Betting on Green Steel Pioneers: Thyssenkrupp and Salzgitter's Decarbonization Play

The global steel industry, responsible for 7-9% of annual CO₂ emissions, stands at a crossroads. As the EU's 2030 climate targets tighten—mandating a 55% emissions cut from 1990 levels—companies like Thyssenkrupp (TKA:GR) and Salzgitter (SLZ:GR) are positioning themselves as leaders in the green transition. Their commitment to green hydrogen-based steel production, despite setbacks and industry fragmentation, makes them compelling investments for investors betting on decarbonization.

The Steel Industry's Green Pivot: A Zero-Sum Game

ArcelorMittal's withdrawal from Germany's green steel subsidies in 2024—citing “unfavorable framework conditions”—left Thyssenkrupp and Salzgitter as the last major players standing. Their resilience underscores a critical truth: early movers in decarbonization will dominate markets shaped by carbon pricing and regulatory mandates, while laggards face obsolescence.

Both firms are leveraging €6.9 billion in German subsidies (part of a broader €13 billion EU hydrogen funding package) to scale green hydrogen infrastructure. Their strategies differ but share a common thread: phased transitions to avoid stranded assets.

Thyssenkrupp: Navigating Hydrogen's Cost Curve

Thyssenkrupp's Duisburg direct reduction iron (DRI) plant—set to begin operations in late 2026—is a linchpin of its green pivot. While the company paused its hydrogen procurement tender in 2024 due to €9/kg+ bid prices (more than double 2030 forecasts), it's not abandoning the project. Instead, it's adopting a pragmatic two-step approach:

1. Bridge to Hydrogen: The plant will initially run on natural gas, cutting CO₂ emissions by 50% versus blast furnaces.
2. Full Transition: By 2045, Thyssenkrupp aims for carbon-neutral steel, supported by its partnership with Volkswagen Group to supply bluemint® Steel (starting 2028).

Investment Catalysts:
- Volkswagen MoU: Secures a long-term buyer for low-carbon steel, critical for Volkswagen's 2050 carbon neutrality target.
- EU Pipeline Support: Germany's hydrogen core network (HCN) rollout, delayed but still planned, could unlock cheaper hydrogen access by 2030.

Salzgitter: Building the Hydrogen Economy's Backbone

Salzgitter's SALCOS® project aims to slash emissions by 95% by 2033. A 100MW electrolysis plant, completed in early 2025, will produce 9,000 tons/year of green hydrogen—enough to power its DRI plant. Crucially, the firm has secured €150 million in EU subsidies for this phase, with further funding tied to grid cost reductions and hydrogen pipeline progress.

Salzgitter's advantage lies in its vertical integration: on-site hydrogen production eliminates supply chain risks. Its partnership with ANDRITZ and HydrogenPro (for alkaline electrolysis tech) ensures technical leadership.

Risks and the Case for Picking Winners

Short-Term Hurdles:
- Hydrogen Costs: Current prices (€9/kg) remain prohibitive. Thyssenkrupp's natural gas bridge and Salzgitter's in-house electrolysis mitigate near-term pain.
- Regulatory Lag: Germany's HCN delays could prolong dependency on fossil fuels.

Long-Term Tailwinds:
- Carbon Pricing: The EU's Carbon Border Adjustment Mechanism (CBAM) will penalize high-emission imports, favoring green producers.
- Demand Surge: Automakers (e.g., Volkswagen) and tech firms are under pressure to green their supply chains.

Investment Thesis:
- Buy Thyssenkrupp and Salzgitter: Both are decarbonization darlings with EU-backed scale. Their phased strategies reduce execution risk compared to smaller peers.
- Avoid Laggards: Companies without green hydrogen roadmaps (e.g., ArcelorMittal) face stranded assets and CBAM penalties.

Conclusion: The Steel Sector's New Darwinism

Thyssenkrupp and Salzgitter are betting their futures on green steel—and the EU is backing them. While infrastructure and cost hurdles remain, their leadership positions them to dominate markets where carbon efficiency is a core competency. Investors seeking exposure to the decarbonization boom should prioritize these pioneers. The alternative? Watching laggards fossilize.