Depth report

　　

Foreword: The future of the steel industry has begun in the German city of Salzgit: the namesake steelmaker recently announced its intention to supply four Mercedes plants this year with steel plates that produce less carbon dioxide during manufacturing. Compared to conventional steel, green steel has a 66 percent lower carbon footprint. Salzjit is the first steel manufacturer in Europe to receive the green plate certification from NANDe Certification Testing.

For decades, steel production has been one of the biggest climate disruptors. The process produces huge amounts of carbon dioxide -- which cannot be removed without profound and expensive technological changes.

But now there is a shift in the market. "Demand for green steel is increasing because automakers and other consumers are under pressure to reduce emissions," said Nicole Voigt, a partner at Boston Consulting Group.

Daimler, for example, intends to decarbonise its supply chain by 2039 and requires suppliers to produce in a carbon-neutral way. "There should be enough green steel to kick-start climate-friendly car production" in the next few years, says Manfred Fishdick of the Wutpertal Institute for Climate, Environment and Energy, a global sustainability think tank.

It is reported that many carmakers already have plans to buy low-carbon products. Not only does Daimler intend to build a zero-carbon supply chain, which will also affect steel supply, but Vw and BMW also want to decarbonise their value creation chains - and so are equally dependent on the fact that the average tonne of steel required for each car is also produced in a green way.

Because today steel is one of the most carbon-intensive materials used in manufacturing. Thyssenkrupp, Germany's largest manufacturer alone, now emits about 20m tonnes, or nearly 3 per cent of Germany's total emissions. In total, the German steel industry emits about 40m tonnes of carbon dioxide, accounting for about 30 per cent of the country's industrial emissions.

So far, it has been mainly European governments and the European Union that have put pressure on the industry to transform, for example by forcing it to buy pollution rights, the report said. But a growing number of customers, including carmakers, are now also calling on suppliers to produce in a climate-neutral way in the future -- and almost all stages of the value chain.

Mr Voigt also said carmakers and many other steel consumers were increasingly concerned about emissions in their supply chains, "which could also address the 'chicken and egg' problem of supply and demand that the steel industry has always had".

Because so far, the industry's emissions cuts have been hampered mainly by unclear how much of the increased production costs can be passed on to customers, the report added. But now industry insiders say talks with potential buyers such as carmakers, which have shown strong interest in green steel, have become more serious.

There is now a need for substantial investment in new process equipment for the factory park. "One thing is clear: green steel will initially be a scarce commodity," says Mr Voigt. So it's likely that products made with green steel won't require as many tons of steel as mass-produced cars."