As the energy transition continues to gain traction, hard-to-abate areas such as steel manufacturing have taken centre stage for decarbonisation.

A Memorandum of Understanding (MoU) signed between Volkswagen Group (VW) and Salzgitter AG (Salzgitter) will see Salzgitter, which plans to start production of low-carbon dioxide (CO2) steel from the end of 2025, provide its so-called ‘green steel’ to VW. 

The deal will enable both companies to accelerate net zero ambitions, in addition to enabling Salzgitter to save over 95% of CO2 emissions in steel production based on hydrogen and renewable energies. 

The reduction of CO2 from its supply chain is part of VW’s strategy to become a carbon-neutral mobility provider by 2050. 

In addition to using green steel, VW’s Trinity electric car project will utilise low carbon components such as a battery-electric powertrain and aluminium components. 

The partners aim to agree on purchase quantities for the low-CO2 steel in the period between 2025 and 2030. 

Salzgitter’s low-CO2 steel production involves its ‘SALCOS – Salzgitter Low CO2-Steelmaking’ process. Instead of pig iron production using carbon-based blast furnaces, company will produce steel through hydrogen electrolysers, direct reduction plants and electric furnaces. 

“The decarbonisation of society and the economy can only succeed with the cooperation of strong partners,” said Gunnar Groebler, Chairman of the Executive Board, Salzgitter. 

“Our joint project is an excellent example of this new way of doing business – the circular economy with closed material flows. The close proximity of steel and car production is another ecological plus of this planned cooperation.” 

Last year, VW processed sample quantities of CO2-reduced steel from Salzgitter for the first time and plan to purchase a further 3,000 tonnes this year alone. 

The two companies also aim to establish a closed-loop recycling system for steel which will involve VW making the steel residues from production available to Salzgitter, which melts them down before processing them into new steel products and delivering them to VW’s Wolfsburg plant to be used in car production.