German Election Favorite Stirs Backlash With Green Steel Doubts

(Bloomberg) -- Germany’s conservative front-runner Friedrich Merz cast doubt on the steel industry’s green transition, sparking a fierce debate before snap elections next month.

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The steel industry has relied largely on the same production techniques using coking coal for more than a century and accounts for more global carbon emissions than shipping and aviation combined. To address that pollution, steelmakers are looking to use hydrogen to produce so-called green steel in electric-powered furnaces.

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That shift has offered a ray of hope to Germany’s largest producer Thyssenkrupp AG, which is being forced to slash its workforce and shutter two blast furnaces by the end of the decade. While the company was promised €2 billion ($2.1 billion) in state subsidies to invest in new direct reduction furnaces, it’s since halted its flagship low carbon steel project amid funding uncertainties.

“I personally don’t believe that the rapid switch to hydrogen-powered steelworks will be successful,” Merz, head of the CDU/CSU alliance, said Monday evening at a campaign event in Bochum, a city in the nation’s industrial rustbelt. “Where will the hydrogen come from?” Merz asked in response to a question from Tekin Nasikkol, chairman of the group works council at Thyssenkrupp.

The company has been waiting for further funding to help bridge the future pricing gap between conventional steel and that made with hydrogen. The clean industry push — to which the outgoing Economy Minister Robert Habeck had pledged €23 billion — was one of the policies halted when the government collapsed in November.

Thyssenkrupp said it remains committed to climate-neutral steel production, but noted delays in the development of infrastructure for reliable hydrogen supply.

“Politicians in Germany and Europe must ensure the timely ramp-up of the hydrogen infrastructure and the framework conditions for a competitive hydrogen supply in the long term in order to secure a competitive steel industry in Europe,” the company said.

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Merz highlighted the costs of green steel using hydrogen. His CDU/CSU bloc is unwilling to spend more money in subsidies.

“If we do it with hydrogen, a ton of steel will still be at least €300 more expensive than the way it has been produced conventionally up to now,” Merz said. “Where is the money supposed to come from?”

Merz’s intervention comes at a time when Europe’s biggest economy is looking for a way to reach its climate goals, while remaining competitive.

Habeck criticized Merz’s comments at a Green parliamentary party meeting in Berlin. They “are a slap in the face of the workers, because they can only be interpreted as meaning that the steel industry in Germany is coming to an end,” he said. “All the major economies, the USA, China, have set out to decarbonize steel.”

--With assistance from Kamil Kowalcze and Arne Delfs.

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