steel exports through third countries.

03:04China is now fighting back against EU anti-dumping tariffs.

03:08How expensive can, may and should steel be?

03:12Prices are volatile and harder to predict than ever.

03:15That's a problem not only for producers, but also for mid-sized businesses.

03:22Like this building materials supplier south of Berlin, which has to stock steel.

03:28But how much?

03:29But how much?

03:34The current material is at around 1,4 million.

03:41Heinecke has to decide how much steel to buy and at what price.

03:45Not an easy call.

03:47The steel prices affect almost every sector.

03:57From construction and infrastructure,

03:59to car manufacturing and renewable energy.

04:16And what about new US tariffs?

04:21German firms worry that if cheap Chinese steel is locked out of the US,

04:26even more of it could be redirected to Europe.

04:29Even more of it could be redirected to Europe.

04:33So what's Europe's plan?

04:52The industry is making a big leap.

04:55Traditional blast furnaces, which produce pig iron from iron ore, coke and coal,

05:00are being phased out.

05:02The goal is to cut emissions using new technology.

05:06Direct reduction plants use hydrogen instead of coal or coke.

05:10The only by-product is water.

05:12And no CO2.

05:14A big step forward for the climate.

05:18Currently, steel production globally contributes 8% to global greenhouse gas emissions.

05:25Falco Ockerhardt is a researcher in climate economics at the Potsdam Institute for Climate Impact Research.

05:35He believes change in the steel sector is long overdue and that the current crisis is pushing it forward.

05:39There's too much producing capacity coal based for steel on the planet.

05:45Steel companies are under pressure.

05:47So they had to move.

05:48So green steel is actually their chance to advance.

05:51Green steel is produced with significantly less CO2.

05:55That's why many German plants are now being converted.

05:59Including those at ThyssenKrupp.

06:01We will not change in one go because this is the biggest steel plant in Europe.

06:07We will be starting with switching off first one then two blast furnaces when we have the new plant ready.

06:15And the whole transformation will certainly take a long time.

06:18But we are confident to start commissioning in 2027 for the new plant already.

06:24The first direct reduction plant is already under construction in Duisburg.

06:29It's being funded in part by nearly 2 billion euros in taxpayer subsidies.

06:35Germany is restructuring its steel sector and investing heavily.

06:40So far nearly 7 billion euros in public funding has been committed.

06:44We are indeed front runners in Europe.

06:48Most of the green hydrogen projects that are announced are in Europe.

06:52The European Commission provided subsidies.

06:57Germany is providing subsidies.

06:59And steel makers in Germany but also across Europe are intending to transform.

07:07Billions have already been pledged.

07:10And during a visit to ThyssenKrupp, EU Industry Commissioner Stéphane Cédroné said more support is coming.

07:17There will also be the desire to put money on the table,

07:23and therefore the innovation fund, 150 billion euros,

07:28which will be proposed with a part in guarantee and a part in subvention.

07:34But the transition carries risks.

07:37For industry and for taxpayers.

07:39There are many open questions, like where will the hydrogen come from?

07:44This is a very good question.

07:46Getting sufficient hydrogen is a challenge, particularly certainly in Europe and in Germany.

07:51It's a challenge that consists out of the situation of the pipeline network has to be built,

07:56the production facilities have to be built, and at the end of the day it needs to arrive here

08:01at the location at an affordable price.

08:04Hydrogen pricing remains unpredictable.

08:07But it will be a key factor in the cost of green steel.

08:10A study commissioned by the German Hydrogen Association shows that at 7 euros per kilo,

08:16hydrogen becomes the largest cost driver in steel production.

08:23That's just one of many factors that will determine the price of steel.

08:28For the building's materials supplier south of Berlin, none of that change is visible yet.

08:34Stefan Heinecke is still guessing what comes next.

08:37Stefan Heinecke

08:39Bisher is so, that the green steel is neither asked,

08:43nor that we have in any form in any form green steel.

08:48Yeah, the question at the end of the day is,

08:50in the way we can do it with the rest of the world then,

08:55if we have in Europe or in Germany the only ones that are green steel,

09:01but that is unbearably expensive,

09:03as in China produced steel,

09:05according to the original methods.

09:07The steel price war is already creating tensions between trading partners.

09:12And this is before green hydrogen-based steel even hits the market.

09:19European producers say they're at a disadvantage.

09:23Unlike many competitors, EU plants must pay for their CO2 emissions,

09:28by purchasing CO2 certificates.

09:32The CO2 price on the classical production,

09:36it's one of the drivers to move for green production, certainly,

09:39but it's also a potential concern for market distortions,

09:43because if the rest of the world doesn't have to bear these costs,

09:47we certainly have a great disadvantage.

09:49That's the reason why it's so important to have a regulatory framework,

09:53so that we don't have a disadvantage against steels

09:56which don't have to bear these costs.

10:01The steel industry says there are still too many loopholes.

10:05But the EU's new steel and metals action plan is set to close some of them.

10:10Since April 1st, there are increased trade political measures,

10:17which are the safeguards measures, and we are very grateful.

10:23So there will be more protection from cheap imports.

10:27But one question remains.

10:29Who will actually buy climate-friendly green steel

10:31if it ends up costing even more than regular European steel?

10:35The EU commissioner has an answer for this, too.

10:40Demand will be generated through new EU regulations.

10:44Since the end of this year,

10:46we will introduce a minimum of clean steel and made in Europe

10:50in the public markets

10:52so that we will open the clean steel demand made in Europe

10:56for companies like yours.

11:00So when will truly green, CO2-free steel become reality?

11:03No one knows for sure.

11:05But there is a short-term workaround.

11:08Actually, it is a fortune that direct reduction plans

11:12can run with natural gas.

11:15That means that you can transform the steel industry

11:18and at the same time don't need to use hydrogen from the start.

11:23You can start with natural gas.

11:25And emissions can be reduced by two-thirds, roughly,

11:29only by switching to this new technology and running them on natural gas.

11:35When steel will be produced entirely with hydrogen

11:38and without emissions is still uncertain.

11:41But researchers say the transition itself is what matters.

11:46If the new technology works in Europe,

11:49it could offer the world an alternative to building new,

11:52high-emission blast furnaces.

11:54India, for instance, they don't want to import steel from China.

11:58They want to build up their own steel industry.

12:01And they want to do that with the established cheap technology.

12:07And that is coal-based steel.

12:08So that's why there's actually the severe risk of new coal-based steel capacity

12:16that has a lifetime of at least 40 years

12:20and would increase this 8% of emissions contribution.

12:24And that is what we call the risk of a carbon lock-in.

12:27So India alone could, with this lock-in,

12:32let our global climate targets slip out of reach.

12:38In short, the way we produce steel

12:41will shape the future of the climate crisis.

12:43How many fires, floods, droughts and extreme weather events

12:54will future generations have to endure?

12:57The answer depends at least in part on the steel industry.

13:01Will Europe manage to cut steel's massive CO2 emissions?

13:07What do you think?

13:08Is Europe on the right track with its steel policy?

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