Salzgitter, Germany's second-largest steelmaker, has been awarded almost €1billion in government funding for its hydrogen-based steel production project, SALCOS.

Through SALCOS, Salzgitter hopes to set up a 100-megawatt electrolyser, a direct reduction unit and an electric arc furnace to replace part of its conventional blast furnace route.

The project will produce around 1.9Mt of raw steel and cut more than 2.5Mt of carbon emissions a year, according to Germany’s economy ministry.

In October 2022, the project received European Commission approval as an Important Project of Common European Interest (IPCEI).

"With our substantial funding, Salzgitter can now enter the implementation phase and realize this flagship project."

Robert Habeck, economy minister

"With our substantial funding, Salzgitter can now enter the implementation phase and realize this flagship project," economy minister Robert Habeck said in a statement.

''We are well on the way towards implementing green steel production, and we are working at full speed in Salzgitter to realize this goal.''

Gunnar Groebler, chief executive officer of Salzgitter AG

Gunnar Groebler, chief executive officer of Salzgitter AG, added: "Having taken our investment decisions last summer, we are well on the way towards implementing green steel production, and we are working at full speed in Salzgitter to realize this goal. With the final notice of funding, we now also have the policymakers fully on board, and we have the long-awaited certainty that support for SALCOS® will be forthcoming.''

Germany also has plans for another initiative to further support industrial companies in the green transition, with plans for a programme in which companies will receive subsidies in exchange for cutting carbon emissions.