German steelmaker Thyssenkrupp has suspended its green steel project at its plant in Duisburg, Germany. The project, which includes a €3 billion hydrogen-based direct reduction plant, is a key element of the company’s decarbonization strategy. The main reason for the suspension was the high cost of the green hydrogen needed for production.

Thyssenkrupp CEO Miguel Angel López Borrego said that the plant would not be cost-effective to operate under current conditions. The company had expected that green hydrogen would be available at competitive prices by the time the plant was completed, but this has not been the case. Thyssenkrupp suspended the hydrogen procurement tender due to the high prices indicated in the preliminary bids.

The German government and the state of North Rhine-Westphalia have provided Thyssenkrupp with grants of around €2 billion for the project. Around a quarter of this amount has already been paid out. However, even with such support, the project has encountered economic difficulties.

The situation with Thyssenkrupp reflects the general challenges in implementing decarbonization projects in the metals industry. According to a report by the European Union Agency for the Cooperation of Energy Regulators (ACER), the EU’s targets for green hydrogen production are unlikely to be met. The installed capacity of electrolyzers in Europe in 2023 was 216 MW, while plans to install around 70 GW by 2030 are expected.

Similar problems are observed at other companies. ArcelorMittal has postponed final investment decisions on decarbonization projects, including direct reduction plants, due to their unprofitability. At the same time, the German company Salzgitter continues to implement its SALCOS® project, which aims to use hydrogen in metallurgical production.

According to estimates by the Netherlands Environmental Assessment Agency (PBL), the cost of producing green hydrogen in the Netherlands will be €12-16 per kilogram over the next 15 years. BloombergNEF also predicts that green hydrogen will remain significantly more expensive than previously estimated.

The implementation of decarbonization projects in the metals industry therefore requires significant investment and depends on reducing the cost of green hydrogen, which is currently an unsolved problem.