Green steel from the electric arc furnace

Georgsmarienhütte expects impulse from climate protection – and is well positioned for it.

If there is one steelmaking corporation in Germany that has reinvented itself from the bottom up, it is 164-year-old Georsmarienhütte, located not far from the city of Osnabrück. Here, the blast furnace long ago disappeared, replaced in 1994 by a giant DC electric arc furnace.


Since then, scrap has been melted, superseding the smelting of iron ore using coke. At that time, conversion to electric steel saved the plant, which owes its name to the nearby town of Georgsmarienhütte, from going under; competing steelmakers normally supplied their blast furnaces by inland waterway, whereas Georgsmarienhütte (GMH) had no alternative to extremely costly delivery of ore and coke using land-based transport. But this transition, born of necessity, could well prove a blessing. It was initiated by businessman and later chairman of the board of RWE (Rhineland-Westphalia Electricity), Jürgen Grossmann, who had acquired the loss-making company from the Klöckner group. The reason for this is the comparatively good carbon dioxide balance. Steelmaking using scrap generates 80 percent less greenhouse gases than the blast furnace route. "We are among the leaders in climate protection. We make a large contribution to sustainable production of steel, via recycling and the circular economy", notes Frank Koch, who has headed the company since early 2017. He puts his faith in ever growing climate-protection demands being reflected in the company's order books in the short and mid-term. GMH Gruppe makes 60 percent of its sales to the automotive industry – one in every four cars produced in Germany contains steel from GMH, in the form of axle components, steering racks, other steering-system elements and numerous other parts. "The CO2 footprint is set to become an important sourcing criterion for automotive subsuppliers", is Koch's belief. For the time being, the economic situation in the automotive sector is also causing plenty of headaches for the family-managed company with its around 7000 employees. On an intra-industry assessment, GMH admittedly remains pretty robust. "To a certain extent, we have continued moving on a level course in sales terms, at 1.9 billion euros", Koch affirms. Here he implies that the group's financial results probably fluctuated more or less around the plus/minus zero mark in the previous year. And, up to now, there has been no talk of redundancies like those at Thyssen-Krupp, where 2800 jobs are to be axed in steel production. Koch is combating the slump in sales with short-time working and agreements with the workforce aimed at assuring continued employment: "We intend to keep our colleagues in the plants on board as far as is humanly possible." The board chairman remains cautious, however. "We're moving ahead with caution, things will not improve by the summer, and we cannot see any further into the future at the moment."

0.4 instead of 1.7 tonnes of carbon dioxide

Koch considers the prophecies of doom concerning the consequences of electromobility for steelmakers exaggerated, however. "There'll be enough business for us, if we play our cards right." Even now, the customer-base includes a number of Tesla subsuppliers, and the new plant planned for construction in Brandenburg may well generate further new orders. "We are a good bit closer, and this fact signifies opportunities for business", he opined. In the longer term, Koch anticipates additional impetus for producers of electric steel. Their production costs have, up to now, generally been slightly higher than steelmakers using the blast furnace route, depending on prevailing prices for ores, coke and scrap. This can be balanced out, among other things, by significantly greater flexibility, since electric production of steel can be reduced and ramped up again much more easily than blast furnace production. "We are not having to stockpile", Koch states. As climate-protection requirements become more stringent and prices for CO2 emission certificates rise, the cost curves will probably intersect in a few years, and Koch is thus expecting electric steel to then be well positioned. In the most modern iron and steel plants, the production of one tonne of crude steel generates around 1.7 tonnes of carbon dioxide. This figure is reduced to only 0.4 tonnes if the steel is melted from scrap. Around one third of German crude steel has up to now been produced in electric arc furnaces. So why does the industry as a whole not move more rapidly in this climate-protecting direction?
"The feed material is there. There is so much scrap cost-efficiently available in Germany that electric steel's market share could be increased to 40 percent", Koch affirms. The "conventional" competition, from Arcelor, via Salzgitter, up to and including Thyssen-Krupp and Tata, are all currently working on new technologies in order to catch up in the field of climate protection. The carbon dioxide which is generated in the production process could be used to recover synthesis gas ("syngas") or ammonia. The longer-term aim will be to replace coke and pulverised coal with hydrogen as the reductant, a project which will involve investments in the billions. Thyssen-Krupp is aiming to achieve this by 2050. Climate-neutral production of hydrogen will require vast quantities of eco-electricity, however. "For this alone, Germany will need to install around 11,000 new wind turbines", Koch calculates. The German Steel Federation (WV Stahl), the industry association, estimates the costs to the industry of conversion to CO2-free production at not less than 30 billion euros. The costs in the electric-steel segment will be significantly lower: Koch considers investments of, roughly, 5 billion euros to be necessary for the one third of German steel production melted from scrap. Here, again, the CO2-balance is critical. The need for renewable energy sources is lower by a factor of 5 for climate-neutral electric steel than for energy-intensive direct hydrogen reduction. "Climate-neutral electricity is the precondition everywhere for green steel", Koch states. Totally forthright, he points to France: thanks to atomic energy's high share of total electricity supplies, the French steel industry's CO2 balance is significantly better than that of Germany, Koch affirms. "We should discuss, without preconceptions, how we can achieve both climate protection and a dependable energy supply. In Germany, however, we have already categorically excluded a number of possibilities, such as carbon dioxide sequestration", he says. This brings Koch to the question of how German producers are to remain internationally competitive in the future. "I'd like to see the Chinese steel corporation that converts from coke to hydrogen." Koch considers the CO2 levy on "dirty" imported steel advocated by a number of other steel concerns and supported by the European Commission to be a dangerous path – not least of all because this would infringe the principal of voluntary climate protection. "Europe's industry is dependent on exports, so we cannot simply fence off parts of our market and expect things to continue to run smoothly in the other direction", says the 48-year-old senior manager.

"We need planning certainty"

What is lacking for Koch is a clear roadmap for the climate neutrality targeted by 2050: "We need planning certainty – in power generation, for example." As he notes, it is difficult to understand why the federal government continues to reckon with an approximately constant consumption of electricity up to 2030. Well-known institutes, on the other hand, forecast a significant increase in electricity needs, the Institute of Energy Economics (EWI) in Cologne even predicting 30 percent. Just how volatile the supply can sometimes be now is apparent in the Saarland, where the company operates another electric arc furnace, as Koch notes: "We have already had to shut down this facility at short notice several times." Electricity is one of the company's most significant cost factors. Despite partial exemption from the Renewable Energy Sources Act (RESA) levy for the promotion of eco-electricity, Koch is anticipating a significant hike in costs in the millions in this and subsequent years. Further burdens, he opines, may be feared in foundries and in steel processing plants as a result of the federal government's climate-protection programme. Having been exempted from the European emissions-trading system up to now, emissions certificates for the use, for example, of natural gas, would in future be needed in these sectors. "There are absolutely no economically rational technical avoidance measures, so this would be a purely penal tax", says Koch, who for this reason is hoping for the recently discussed concessions in the near future. (Source: Helmut Bünde, Frankfurter Allgemeine Zeitung, 2 March 2020, © All rights reserved, Frankfurter Allgemeine Zeitung GmbH, Frankfurt. Courtesy of the Frankfurter Allgemeine archive)

Klaus Schmidtke

Head of Communications GMH Gruppe