Habeck's Vision for Green Steel Faces Setback as Major Project Abandoned

In a significant blow to Germany's ambitions for environmentally friendly steel production, ArcelorMittal, one of the world's largest steel manufacturers, has decided to halt its plans for transitioning to CO2-free production at its facilities in Bremen and Eisenhüttenstadt. This decision comes despite a promised state funding of EUR1.3 billion aimed at supporting this green initiative, raising concerns about the future of Germany's heavy industry and its climate goals.

The CEO of ArcelorMittal's European flat steel division, Reiner Blaschek, stated that the current market conditions do not support a viable business model for the proposed green steel production. The company's withdrawal signals a troubling trend for the steel industry in Germany, which is under intense economic pressure.

According to Professor Reint Gropp, President of the Leibniz Institute for Economic Research in Halle, the challenges are twofold. He highlighted that the German steel sector is facing fierce competition from significantly cheaper steel produced in China, where production relies heavily on coal power. This situation is exacerbated by the emergence of cheaper green steel alternatives being produced in Southern Europe, where renewable energy sources and green hydrogen are more readily available and cost-effective than in Germany.

Andreas Schneider, an expert from the consulting agency Stahlmarkt Consult, echoed these sentiments, indicating that the green transformation plans within the steel industry are increasingly unfeasible. He noted that the conditions for hydrogen-based steel production in Germany are objectively less favorable compared to other countries, along with a declining demand for steel within the EU.

Amidst these developments, Bremen had committed EUR250 million towards the green transition, even modifying its state constitution to manage the associated debt. Mayor Andreas Bovenschulte of the SPD expressed disappointment at the setback, calling it a severe blow to the Bremen economic landscape.

In light of these challenges, Bremen's FDP leader, Thore Schäck, pointed out that investing in the future cannot be achieved through debt-funded subsidies to companies, emphasizing the unsustainable nature of such financial strategies.

While ArcelorMittal has stepped back from its green steel ambitions, other steel manufacturers like Thyssenkrupp Steel and Salzgitter continue to pursue their plans for green steel production, albeit at the edges of economic viability. Thyssenkrupp has acknowledged that their efforts are operating on the brink of being financially sustainable.

As the EU's climate targets and associated CO2 costs evolve, the future of traditional blast furnace-based steel production appears increasingly precarious, particularly in the face of global competition and local economic realities.