Steel to Zero: como o aço se torna verde

O DESAFIO: A COMPLEXA CADEIA DE CRIAÇÃO DE VALOR NA INDÚSTRIA SIDERÚRGICA

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Host Ute Neuhaus: Steel to Zero – how steel will go green. The sustainability podcast by Waelzholz.

[Theme song]

Original speaker Ute Neuhaus: My name is Ute Neuhaus, and I’m the host of our German podcast series. In order to make it accessible to an international audience as well, we’ve had the conversations professionally dubbed by native English speakers.

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In order to meet the EU’s emissions targets, steel must become green by 2050. Steel is ubiquitous in our everyday lives, and also plays an important role in the energy revolution. It’s found in the eco-friendly electric car we drive to work, and it’s also found in the energy-efficient washing machine we use to wash our socks. The electricity for both will then – hopefully – come from wind turbines that require steel to build. So steel makes green things, but steel itself isn’t green – it’s a major source of carbon emissions. So just how can steel become green itself? What needs to be done to meet the EU’s emissions targets? These are the questions we will be addressing in our sustainability podcast Steel to Zero. My name is Ute Neuhaus and I’ve worked in the steel processing industry myself for many years.

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Host Ute Neuhaus: To kick off the series, I’m speaking with two experts who have a close eye on steel’s entire journey – from the blast furnace to the end user. In the studio with me today are Dr. Heino Buddenberg and Dr. Matthias Gierse, both general managers of C.D. Wälzholz GmbH & Co. KG, headquartered in Hagen, Germany. But before we get to talking about green steel – Dr. Buddenberg, can you briefly explain what a cold rolling mill is exactly?

Dr. Heino Buddenberg: I’d be happy to. Cold rolling refers to the further processing of hot rolled steel strip that we purchase from steel producers. Waelzholz rolls, heat treats, and finishes this steel, to name just a few core processes, and in doing so we give our cold rolled materials a wide variety of properties that are precisely tailored to the requirements of the final products.

Host Ute Neuhaus: So is Waelzholz something of an intermediary between steel manufacturers and customers?

Dr. Heino Buddenberg: Yes, that’s one way to describe it. We translate the properties that a final product needs to have into demands that the required steel needs to meet. This leads to specifications for the steel mill and we then process the hot strip for our customers into customized materials that possess specific properties.

Host Ute Neuhaus: And these are materials that can also make the customer’s product green – or at least greener?

Dr. Gierse, in my introduction I mentioned – maybe somewhat simplistically – that an electric car and a washing machine are examples of sustainable products made with steel. Is the steel industry contributing to the energy revolution? Or is it merely a major source of carbon emissions that it is so much in the public eye as at the moment?

Dr. Matthias Gierse: I think you have to paint a more nuanced picture. A significant amount of carbon emissions are generated during the production of steel. Nevertheless, steel plays a vital role in the energy revolution. It is simply the most important industrial material in the world, and I’m firmly convinced that it will play an even more important role in the future.
I would even go so far as to say that the energy revolution would be impossible to achieve without steel.

Host Ute Neuhaus: In other words, when it comes to combating climate change, steel is both a problem and a problem solver? How does that make sense?

Dr. Matthias Gierse: It depends on your perspective. There’s no doubt that the production of steel generates a large amount of carbon emissions. And reducing these emissions is definitely a daunting task. But even today, this fascinating material with its truly outstanding properties is helping us reduce carbon emissions, both technologically and in many important forward-looking sectors that are crucial to the energy revolution. But also as a material for products that are better, lighter, more durable, and more economical thanks to high-tech steel, which is good for the overall carbon footprint.

Host Ute Neuhaus: You’re going to have to give us a few examples.

Dr. Matthias Gierse: For example, the world will be transitioning its transportation systems to electric power – this process is already in full swing here. And these battery-electric and hybrid systems require thin electrical steel strip. These thin electrical steel strips are used in efficient electric motors to power vehicles using electricity.
That is one example; another example is the generation of renewable energy via wind and hydroelectric power plants. These wind and hydroelectric power plants require generators to produce electricity. And these generators are also made of high-performance electrical steel strip.

Last but not least, you can certainly also mention fuel cells. Fuel cells use hydrogen to generate electricity. But you can’t manufacture fuel cells without ultra-thin rolled stainless steel strip, which is used to make the bipolar plates that are found in these fuel cells.

Host Ute Neuhaus: I can tell that you possess a great deal of expertise, and you certainly need to be enthusiastic about it in order to implement all of this. But let’s take a step back for a moment – the steel industry is a source of carbon emissions, but at the same time, it’s playing a major role in the energy revolution and combating climate change. Isn’t that contradictory? How can these two conflicting aspects be reconciled? Dr. Buddenberg?

Dr. Heino Buddenberg: What this shows is that we have to work on two aspects, along two different paths, in order to pursue our strategy. On the one hand, we’ll continue to work intensively on materials development in order to manufacture the products that are necessary for and beneficial to the energy revolution, and on the other hand, the entire steel industry must focus very closely on process development in order to make its processes carbon neutral. We are all bound by the Paris Agreement, with its goal of “zero emissions” by 2050, and we are committed to achieving this.

Host Ute Neuhaus: That’s an ambitious goal – is it even achievable? After all, the steel sector accounts for thirty percent of industrial emissions in Germany.

Dr. Heino Buddenberg: The steel industry is undoubtedly facing an enormous challenge.  But it is rising to it. All European steel producers have now committed to achieving carbon neutrality by 2045. The technologies exist, however the investments required will be quite substantial.

Host Ute Neuhaus: And the manufacturers of cold rolled steel? What is Waelzholz doing in this context?

Dr. Heino Buddenberg: We have to gradually reduce our carbon emissions, and we are going to do so – across all levels of our value chain. We will procure green power and either use decarbonized fuels or generate the necessary process heat using renewable electricity as well.

Host Ute Neuhaus: That’s another point that I’d like to touch on – why is it so important to look at the value chain?

Dr. Matthias Gierse: Well, the products that we purchase and then process further already have a history, and this history is also expressed in the form of a carbon footprint. The steel products we use are produced from ores, from coal, from coke, using natural gas, using electricity, and the use of these energy sources and these raw materials generates carbon emissions. The same applies to our processes; our processes also generate carbon emissions, essentially through the use of electricity and natural gas, which can then also ultimately be attributed to the product, and in this respect, we have to look at the entire supply chain in order to calculate a product carbon footprint that, in the end, also needs to be transparently disclosed in the final product that we deliver to our customers.

Host Ute Neuhaus: This all sounds pretty complicated. So how do you sort out what’s from where and what’s what?

Dr. Heino Buddenberg: If I may add to what Matthias Gierse said, when calculating carbon emissions, three different types of emissions known as “scopes” are used. Emissions from a company’s own primary energy use, such as natural gas or heating oil, are referred to as Scope 1. Second are the emissions from the use of converted primary energy sources, primarily electricity, known as Scope 2. And then you have Scope 3, which are emissions attributed to products that a company has purchased. At Waelzholz, these primarily include hot rolled strip, inert gases, and other services.

Host Ute Neuhaus: So a customer orders five tons of cold rolled steel strip and then you can say, this five tons of steel strip in grade XY and size Z have such and such a carbon footprint?

Dr. Heino Buddenberg: Exactly! This is also necessary because our customers, in turn, have to implement this information as their Scope 3. And across the value chain, this adds up to a carbon footprint all the way through to the final consumer product.

Host Ute Neuhaus: Well, I’ve certainly learned a lot about how to determine the carbon footprint, and I’ve also learned that it’s by no means a trivial task.

Dr. Heino Buddenberg: Indeed, the difficulty lies in rigorously documenting these three scopes and combining them across a complex factory structure. We’ve made it our mission to track this precisely and clearly, because this is the only way we can make the carbon footprint of our steel products transparent, from production to the coil delivered to our customers for further use as Scope 3.

Host Ute Neuhaus: Not quite so simple. I think I’ve already learned a lot about calculating the carbon footprint and that it’s not a trivial matter, but what is Waelzholz doing to actually reduce its carbon footprint, specifically at its own production facilities?

Dr. Matthias Gierse: We’ve drawn up a roadmap for this, a roadmap for reducing our carbon emissions. Over the long term, this roadmap also leads to the company Waelzholz as a whole and to its own production facilities becoming carbon neutral.

Host Ute Neuhaus: And what steps does this roadmap contain? How exactly are you aligning Waelzholz with sustainability?

Dr. Matthias Gierse: In terms of our own production processes, we have to consider Scope 1 and Scope 2, as Heino Buddenberg previously described. When it comes to Scope 2, which essentially relates to our electricity consumption, we already cover fifteen percent of our annual requirements with electricity generated from renewable sources, and by the end of 2022, we’ll meet forty percent of our electricity requirements with power from renewable sources. We’re going to continue increasing this percentage over the next few years, leading to carbon neutrality with respect to our electricity use by 2030 at the latest. Now when it comes to the use of natural gas, the situation is a bit more complicated – we could use hydrogen instead of natural gas, the burner technology required for this is already being tested in-house and the burners could easily be converted to use hydrogen, but currently hydrogen is simply not available in the significant quantities we require. In this respect, we are forced to continue using natural gas for the next few years.

Dr. Heino Buddenberg: It might be worth adding that, in the case of electricity in particular, we aren’t becoming sustainable through offsetting measures such as planting trees in South America, but exclusively through qualified certificates of origin from renewable sources. Needless to say, our commitment to sustainability is also reflected in many small steps and individual innovations. Solar panels on the roofs of factory buildings are certainly a clearly visible example of this. Also LED lighting in the production halls, which consumes significantly less electricity than old light fixtures. The ultimate goal is to firmly entrench the idea of sustainability in our corporate culture through a wide range of measures, both large and small.

Dr. Matthias Gierse: It’s important to note that ninety percent of our carbon footprint is attributable to the use of raw materials. We can really only influence ten percent through our own actions, and in this respect, it is essential that steel production gradually becomes carbon neutral, because at the end of the day, this is the only way we can make our company’s footprint carbon neutral. It simply isn’t possible otherwise.

Host Ute Neuhaus: So, if I’m understanding you correctly, there are a few things you can do in your own production facilities, and you’re already doing them. But there are also requirements that lie outside the influence of Waelzholz or the cold rolling industry that have to be met for this strategy to work at all. What are these requirements?

Dr. Matthias Gierse: Indeed, the first thing we need to talk about in this context is a massive investment in the energy infrastructure. We simply need gigantic amounts of green power, and ultimately this renewable electricity will then be used to produce renewable hydrogen. And hydrogen is precisely the source of energy that is considered the key to green steel production.

Host Ute Neuhaus: Now Germany does have a national hydrogen strategy. And this is also tied to several billion euros in funding. Is this enough?

Dr. Matthias Gierse: Green steel production requires coal and coke to be replaced by green hydrogen. And this will necessitate technical modifications that require substantial, massive investments, including in the steel industry. We are increasingly faced with the problem that green hydrogen is currently not available at all on the required industrial scale, and the plant infrastructure for producing this hydrogen hasn’t even been built yet. Not to mention the quantities of renewable electricity required, which are also not currently available. So, at the present time, we have to say that green hydrogen is simply not available for purchase at commercially viable prices.

Host Ute Neuhaus: And what if it were available for purchase? How would it get where it needs to go? Would trucks then come and drop off hydrogen at Waelzholz and everything would be okay?

Dr. Matthias Gierse: No, that certainly wouldn’t work either. Currently, our supply of natural gas is delivered to us via pipeline systems, of course. Now you have to know that Waelzholz’s natural gas requirements at German sites alone stand at around 3,600 megawatt hours per day. If we wanted to meet this demand with tank trucks, then around 200 hydrogen trucks would have to make their way to Waelzholz’s sites every day to drop off their cargo. In other words, over the course of a 24-hour day, one truck delivering hydrogen every twenty minutes. Now that’s completely out of the question; it would be impossible to manage that logistically at all, let alone organize a fleet of trucks on that scale. That’s why we need a very clear vision from policymakers. We not only need to produce the hydrogen, but also to transport it via appropriate pipeline systems with connections to the industrial facilities. None of this will be possible without pipelines.

Dr. Heino Buddenberg: We’re located in Hagen in Westphalia, which is a bit off the beaten track from the major chemical sites, and we don’t have the infrastructure in the form of pipelines that hydrogen could flow through. This is definitely an issue that policymakers need to address in order to ensure that the infrastructure is developed in key industrial regions – and Hagen is a key industrial region.

But when talking about a pipeline system, I’d like to take a step back and look at a somewhat broader picture, because a national hydrogen strategy won’t be sufficient to meet Germany’s extremely large energy needs. Even today, we still import most of our energy resources, and they do not come from Germany. This will also be the case with hydrogen. It won’t be enough to build wind turbines in the German state of Mecklenburg-Vorpommern to satisfy Germany’s hunger for energy; we have to take a European view of this, both in terms of hydrogen production and transport, and North Africa will also have to be very heavily involved in this policy.

Host Ute Neuhaus: So, there’s a lot of work to be done, both nationally and internationally. We’re talking about billions of euros in investments – in new technologies, in the procurement of green hydrogen, in networks. This, of course, makes one thing abundantly clear – steel’s carbon neutrality is going to cost quite a bit of money. But who’s going to pay for all this? Us as taxpayers?

Dr. Heino Buddenberg: At the end of the day, the citizens, the consumers, pay for everything, whether through taxes and social security contributions or through the prices of the goods and services they purchase, and no matter whether directly, indirectly, or diverted through EU coffers – at the end of the day, it’s the citizens, the German citizens, the European citizens, the global citizens who will have to pay.

Host Ute Neuhaus: And how do I, as a consumer, know what the right amount is, that I shouldn’t just accept whatever price increases come along under the guise of combating climate change?

Dr. Heino Buddenberg: That’s exactly the point! We can’t just assume that costs incurred at one point will simply be passed along; instead we need to create a market for reducing carbon – reducing emissions. And then establish this carbon market across all stages of the value chain.

Host Ute Neuhaus: And how could this work? And what is Waelzholz’s approach to this issue?

Dr. Matthias Gierse: All participants, every part of these supply chain and value networks, will have to spend time accounting for their carbon emissions. In addition to documenting how much carbon is emitted, we also need to assess how much we can avoid emitting. After all, avoiding carbon emissions costs money, and, as Heino Buddenberg just said, that will have to be translated into a market price mechanism that ultimately assesses how much avoiding a ton of carbon in the manufacture of certain products is worth.

Host Ute Neuhaus: And what about Waelzholz? With respect to the value creation stage and value chains, what exactly is Waelzholz doing?

Dr. Heino Buddenberg: We’re already very far along in this respect. As previously mentioned, we can now accurately measure, allocate, and assess the Scope 1, 2, and 3 emissions, and through our hot strip and energy purchasing performance, we can agglomerate the mitigation costs in our system and then pass them on to the customer. And it is precisely this transparency, creating this transparency, and actually avoiding carbon emissions, that is a service that we believe will be a key aspect of our business policy in the future.

Host Ute Neuhaus: So, if I can put it in a nutshell, I understand that Waelzholz also wants to play its part as an intermediary in this process, meaning as a link between the steel producer and Waelzholz’s customers. Is that true?

Dr. Heino Buddenberg: Of course! Our mission is to be the market and technology leader in our segment of the cold rolling industry, and we will play an active role in shaping the transformation of the steel industry towards climate neutrality. We will also use our market position and the economic importance of our industry to communicate and strengthen awareness of our needs. This is also necessary so that the decision-makers – in politics, public administration, government agencies, wherever, energy networks – understand the impact of their climate policy decisions on our industry and so that we can ultimately work together to ensure that the German steel industry is not only competitive, but that we even have a national industrial structure in the first place, namely the value network.

Host Ute Neuhaus: I’d like to touch on that once again – within the steel industry’s entire transformation process, if you look at all the different aspects, what role does Waelzholz play, what responsibility do you feel as a company with a long tradition in this industry and in this value network?

Dr. Heino Buddenberg: Well, sustainability, the word alone says that you plan to operate for a sustained period of time. That is to say, we are now over 190 years old and we’d like to be around in another 190 years. That’s what sustainability is all about.

We mentioned the Paris Agreement earlier – the target is set for 2050, and we will do everything we can to make Waelzholz and its products carbon neutral by implementing the necessary changes and thereby fulfilling the company’s responsibility. After all, it is also our duty as a company to ensure that we will still have a competitive steel industry tomorrow and that a functioning value network will also be in place to provide jobs for our children.

Host Ute Neuhaus: And does Waelzholz have a voice in this? What is it, what role can you play, what position can you take on? I’m also thinking a bit in terms of politics.

Dr. Heino Buddenberg: Every individual has a voice, every company has a voice, you just have to speak loud enough for others to hear.

Dr. Matthias Gierse: Indeed, and as a matter of fact, we put a great deal of effort into lobbying in the relevant bodies, which we have to do in order to move policy in the right direction. And you know, this is definitely an active process, it isn’t just waiting for things to happen.

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Host Ute Neuhaus: Well, Steel to Zero – the goal is truly ambitious. We learned that companies throughout the steel value network are facing major challenges, but are preparing themselves for the changes and are already working hard on the transformation. We also learned that steel is actually a powerful material that makes combating climate change possible in the first place. And one thing I took away from this conversation is that steel will only be carbon neutral by 2050 if the right policies are put in place. And if so, it won’t just make other products green, it will also be green itself.

Dr. Buddenberg, Dr. Gierse, I’d like to thank you very much for your time, for being my guests today, for allowing us to be here with you on site, and for making this extremely complex topic a little easier for us to understand.

Dr. Heino Buddenberg: Thank you, Mrs. Neuhaus. Happy Rolling!

Dr. Matthias Gierse: Many thanks to you and Glück auf!, as they say in the German steel industry.

[Outro]

Host Ute Neuhaus: Best of luck to you, too, dear listeners, and thank you for listening. Glad you could join us. There will be another episode of the Steel to Zero podcast series, and in it we take a look at how to manufacture green steel in the first place. We’ll be speaking with one of Germany’s most important steelmakers. So please stay tuned, and also subscribe to the podcast so you don’t miss an episode.

Stay in the know with Steel to Zero, the sustainability podcast by Waelzholz. Listen now with just one click at waelzholz.com/steeltozero. And remember: Waelzholz with AE.

REDUZIR A PEGADA DE CARBONO: DO AÇO COM BAIXA PEGADA RUMO À NEUTRALIDADE CLIMÁTICA

[Theme song]

Ute Neuhaus: Steel to Zero – how steel will go green. The sustainability podcast by Waelzholz.

[Theme song]

Original speaker Ute Neuhaus: My name is Ute Neuhaus, and I’m the host of our German podcast series. In order to make it accessible to an international audience as well, we’ve had the conversations professionally dubbed by native English speakers.

[Theme song]

Ute Neuhaus: “Cooking steel” – this phrase has a long tradition, especially here in the Ruhr region of Germany. The same goes for coal, which has always been a key ingredient in industrial-scale steel production and is part of the formula. But this process, which is indeed tried and true, also means that steel manufacturers are major emitters of CO₂. For every ton of steel produced, around two tons of CO₂ are emitted. That’s a significant amount, and it’s also why the greatest potential in the steel value network lies with the steelmakers. Because they are the ones that can cut carbon emissions by the greatest amount. This means the most important task is changing the formulation. But what could a new formula look like that would make it possible to cook green steel in the future? What technologies would this require – and what environment? What’s already possible today and what’s the long-term goal? That’s what I want to talk about in the second episode of our Steel to Zero podcast.

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Ute Neuhaus: My name is Ute Neuhaus and I’d like to welcome my guests Dr. Marie Jaroni, Head of Decarbonization at thyssenkrupp Steel, who’s work, as her title suggests, focuses on precisely this topic...

Dr. Marie Jaroni: Hello Mrs. Neuhaus.

Ute Neuhaus: …and Dr. Heino Buddenberg, CEO of cold rolled steel manufacturer Waelzholz.

Dr. Heino Buddenberg: Hello Mrs. Neuhaus.

Ute Neuhaus: thyssenkrupp Steel is an important supplier of hot rolled steel strip to Waelzholz and a long-standing development partner.

Let’s begin with a few figures: Approximately two billion tons of crude steel are produced worldwide each year, of which around 150 million tons are produced in the EU. Accounting for almost 40 million tons of crude steel, Germany is the European Union’s largest steel producer. And this is also an interesting fact: In Germany, around 180 kilograms of steel are needed per person for private consumption each year. thyssenkrupp Steel Europe produces around eleven million tons of crude steel per year alone. Dr. Jaroni, Dr. Buddenberg, why is the demand for steel so staggeringly high?

Dr. Marie Jaroni: Steel is the most widely used industrial material and plays an indispensable role in the German industrial sector, across the entire value chain. When we think about body panels for the automotive industry, about structural steel for buildings, about quite a number of applications – we need steel everywhere. This is due to steel’s inherent properties: it is very soft, is extremely malleable, can exhibit high degrees of tensile strength, and high levels of stability. All of this makes steel so exciting and important to our industry in Germany, and we are constantly conducting research to ensure that we develop ever better steel materials for our customers.

Dr. Heino Buddenberg: Yes, I completely agree. As a manufacturer of cold rolled steel strip and special steel solutions, Waelzholz relies on suppliers such as thyssenkrupp Steel so that it can purchase high-quality special steel materials and manufacture them for its customers in such a way that they meet their explicit, individual requirements. Our job is to develop steel strip solutions for individual applications. This wouldn’t be possible without the right hot rolled steel strip, suitable analyses, and steel formulations with high degrees of purity. It’s impossible to see the quality and sophistication of the processes employed by the hot strip supplier when driving past their blast furnace here in Duisburg. But they’re definitely there.

Dr. Marie Jaroni: If I could add to that – there are also quite a few applications that are important to the energy transition. In other words, it’s not just about the green steel that we produce, but also about where the steel actually goes and how it will help stop the climate catastrophe. Examples include wind turbines containing steel, motors for electric vehicles, and submarine cables that bring wind power to the mainland. There are many examples of where steel is needed in the climate debate. This is a huge market that is opening up – 15 million electric vehicles are expected to be on the road in Germany by 2030, for example, compared with only half a million today. We need renewable energy on a large scale, because 80 percent of our electricity is supposed to come from renewable sources by 2030. In other words, the demand for high-tech steel materials is enormous and will continue to grow.

Ute Neuhaus: But this also means that electric cars, wind power, all of this is necessary for, let’s say, the transformation and to achieve climate neutrality, but this means that even more steel will be needed, and that would also mean even more carbon emissions. We said at the beginning that one ton of crude steel generates two tons of carbon emissions. Dr. Jaroni, could you perhaps briefly explain to us why CO₂ is actually emitted during the current steel production process at all?

Dr. Marie Jaroni: Sure. Today, steel is primarily produced in a blast furnace process. In this blast furnace, iron ore – this is the feedstock, FeO if you express it chemically – is layered together with coking coal. Coking coal is essentially the C carrier, again expressed chemically, it’s the C. And this coal “steals” the oxygen from the FeO, the iron ore. So CO₂ comes out of the top of the blast furnace, and these are the emissions that are generated by the process today. But we no longer want to conduct this process in a blast furnace in the future. This is because we can’t simply use hydrogen in a blast furnace, for example, but have to use a new process to reduce the FeO, i.e., the iron ore, but in this case using hydrogen, H, so that H₂O comes out at the top, which most people are familiar with. This is simply steam and is completely harmless.

Ute Neuhaus: At the moment, green hydrogen is still a little way off. But if you look at the near future, steel is also recyclable. So isn’t there a good starting point for a circular economy somewhere in there? Couldn’t a solution be found in that regard?

Dr. Marie Jaroni: Steel is an extremely recyclable material; 100 percent of steel is recycled today. In fact, there’s no other material where this works better than with steel. But our customers also have high standards of quality, and we can’t satisfy them with recycled materials alone. That’s why we also have to use fresh ore via the blast furnace process and produce what is known as primary metal, and that’s what we do here at thyssenkrupp. Nevertheless, we also try to use scrap as far as possible, for example in our converters and in our steel mills, so that we also have a high recycling rate of about 20 percent at our plant.

Dr. Heino Buddenberg: I can only agree with Dr. Jaroni and point out that around 30 percent of global steel production is already made from scrap in electric arc furnaces, which reduces the CO₂ output of this process route to a third of that of the blast furnace process. The scrap available worldwide, which is roughly equivalent to the amount of steel produced 30 or 40 years ago, is now consumed in large quantities for steel production. An additional reduction in carbon emissions by switching to scrap-based variants is therefore only relevant from a business point of view, but irrelevant from the perspective of the global carbon footprint, and doesn’t lead to any further reduction in carbon emissions in the overall processes. Furthermore, high-quality scrap is, of course, in short supply, so the aspect cited by Dr. Jaroni regarding the quality of the steel materials is relevant, but using more scrap won’t have any effect on the overall carbon footprint.

Ute Neuhaus: Okay, so the steel industry currently accounts for six percent of total carbon emissions in Germany. And 2.5 percent are emitted by thyssenkrupp Steel alone. So the need to take action is clear. thyssenkrupp aims to produce three million tons of carbon-neutral steel per year starting in 2030 and become completely climate neutral by 2045. But doesn’t something need to be done now, doesn’t something need to be done today?

Dr. Marie Jaroni: A lot is already being done at thyssenkrupp today, but also across the steel industry as a whole. Over the last 30 years, we’ve improved our processes so that we generate more than 20 percent fewer carbon emissions or even emissions in general than we did 30 years ago. And in this context, we’ve improved energy efficiency, we’ve improved the feedstocks, we’ve improved processes as a whole and, of course, we’ve also invested a significant amount in these new processes, but at some point you reach a limit to how much you can optimize the blast furnace route, and we have to start using new processes. And that’s what we’re doing now, and we’re starting by building a direct reduction plant here in Duisburg, because it’s simply no longer possible to optimize the current processes.

Ute Neuhaus: In other words, direct reduction is the name of the game in the future? Can Waelzholz say today: “But we’d like to have low-carbon emission material right now”?

Dr. Marie Jaroni: Yes, very gladly even. Today we’ve already developed two such products produced via the blast furnace route: one is bluemint pure and the other is bluemint recycled, these are both steel materials with reduced carbon emissions. In the case of bluemint pure, we are already using HBI, biomethane, or hydrogen in the blast furnace today in order to improve the carbon footprint somewhat, and are therefore also offering a low-carbon emissions material. The entire system is certified, of course, in this case by DNV. In the case of bluemint recycled, we use steel scrap, special steel scrap. In both processes, we can cut emissions by almost 1.5 metric tons of CO₂ per metric ton of steel or hot rolled strip – that’s 70 percent. So it’s already possible to make considerable progress here.

Ute Neuhaus: I’d like to jump in briefly, if I may – can you explain the term HBI, which not everyone listening might be familiar with?

Dr. Marie Jaroni: Sure, HBI stands for hot-briquetted iron, a compacted form of direct reduced iron, also known as sponge iron, which is then still melted down in a blast furnace. But this means less coal has to be used, so less C “steals” the oxygen as explained before, and therefore we end up with less CO₂.

Ute Neuhaus: And how much of it is available for purchase? How do you calculate it, especially since it’s applied to the footprint in this way?

Dr. Marie Jaroni: It’s true, we can only use a small amount of HBI. As I said, the blast furnace is also optimized in terms of energy efficiency, etc. We can still use more HBI or even biomethane and other materials, but only up to a maximum of ten percent, however. We can’t use much more, because we need the layers in the blast furnace, of the coking coal and the iron ore, for the process to work.

Ute Neuhaus: Now this is interesting, a new brand, a new brand environment – bluemint. And bluemint doesn’t offer increased tensile strength, or incredible tolerances, or a profile. Instead, it has a single feature – fewer carbon emissions. This is actually something of a first for steel manufacturers, selling something like this. How do you do that, how do you tell customers to please buy something that serves a social goal?

Dr. Marie Jaroni: It’s important to us to offer our customers products with reduced carbon emissions that are based on real and verifiable CO₂ savings as quickly as possible. And our customers are asking for them, too. Because, in turn, our customers’ customers are asking for them. This is because society is changing and many people now realize that products with lower carbon emissions are also good products. That they meet a new requirement that may not have existed a few years ago, and we can see that there’s a demand for them.

Ute Neuhaus: Dr. Buddenberg, is this product characteristic also relevant to customers like Waelzholz?

Dr. Heino Buddenberg: This feature is tremendously important and we’re depending on our partners to use innovative processes to minimize carbon emissions. At Waelzholz, we have an ambitious and comprehensive roadmap to cut carbon emissions ourselves, and are striving to achieve climate neutrality over the long term. However, 90 percent of the emissions from our products stem from the raw material, which in this example means from thyssen. And we can influence our own emissions. But we can only make our final product emission-free if the source of the raw material also does its part to ensure that this is the case. When it comes to steel, the factor that plays the key role in emissions is determined upstream at the beginning of the value chain.

Ute Neuhaus: So thyssenkrupp Steel, as the first stage in the value chain, bears a big responsibility on the road to green steel, doesn’t it?

Dr. Marie Jaroni: As you said earlier, thyssenkrupp accounts for 2.5 percent of Germany’s carbon emissions. And we’re working on it, we’re aware of our responsibility.

Ute Neuhaus: How then, Dr. Buddenberg, is Waelzholz, as the next stage in the value chain, helping drive the climate transition?

Dr. Heino Buddenberg: You can’t look at this process of achieving carbon neutrality in isolation from the perspective of one company alone. We are part of value creation networks where we need to consider and achieve climate neutrality for the final products step by step at every level of production. Major investment decisions need to be made at every level to eliminate carbon emissions from the relevant processes. And the energy industry that supplies these networks must also play a massive role, and this must, of course, be recognized by policymakers and society at large. Because we also have a collective responsibility to create this product characteristic, namely that the product is, as I always say, “marketable.” After all, at the end of the day, costs that are incurred as a result can’t simply be borne by an individual company, but must be shared collectively via the value network and ultimately reach the end customer and, unfortunately, also be paid for there.

Ute Neuhaus: You mentioned policymakers earlier, and the energy industry. This means that there is an underlying framework and the framework conditions have to fit. But at the moment they don’t fit. What can be done to make it easier for companies to plan when it’s not yet clear what the framework conditions will look like?

Dr. Marie Jaroni: I don’t think you can plan for everything. This is a period of transformation. That’s clear to us as a company, and I think it’s clear to the entire industry that’s going through this transformation. You simply can’t plan for everything. You can try, together with policymakers, to ensure that the regulatory framework remains stable and , at least, to make plans within this framework. And ultimately, it isn’t politics that stands at the end of this entire transformation, but a business model that works for us. And works for our customers and our suppliers. And we need to work together to get there, through this entire period of transformation until this business model works, the market has to develop, and policymakers have to provide support as well. But our goal is always to return to a self-sufficient market that doesn’t need politics or subsidies, but in the end is also green and climate neutral.

Ute Neuhaus: But that means a market has to be created around carbon emissions?

Dr. Heino Buddenberg: Exactly! At the end of the day, carbon emissions must represent a real cost for the end user. This cost must remain affordable, but it also has to be paid. And this additional cost must be enough to cover the gigantic investments involved in this transformation process. According to estimates, Germany alone will have to invest around three trillion euros to achieve a complete climate transition. And it goes without saying that the raw material industries and also steel will account for a commensurate share of this.

Ute Neuhaus: This means that we have to create an awareness of the costs associated with these things, and we’ve also heard that there are already opportunities today to offer products that at least were produced with fewer carbon emissions. If we now look ahead to 2045, what will it take for steel to truly go completely green in the end? What needs to happen?

Dr. Marie Jaroni: If you ask me, we’ll ultimately need to kick-start a small revolution. In the steel industry and also here at thyssenkrupp. What we’ll ultimately need to do is replace our coal-based blast furnaces, which have been in place for many, many years and decades, even centuries, with direct reduction plants. These direct reduction plants no longer work with coal, but instead with hydrogen. This means that we’ll need vast, massive quantities of green hydrogen. And we’ll need large amounts of green power here in Duisburg. These have to be available in the first place, and of course they have to ultimately be available at a competitive price. All of this means that we have to work on this in collaboration with our partners today. You can’t achieve this within the scope of the normal supplier-provider-customer relationship. Instead, we have to work with each other and think a little differently in this case, and that’s what we’re doing right now. With our customers, but also with our suppliers. This is necessary to ensure that we can procure the new feedstocks and then produce green steel here.

Ute Neuhaus: Now when it comes to direct reduction, companies have experience, I believe, with electric arc furnaces. What’s the situation with this at thyssenkrupp? After all, you actually use a completely different technology. Can you briefly explain what the differences are? What’s your idea?

Dr. Marie Jaroni: So we have a direct reduction plant. This is the initial basis for us to emit less CO₂. The direct reduction plant produces sponge iron, a fully reduced iron, which then goes to our smelter. The smelter also has a reducing atmosphere and in the smelter the sponge iron is melted again, somewhat modified in terms of quality, and the pig iron then comes out of this smelter. The pig iron is actually exactly the same as when it came out of a blast furnace. So let’s just call this “pig iron 2.0.” And this pig iron 2.0 then follows exactly the same path as the pig iron from the blast furnace did before, namely it goes to the steel mill next and on to the further processing steps. This has tremendous advantages, because we can offer exactly the same levels of quality as we can today because the only change we’re making to our entire process is where the carbon emissions are actually generated. A total of 90 percent of today’s carbon emissions are generated in the blast furnace, and that’s exactly what we’re replacing with the direct reduction plant plus smelter. The rest of the process in the mill remains the same.

Ute Neuhaus: In other words, the established processes, the quality-controlled processes, will remain unchanged, and carbon emissions will simply be avoided at certain points in a micro-operation that’s not really a micro-operation at all?

Dr. Marie Jaroni: Exactly.

Ute Neuhaus: Okay, so as you said earlier, collaborations play a key role, but beyond that, green hydrogen is a vital component. And it isn’t available yet. You mentioned that the first direct reduction plant is currently in the planning stage and should be completed by 2025. And yet green hydrogen still won’t be available. How do you plan to bridge the gap?

Dr. Marie Jaroni: So we’ll have the first direct reduction plant here in Duisburg in the mid-twenties. And for the time being, we will also be able to operate it using natural gas. How quickly we can then switch to green hydrogen is a question of availability. But we are in talks with numerous partners, our hydrogen partners, and, of course, we’re also partly dependent on pipelines. So we’re also in talks with pipeline network operator partners. Nevertheless, we also have partners that are located close to our plant, and this would make it possible to obtain a supply of green hydrogen sooner, since we would not need large pipeline connections to Rotterdam or other ports. So we have a variety of options available when it comes to obtaining hydrogen here, and so we also hope to be able to switch from natural gas to hydrogen-only operation very quickly.

Dr. Heino Buddenberg: We just need to keep in mind that natural gas, which is what is used today, is essentially methane. And methane has one carbon atom and four hydrogen atoms. This means that when natural gas is used, it’s already a major step towards the hydrogen economy, which is something that is always quickly forgotten. And hydrogen will end up playing a key role in the transformation of the entire energy industry. We need to anticipate that electricity will serve as the primary energy source in the future. After all, renewable energy is electricity, and it doesn’t matter if it comes from wind or solar sources. And this hydrogen will also play an extremely important role in the conversion of electricity consumption as a buffer medium – because the wind doesn’t always blow and the sun doesn’t always shine. And this conversion of the entire energy system is going to keep us busy until 2045.

Ute Neuhaus: Natural gas as a stopgap technology. That seems difficult to imagine from today’s perspective, against the backdrop of the war in Ukraine and the shortages in Europe. What impact does that have on the transformation, how do you view this at thyssenkrupp Steel?

Dr. Marie Jaroni: It obviously has an impact on us as well. First of all, in the short term, operationally. And if we look ahead to the transformation, then we are actually working with our hydrogen partners to try to answer the questions of how we can get hydrogen here to Duisburg more quickly and how we can use it more quickly so that we can minimize the amount of natural gas that we need and the length of time that we’ll need it. This is something we’re working on. But we always work with the philosophy that we won’t stop transforming simply because there’s a gas crisis, but instead will keep pressing forward. After all, climate change isn’t waiting – we have to keep going, and we are.

Ute Neuhaus: Okay, so I’ve read that by 2030, the steel industry will need up to 660,000 tons of green hydrogen. Then on top of that, the chemical industry will need some more, then private households will need some more... How will it be possible to achieve this necessary transformation at all? I mean, we’re talking about gigantic quantities that will be required.

Dr. Heino Buddenberg: The German government plans to produce just over 400,000 tons of hydrogen in Germany by 2030. But we have to get away from the idea that the future hydrogen economy will remain purely a domestic affair. We’ll be part of an international energy market, just as we are today. And Dr. Jaroni just mentioned the connection to the Port of Rotterdam, which has established itself as a major hub for imported energy commodities and will also be the hub for imported hydrogen sources in the future. Whether that will be hydrogen via pipeline networks from North Africa, or whether that will be hydrogen sources coming from Australia via the vehicle ammonia, only time will tell. This all needs to be developed. And this is necessary within the energy network to ultimately set the future course.

Ute Neuhaus: You just said it, the key word here is once again “networks.” Dr. Jaroni, you mentioned partnerships, and if you take this idea a step further and think about what the whole thing could look like from 2045 onward, these will certainly go far beyond national partnerships.

So we’ve learned that the steel of the future will be produced with green hydrogen. And this requires hydrogen technologies, which in turn are also emission-free, and innovative production processes, such as the direct reduction process, and these are all absolutely essential if the transformation of the steel industry is to be successful at all.

I’d like to thank my two guests, Dr. Jaroni and Dr. Buddenberg, very much for their time and for these extremely interesting insights into the future of green steel.

Dr. Marie Jaroni: Thank you very much, Mrs. Neuhaus, thank you very much, Mr. Buddenberg. This was a really interesting conversation and I look forward to hopefully speaking with you again in the future.

Dr. Heino Buddenberg: Yes, sincere thanks to both of you from my side as well. I enjoyed it.

Ute Neuhaus: And I’d also like to thank you, dear listeners, for your interest, and I’m very glad you were able to join us.

Today we looked at the transformation of steel production. In our next episode of the Steel to Zero podcast series, we’ll be taking a look at how important green steel is for carbon neutrality at the other end of the value chain. And we’ll be speaking with a company that has been systematically focusing on sustainability for more than 100 years.

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Ute Neuhaus: Stay in the know with Steel to Zero, the sustainability podcast by Waelzholz. Listen now with just one click at waelzholz.com/steeltozero. And remember: Waelzholz with AE.

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SEM ELE É IMPOSSÍVEL: O PAPEL DESEMPENHADO PELO AÇO EM UMA ECONOMIA SUSTENTÁVEL

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Ute Neuhaus: Steel to Zero – how steel will go green. The sustainability podcast by Waelzholz.

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Original speaker Ute Neuhaus: My name is Ute Neuhaus, and I’m the host of our German podcast series. In order to make it accessible to an international audience as well, we’ve had the conversations professionally dubbed by native English speakers.

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Ute Neuhaus: How can I do my laundry in a way that’s really sustainable? When thinking about this question, eco mode and laundry detergent with the Blue Angel label might come to mind – but green steel probably doesn’t. But it is precisely green steel that also has an impact on how climate-friendly the washing machine in our basement is. So exactly how important is green steel to the transformation of the industry? What will it take to become greener? And what role do retail consumers play on the path to these more sustainable products? These are the questions we’ll be addressing in the third episode of our sustainability podcast Steel to Zero.

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Ute Neuhaus: My name is Ute Neuhaus and I’m looking forward to speaking with two guests today who not only share a long business relationship, but also their focus on sustainability. In the studio with me are Konstantin Eckert, responsible for steel purchasing at Miele, one of the world’s leading manufacturers of household appliances, headquartered in Gütersloh, Germany. Hello Mr. Eckert.

Konstantin Eckert: Hello Mrs. Neuhaus, glad to be here. Thanks for inviting me.

Ute Neuhaus: … and Dr. Matthias Gierse, Managing Director Sales and Purchasing at Waelzholz cold rolling mill in Hagen, which supplies Miele with special steel materials. Hello Dr. Gierse.

Dr. Matthias Gierse: Hello Mrs. Neuhaus, nice to see you too.

Ute Neuhaus: Sustainability has been  the core of Miele’s corporate DNA since its founding until today. The company uses high-quality electrical steel strip, for example from Waelzholz, for the electric motors in its premium household appliances.

Mr. Eckert, in 2021 Miele sold more than six million appliances worldwide – many of which contain steel. Miele without steel – is that even possible?

Konstantin Eckert: The answer is simple: no, not possible. In fact, our entire product range, if you think of our washing machines, ovens, etc., depends on steel, uses steel, and would be impossible to make without steel. To give you an idea of how much steel Miele buys, in 2020 we purchased around 110,000 tons of metal. Now that may not be so much when compared with the automotive industry, but it’s a relatively large amount for us. If you think of it in terms of cars, it’s also a relatively large amount. A mid-size sedan weighs around 1.5 tons, which means that we purchased an amount of steel that’s equivalent to 70,000 vehicles lined up next to each other.

Ute Neuhaus: Indeed, and you use a special type of steel in the motors of these household appliances from Miele, namely electrical steel strip – some of which you source from Waelzholz. What’s so special about this particular material for Miele?

Konstantin Eckert: Miele stands out because we have a relatively high degree of vertical integration. You mentioned it – we build our motors ourselves. This means that we’re dependent on primary products of very high quality, which we then process ourselves. Miele – as I think everyone knows – has high standards when it comes to the quality of our finished products, and this, in turn, is directly linked to the upstream products mentioned. And it is precisely for these electric motors that we need electrical steel strip.

Dr. Matthias Gierse: Right, and we try to have a positive impact on the longevity and efficiency of these motors through the electrical steel strip we supply, with highly qualified products. More specifically, by reducing the thickness of the material, you can minimize eddy current losses, so less heat is generated when the motor is running. This increases the motor’s efficiency.

Another aspect is rolling to extremely tight tolerances. This then ultimately makes it possible to join the stamped sheets into stator stacks with exceptionally high levels of dimensional stability and precision, which also has a positive effect on the service life of the motor.

Ute Neuhaus: So in summary, the high quality of the steel increases the energy efficiency and also the service life of the household appliances. It wouldn’t be possible to manufacture them without this steel. And fortunately, steel can also be recycled. What’s the situation like at Miele – is the steel from your products reused?

Konstantin Eckert: This begins with the service life, let’s take a washing machine as an example. Miele is traditionally committed to offering washing machines with the longest possible service life. In fact, we’re the only company in the industry that tests its products for a lifetime of up to 20 years. This is also supported by the repairability of our products. We also offer a spare parts service, of course, even for appliances that were launched many, many years ago. And if, in the end, one of our customers does have to part with an appliance, we use our dealer network to ensure that the materials that can be recycled are recycled. And that includes, as you quite rightly pointed out, steel, of course.

Ute Neuhaus: Recycling is surely an important topic at Miele. Durability, of course, customers should use the products for a long time. But what about when you design new products now, what about the ability to recycle all of an appliance’s components?

Konstantin Eckert: This plays a pivotal role in the product development process at Miele, laying a foundation so that in the end, we create and build products that are made of materials that are recyclable.

Ute Neuhaus: Steel is indeed a versatile material – high quality, easily recyclable. It would actually be perfect if it weren’t for the significant carbon emissions generated during production – which also worsens the carbon footprint of Miele’s products. What are you doing at Miele to reduce your product carbon footprint?

Konstantin Eckert: This is something we have to do and want to do. So what does that mean in concrete numbers? We plan to reduce our Scope 1 and Scope 2 carbon emissions by 50 percent by 2030 compared to a 2019 baseline. We’ve been net carbon neutral since 2021 in terms of Scope 1 – i.e., everything that is generated by our own company in connection with the manufacture and assembly of our products – and Scope 2, i.e., all of the energy we procure from external sources. We’ve already managed to cut Scope 1 and Scope 2 emissions by 40 percent compared to 2019. But we aren’t done yet!

Ute Neuhaus: 40 percent since 2019 is already quite a lot. What specifically did you do?

Konstantin Eckert: We invested in the energy efficiency of our own sites, of course. We significantly expanded the use of renewable energy. And we are, of course, also working with our partner Waelzholz on the issue of Scope 3.1 emissions, i.e., in the supply chain.

Ute Neuhaus: That’s precisely what I’d like to come back to now: What does Scope 3 include at Miele?

Konstantin Eckert: Oh, we’ve already talked so much about Scope 1, 2, 3... so a company’s carbon emissions are sorted into these different Scopes in order to analyze where they come from, these carbon emissions. 85 percent of all carbon emissions attributed to Miele are generated by our customers’ use of our appliances over their lifetime. In terms of these carbon emissions, as we’ve already briefly touched on, we’re now in a very good position. Our appliances’ long service life pays off massively in terms of their carbon footprint. If you use a washing machine for only 10 years, you end up with a very different carbon footprint than if you use it for 20 years.

Ute Neuhaus: So if I understand you correctly, Scope 3 at Miele primarily means customers, the customer side, end consumers. On the other hand, steel is also part of Scope 3. That is, what you source externally. What’s the situation there?

Konstantin Eckert: So steel, at over 30 percent, is the product group with the highest share of carbon emissions among the materials we purchase. In other words, and this leads us to the answer to your question, green steel is a possible way for us to drastically cut our carbon emissions. And this is exactly the path we are going to take as a company. Working together with the industry, of course, because we’re dependent on our partners, our suppliers, to also provide this green steel to us. For example, we’re already using low-carbon emissions steel for our ovens, for one of the components. By using this steel for this part, we’ve cut the carbon emissions by 66 percent.

Ute Neuhaus: So what I take away from this is that green steel, or actually steel in general, already has an impact, meaning an influence, on how green Miele products can ultimately become. And that brings us to the steel value network. Dr. Gierse, what’s the situation with Scope 3 at Waelzholz?

Dr. Matthias Gierse: So at Waelzholz, Scope 3 emissions are generated by the purchase of our primary products, our raw materials, essentially hot rolled steel strip. We usually transform one ring of hot rolled steel strip, one coil of hot rolled steel strip, into a large number of different customer orders, in some cases with very different levels of vertical integration. This means correctly allocating the carbon footprint of the products we source, i.e., the Scope 3 impact, to each of these individual customer orders is a very challenging task in the first place.

In the case of hot rolled steel strip, emissions result from crude steel production. If we look at our carbon footprint, around 90 percent is attributable to Scope 3, i.e., carbon emissions from the value chain. We see that Scope 3, i.e., the purchase of raw materials, is by far the area with the greatest ability to move the needle on our path toward climate neutrality. We are testing material with reduced carbon emissions from different routings and, of course, sharing the processing results with our suppliers to help them continue on this path.

Ute Neuhaus: Yes, at Miele, we heard this earlier, the level of vertical integration is high. This means that green steel will also have a direct impact on Miele products becoming green. But that also means that you have to exert influence in this value network, in this value chain. Mr. Eckert, how are you doing this?

Konstantin Eckert: I’d like to touch on what you said at the beginning, just to emphasize the point once again. So, both Miele and everyone else, like the automotive industry, will have to purchase green steel if they want to address carbon emissions in their procurement portfolio and improve the situation over the long term, there’s no way around it. This will involve the steel industry undergoing a huge transformation. And what we’re doing as Miele is influencing the steelmakers and saying, “we want to go down this path with you toward green steel.” We also have to make sure that we build products that the market can buy and wants to buy, but personally, I firmly believe that this is the right path that the industry has taken.

Ute Neuhaus: That’s a very confident outlook, and the fact is, it’s no good if steel ends up being 66 percent green, it has to be completely green. Dr. Gierse, does Miele occupy a special position because of the high demands it places on product quality and also because of its requirements for green steel?

Dr. Matthias Gierse: Miele does indeed place very high demands on us, but that’s not really surprising, because our material quality ultimately has a direct impact on the sustainability of Miele’s products. But we’ve also placed high demands on ourselves – we want to achieve climate neutrality by 2045. We can make reliable statements about the carbon footprint of our products, and we see this as part of our responsibility as an industrial company, but also, of course, as a service to our customers. This means that today we can tell our customers the product carbon footprint for each item individually. Ultimately, we believe that it is very important for us to be transparent about the carbon footprint of our products so that, at the end of the day, everyone knows which figures we need to work on and in what form successful reductions can actually be measured.

Ute Neuhaus: What I’m taking away from this is that the path to climate neutrality can only be a shared one. Everyone in the steel value network has to work together, everything is interconnected after all. So, this partnership between Miele and Waelzholz specifically, is this the result of many years of collaboration or is it now simply a necessity?

Dr. Matthias Gierse: Both. We’ve been working together as partners for many years and we believe we also have the same understanding of social responsibility and sustainability. And there is no doubt that the steel industry needs to work together along the entire value chain. That’s why we’re extremely interested in participating in the transformation of the steel industry, which is already underway, and playing an active role in it. But business and politics must also pull in one direction to have a chance of even getting closer to the goals of the Paris Agreement.

Konstantin Eckert: I couldn’t agree more. We obviously have an obligation, but also an opportunity as a premium manufacturer, to play our part in driving sustainability forward on this front. There’s a saying at our company, from senior management, that goes, “we soon won’t be able to separate profitability from sustainable business practices.” These are two sides of the same coin.

My children – I have two – they will live on this earth a few decades longer than I will and I very much hope that we can still somehow slow down the rate at which things have been changing the last few years. I don’t want to imagine what the situation will look like in 30 years otherwise. And if we can’t get steel right, we’ll have a hard time with the rest. And one thing is quite clear – it won’t happen without green steel.

Ute Neuhaus: Mr. Eckert, you’ve just described it passionately and, let’s say, expressed your view as a family man, as a consumer, as the one who, ultimately, has to deal with the consequences. So now let’s talk about the consumers. How do they view green products, how sustainable are your customers, what are their demands?

Konstantin Eckert: I think it’s fair to say that when a customer chooses the Miele brand, there’s a conscious decision behind it – one that also includes a desire to buy sustainable products. And this desire is growing. People want sustainable and resource-friendly products, precisely in order to make their own contribution to protecting the environment and the climate.

Ute Neuhaus: Consumers, and this brings me to another aspect, are also prospective employees. Does this play any role in your recruiting activities, in the specialists you aim to attract? Do people who apply for jobs also ask questions about sustainability at Miele?

Konstantin Eckert: The answer is a resounding yes. So, generally speaking, we’ve seen that applicants and their needs when it comes to their new employer have changed a bit in recent years. There’s a significant focus on work-life balance, family life, etc., development opportunities, learning opportunities, but also, as you mentioned, Mrs. Neuhaus, the issue of sustainability. And we specifically promote the fact that employees can “change the carbon footprint of purchased materials” at Miele. Here they have the opportunity to actively make a difference. And that is something that excites or interests many prospective employees.

Ute Neuhaus: How do you promote this internally? Can you share some examples of what you do, specifically, in detail?

Konstantin Eckert: It starts with – here’s an example – days of action, such as a car-free day. It continues with employees who work as a team to address the sustainability of our company and play a very important role by showing us as a company where we stand, what our goals are, and where we want to develop as a company.

Ute Neuhaus: So the manufacturers of the final products, the consumers, and also the employees – everyone cares about greater sustainability, it’s a part of everyone’s mindset, you might say. This means that there’s also a lot of pressure on the steel sector. Dr. Gierse?

Dr. Matthias Gierse: Allow me to share two more figures about steel: according to the latest figures from Worldsteel, just under two billion tons of steel was produced worldwide in 2021. In the process, more than three gigatons of carbon was emitted, which is equivalent to about eight percent of the world’s total carbon emissions. These figures show that reducing the amount of greenhouse gases emitted during steel production is absolutely essential if we ever really want to achieve climate neutrality on a global scale.

This requires the creation of some key fundamental conditions, however, because it will only be possible to produce green steel in the future if certain basic requirements are met. And it goes without saying that policymakers must support this change. This needs to be backed by a broad base; the steel industry and the supply chain behind it cannot manage it alone. After all, we have to make enormous investments in steel production infrastructures; we’re talking about an investment volume of around one billion euros per million tons. German steel production stands at around 40 million tons. That translates into an investment of 40 billion euros that would be required for Germany alone to shift to green production.

This requires gigantic quantities of green hydrogen. The green hydrogen would then be used to replace today’s carbon-based process. So we need the producers of hydrogen, of green hydrogen, the green electricity required for this, and last but not least, of course, we also need a pipeline infrastructure that can then transport these hydrogen quantities. There will have to be international supply networks for this. At the end of the day, this will make production processes more expensive and will put the global competitiveness not only of the steel industry in Europe, but also of the suppliers behind it, under severe pressure.

Ute Neuhaus: High costs – high costs of everything, from investments in the facilities, to hydrogen production, to infrastructure... so yes, at some point it comes down to money, to competitiveness. And that raises the question, Mr. Eckert: How willing are customers to pay money for this?

Konstantin Eckert: So, in this context, you now have to specifically calculate what the benefits are of the long service life, the excellent consumption values – which isn’t just interesting from a sustainability point of view, but also very interesting from a financial point of view. I’m convinced that in two, maybe three years at the latest, carbon emissions will be pushed by the purchasing departments of this world with the same energy as the issue of the euro. The euro has always been the determining factor for us in purchasing, that’s what’s guided us, that’s what our goals are centered around. Carbon will become just as important. And we will – please excuse the expression – confront our suppliers with this. We will no longer only discuss costs. We will discuss carbon emissions in the same way, with the same energy, with the same investment of resources. And these two aspects will go hand in hand, I’m sure of it. This represents a shift in culture for us in purchasing, and it represents a shift in culture on the supplier side.

Ute Neuhaus: That means, to summarize, there will not only be a market for, let’s say, material properties, but also for carbon. When considering a cross-section of customers, how much demand is there for green products, and what can Waelzholz offer at the moment?

Dr. Matthias Gierse: There’s definitely demand for low-carbon emission steel products, and we can also see that the demand is gradually increasing. So, if we’re now talking about our customer Miele specifically, which is active in the consumer goods sector, the pressure there is usually greater than with customers who are tier suppliers to the automotive industry in the B2B sector, for example.

Personally, I’m firmly convinced that the demand for low-emission and, in the future, zero-emission steel grades will grow massively over the next few years. We’ve already processed the first low-emission hot rolled coils and found that from a technical and technological point of view, we have zero difficulties with these products and also achieve excellent results when it comes to quality. The reduction in carbon emissions is achieved by using scrap as a raw material, and scrap is a net-zero-emissions material. But you have to be very careful when interpreting these figures, however. We need to be aware of the fact that the amount of scrap available worldwide is limited and is 100 percent recycled.

So if we decide to use more steel produced using the EAF route, it wouldn’t lead to a global reduction in carbon emissions, it would just lead to a different allocation. So it’s essentially a zero-sum game, at least on a global scale. That’s why we won’t see any real reductions in carbon emissions until 2025/26, when production of direct-reduced iron will begin to increase. That’s still a very long way off.  What will also most likely happen is that these direct reduction plants won’t be able to run on green hydrogen initially, because it simply won’t be available by then. These plants would then have to run on natural gas as a reducing agent, but even that cuts steel production’s carbon footprint by about 50 percent.

The path has been decided on, all the major European steelmakers are now moving down it, and at the end of the day, we have to ensure in purchasing that we secure the resulting quantities of low-emission steel and then also put it on the market.

Ute Neuhaus: We’ve already heard that there’s a cost of moving down this path. Sustainability has its price. So who’s going to pay it in the end? If we put ourselves in the consumers’ shoes once again, will Miele pass on the rising costs of green steel to the end consumer, to the people who buy its products?

Konstantin Eckert: Looking only at steel again, it might be interesting to take a look at the years ‘21 and now ‘22 as well. During these years in particular, we observed a development on the steel market that we haven’t seen before. We saw prices and manufacturer costs largely decoupling. In other words, the price of steel has increased massively, yet the manufacturer’s costs have not risen by the same amount. This is something that couldn’t be completely passed on to the customer in this form – so no, it won’t be completely passed on. At the end of the day, everyone in the value chain will have to do their bit, and the hope is that the steel industry has carved out one or two opportunities over the last two years to make even more rapid progress on this front.

Ute Neuhaus: Dr. Gierse, how do you see it?

Dr. Matthias Gierse: So the cost of raw materials and energy is inevitably going to rise, which will ultimately make the final products more expensive. I personally am convinced that in the medium to long term, we will have to pass this surge of costs through the supply chain, through the supply networks, and the end consumer will have to foot the bill. After all, we’re paying for our children’s and our grandchildren’s future here. It’s a huge job, a massive load that needs to be lifted, and we all have to shoulder it.

So when looking ahead, I’m personally confident that we’re going to make significant progress in the next five to ten years, that maybe by 2030, 2035, we’ll have actually taken major leaps forward. I’m personally convinced of it.

Ute Neuhaus: Okay, if I sum it all up now, on the one hand we’ve learned what the versatile material steel can do, and that excellent consumer products also require excellent steel. And that it’s essential for many areas of our lives and also, among other things, for the fact that the washing machine mentioned at the beginning of the interview can wash our clothes so economically and last for such a long time – maybe even for 20 years.

But only if steel goes green can the final products and the companies also become completely climate neutral. And Mr. Eckert, you summed it up perfectly when you said that sustainability and business success will be two sides of the same coin. This means that Steel to Zero is inevitable and the transformation has already begun.

We heard from market and technology leaders Miele and Waelzholz just how thoroughly they are preparing and how they are facing the challenges that lie ahead. Mr. Eckert, Dr. Gierse, thank you very much for your time and for the insights and perspectives you’ve shared with us today. I’d like to thank you both again very much.

Konstantin Eckert: This was a lot of fun, thank you very much.

Dr. Matthias Gierse: Thank you very much, I also enjoyed it very much.

[Theme song]

Ute Neuhaus: We’ve all understood that green steel, this ambitious goal, can only be achieved by working together. To you, dear listeners, thank you very much for joining us again for the third episode of our podcast Steel to Zero.

[Theme song]

Ute Neuhaus: Stay in the know with Steel to Zero, the sustainability podcast by Waelzholz. Listen now with just one click at waelzholz.com/steeltozero. And remember: Waelzholz with AE.

[Theme song]

IS SCRAP THE SOLUTION? WHY THE USE OF EAF STEEL WON’T REDUCE GLOBAL CARBON EMISSIONS

Host Ute Neuhaus: Steel can be found everywhere, in nearly every area of life. It’s an indispensable part of modern industrial society and has been for many decades. What is it that makes steel so valuable? Steel is infinitely recyclable. Some people believe that steel recycling is the ideal way to achieve climate neutrality and are calling for recycling quotas for steel production. In the first three episodes of our podcast Steel to Zero, scrap steel recycling was discussed several times. When it comes to the use of scrap in the various steel production routes, but also as a customer requirement in order to achieve sustainability targets. But can we get to zero carbon with scrap? Is scrap the ideal way to make greener steel, or are we pinning too much hope on recycling? I’m Ute Neuhaus, and today I’d like to talk about the challenges of achieving higher recycling rates with two people who certainly should know. We’re joined in the studio by Sandrina Sieverdingbeck, general manager of DEUMU – that’s Deutsche Erz und Metallunion GmbH, headquartered in Peine, in Germany – and Dr. Matthias Gierse, long-time Director of Sales and Purchasing at Waelzholz. Hello and welcome! 

Dr. Gierse: Good morning, Mrs. Neuhaus. 

Sandrina Sieverdingbeck: Hello. Glad to be here. 

Host Ute Neuhaus: Mrs. Sieverdingbeck. What exactly is DEUMU? What’s the company’s business model? 

Sandrina Sieverdingbeck: So, DEUMU is a wholly owned subsidiary of Salzgitter AG in Europe, one of the leading steel technology and systems engineering corporations. We are a major player in scrap recycling and handle around two million tons of scrap per year. And we do so primarily to supply our own steelworks in Salzgitter and Peine, in Germany. In Salzgitter, we operate one of the largest scrap yards in Germany, and through everything we do, we are one of the top three steel recyclers in the country. The scrap is used in the steelworks in Salzgitter and Peine. Salzgitter’s long-term strategy is focused on closed energy and material cycles. And we are pursuing a circularity strategy – “Pioneering for Circular Solutions” is the group’s vision.

Host Ute Neuhaus: Thank you. We will of course come back to the topic of the circular economy in a moment. Dr. Gierse, would you like to briefly introduce yourself? And also the company Waelzholz?

Dr. Gierse: Sure, I’d be glad to. I was Director of Sales and Purchasing at Waelzholz for many years. I handed over the role to my successor in the middle of this year, but I remain connected to the company and am still closely involved in sustainability strategy issues, among other things. Waelzholz is the technology leader in the cold rolling industry. We produce an extremely broad range of products, including every conceivable cold-rolled product – shaped wire, flat rolled wire, and stainless products. And we do this internationally at locations in Europe, Asia, as well as North and South America. The cold-rolled material that we produce is used all over the world in various applications, such as in the automotive industry in both vehicles with combustion engines and electric drive systems, as well as in many other industrial applications, but also serves as an enabler in numerous applications for products that are needed for the energy transition. Examples here include fuel cells, generators, and wind turbines, i.e., wind power generators that are supplied with our products.

Host Ute Neuhaus: Mrs. Sieverdingbeck, Dr. Gierse, our podcast series Steel to Zero deals with the question of how steel production can become green, i.e., climate neutral. And recycling is always a good thing. But what role does it play when it comes to steel? Why is scrap relevant in the discussion about reducing carbon emissions? 

Sandrina Sieverdingbeck: As a completely recycled product, scrap is considered to have zero emissions when used in the steel production process. Steel production exclusively using scrap in an EAF, i.e., an electric arc furnace, translates into approximately 1.67 tons less CO2 per ton of steel produced. However, we can’t rely on the recycled product scrap alone. We still need ore as a primary raw material, as scrap is a finite product. And as a result, we are also investing in production lines in Salzgitter, in what are known as direct reduction plants, in order to reduce ore with low carbon emissions in the future. This is both expensive and time-consuming, however. We will need around three years to bring the production line online.

Host Ute Neuhaus: In other words, you can’t use scrap metal exclusively. But scrap recycling is a good idea in and of itself on the road to greener steel. And it would be best if we could produce steel entirely with scrap. Dr. Gierse – that’s a good idea, isn't it?

Dr. Gierse: Yes, it’s a really good idea that has actually been implemented in the global steel industry for many decades. Scrap is already used to a considerable degree in steel production. However, there are technological limits to this technology and also limits in terms of availability. Steel is very well recyclable, no question about it. But the level of quality that can be achieved from an EAF process with scrap depends very heavily on how well the scrap that is used has been presorted. When it comes to our products, for example, the hot rolled steel can’t contain any trace elements from nonferrous metals such as copper or brass, which aren’t compatible with our products. In other words, to meet the standards of quality certain applications require, virgin steel production from ore is needed as the availability of suitable scrap is limited. 

Host Ute Neuhaus: Does this mean Waelzholz receives special scrap, Mrs. Sieverdingbeck? 

Sandrina Sieverdingbeck: In flat steel production for grades such as those we supply to Waelzholz, we mainly use new scrap.

Host Ute Neuhaus: And so new scrap is particularly pure? 

Sandrina Sieverdingbeck: Exactly, they are less contaminated with by-elements, i.e., undesirable elements such as copper, nickel, and chromium. And that’s why we rely on the use of new scrap. However, in the future we will also be able to process old scrap in such a way that it meets the purity requirements.

Host Ute Neuhaus: Earlier you indicated that future steel production at Salzgitter will look different. Can you explain this again with a few figures? What exactly will it look like? And as far as the e-scrap EAF, what’s Salzgitter’s strategy?

Sandrina Sieverdingbeck: We currently produce 4.5 million tons of crude steel annually at the site in Salzgitter. And all using the blast furnace route. We currently have three blast furnaces in operation for this purpose. We will gradually shut these down by 2033 and replace our metallurgy with an electrified route. We are going to build three electric arc furnaces, and then we’ll need direct reduction plants for the reduction of iron ore to sponge iron. We will also implement these. We are currently in the process of building an electric arc furnace and a direct reduction plant for stage one.

Host Ute Neuhaus: Dr. Gierse, when it comes to the carbon footprint of the raw material being used, you must welcome what Salzgitter is now doing? 

Dr. Gierse: Yes, we very much welcome the fact that Salzgitter is looking into new technologies for green steel production. Approximately 90% of the carbon footprint of our products depends on the raw material used. In other words, we only contribute around 10% of the product carbon footprint through our own production, 90% is the raw material. So without low-emission hot rolled steel strip, there is simply no green cold rolled steel strip. That’s just a fact. This is why we maintain a very close relationship with Salzgitter and have also entered into a development partnership to test products that can be produced from the new routes in the coming years and use them for our processes wherever possible. However, we must realize that the use of scrap alone can’t solve the problem. We have to move towards the technologies that Salzgitter is aiming for – green hydrogen, DRI production, and then melting in smelting units – because the amount of scrap available worldwide is nowhere near enough to cover the global demand for steel of around two billion tons. In this respect, we will continue to be dependent on reducing ore on a large scale in order to make virgin steel from it.

Host Ute Neuhaus: So now we’ve already delved quite deeply into the subject of quality and new concepts. But I’d like to take a step back and return to DEUMU and ask the question: how does scrap end up back in the recycling loop exactly? We’re all familiar with the scrap dealers who collect what we put out on the street. But surely that doesn’t play a major role when it comes to the quantities of scrap steel relevant to industrial production. So how does recycling actually work?

Sandrina Sieverdingbeck: In Germany, a well-established recycling infrastructure for collecting and recycling scrap metal has existed for decades or even centuries. There is a typical scrap pyramid, which is structured as follows: On the one hand, there are the small scrap collectors who collect scrap metal from private households or small businesses. That amounts to roughly 2,000 tons of scrap metal per year. Then there are the medium-sized scrap yards, which in turn consolidate the quantities collected by the small scrap collectors. And here we’re talking about an annual scrap tonnage of around 15,000 tons. And then there are the large processing companies like DEUMU. Here the scrap is sorted and further processed using shears and shredding machines so that the material can be reused in steel production.

Host Ute Neuhaus: You mentioned earlier that you run the largest scrap yard in Germany. What does that look like? 

Sandrina Sieverdingbeck: We operate a yard in Salzgitter that is approximately 40 hectares in size, which is the equivalent of 56 full-size soccer fields. 

Host Ute Neuhaus: Really? I wouldn’t have imagined it would be that big. So, you collect scrap in Germany. But where does the scrap go then? Does the scrap remain in the region where it is collected, or are we talking about global cycles?

Sandrina Sieverdingbeck: The scrap itself is a regional product, and ideally we collect it within a radius of 200 – 250 kilometers. We preferably obtain new scrap using what are known as closed-loop concepts. This means that our sister company, Salzgitter Flachstahl GmbH, supplies its customers, like Waelzholz, with flat steel products, and the resulting scrap is collected on the way back. From a logistical standpoint, this is a very cost-effective process, and it is also our favorite. Otherwise, scrap is also exported, especially to countries that produce a large amount of steel via electric arc furnaces. Steel produced in electric arc furnaces is primarily structural steel for construction, and the main country for this is Turkey. So a lot of material goes to Turkey today. But new countries are also being added to the list, such as India and Bangladesh.

Dr. Gierse: In fact, scrap metal is actually exported in relatively significant quantities. According to World Steel, approximately 50 million tons of scrap were exported extraterritorially in 2023, i.e., outside the region in which the scrap was produced. And you have to take into account that the amount of scrap metal in the world is very unevenly distributed. This has to do with the economic development of different economic areas. Economic areas such as the EU, Europe, and the United States have a very high volume of scrap because they are old economies, while Turkey, which Mrs. Sieverdingbeck just mentioned, has a low volume of scrap and therefore has to import it. The two regions of the world I just mentioned, the US and Europe, export a relatively large amount of scrap. 

Host Ute Neuhaus: We were just talking about scrap for, for example, structural steel, and then in particular Turkey. In that regard, I’d like to ask: what different types of scrap are there? How can we distinguish scrap for the production of structural steel from scrap for the production of high-quality cold rolled steel strip? Can you sort scrap into different categories?

Dr. Gierse: Yes, Mrs. Sieverdingbeck just explained that very well. The scrap grades used for EAF production of high-quality steels must be extremely pure and processed in a very sophisticated manner. With old scrap, the EAF process is generally used today to produce structural steels that are not as sensitive to the by-elements, trace elements, and nonferrous metals that are found in old scrap. This is also reflected in our demand for roughly 95% BOF-produced steel. EAF steel only accounts for about 5% of our production, and most of that is for stainless products, which are made almost exclusively using the electric arc route. Of course, in this case as well, only after first sorting the scrap in an extremely complex process in order to then produce the qualities and alloys that are required for stainless products.

Host Ute Neuhaus: Just as a brief explanation for the listeners: BOF refers to the blast furnace route, which means that the iron is reduced with coke, while EAF stands for electric arc furnace, where scrap is used and the process is powered by electricity. When you say EAF is currently only for stainless steel products – doesn’t that mean that the remaining quantities – given that Waelzholz has a large product range – don’t come from EAF?

Dr. Gierse: The vast majority do not. As I just said, about 5% of the quantities we source come from EAF, the majority of which is for stainless products. We’re talking about maybe 1% to 2% of our total procurement volume which comes from EAF, for carbon steel applications. So it’s mainly BOF.

Host Ute Neuhaus: But that also means that the quantities, the large quantities, come from BOF. Mrs. Sieverdingbeck, you said BOF is what Salzgitter still has in operation at the moment. Which is what needs to be changed in order to actually be able to manufacture a, well, more climate-neutral or greener steel product. And I think the relevant project even has a name, right? Perhaps you could briefly explain how this works at Salzgitter, what your goal is, and provide some more details about this project.

Sandrina Sieverdingbeck: You’re referring to the SALCOS project, which we launched and are in the process of implementing. The whole thing will be completed in three stages by 2033. What does SALCOS stand for? Salzgitter Low CO₂ Steelmaking. So that’s the name of the project. Just to briefly provide some background information: we produce 4.5 million tons of crude steel annually, and in doing so, we also emit eight million tons of carbon. To put this in perspective, this is equal to about 1% of Germany’s total annual emissions. In order to reduce this figure, we simply have to change our metallurgical technology. Today, iron ore is reduced with coke using blast furnace technology, via the blast furnace route. And that is precisely what drives these carbon emissions. We are already using scrap as a coolant today. But this is limited by technical factors. More specifically, we can only use a maximum of 20% scrap in the BOF-converter route. As I already mentioned, in the future we will switch to production based on the EAF route. This will also make us more flexible in the use of primary and secondary raw materials. This means that in the future, we will also be able to use higher quantities of scrap in the electric arc furnace route.

Host Ute Neuhaus: Dr. Gierse, will you then specifically order materials with a higher scrap content in the future? 

Dr. Gierse: This could well be a way forward in the future. Today, we are often already required to state and comply with recycling quotas in the supply routes for the automotive industry. However, I have to admit that we are at the very beginning of the chain. At present, we have no way of knowing how much recycled material is contained in the hot-rolled steel strip we purchase. At least this isn’t something our suppliers are telling us at the moment. And to be perfectly honest, I personally doubt that our current suppliers even know how much recycled material is in the steel, and how we can tell from a mass balance how much scrap was used to produce a certain quantity of steel. In terms of a single product, in terms of a grade, it’s something we simply don’t know today. However, it may well be that requirements for the future develop from this, which at the end of the day will require us to report this.

Host Ute Neuhaus: Okay, so we’ve already heard a few times that there really isn’t enough scrap available. And if scrap is going to become a kind of currency, where companies are required to declare it and reach certain quotas, then we are really talking about availability. So Dr. Gierse, why is there actually a shortage of scrap and more precisely also a shortage of high-quality scrap?

Dr. Gierse: Well, the amount of available scrap primarily depends on three factors. On the one hand, we have the historical steel production, and here we are talking about the steel production from around 40 to 45 years ago. The current level of production plays a role, as does the recycling rate. These are the three factors that ultimately determine the global volume of scrap.
And the fact is that the scrap metal available today, including both new scrap and collected scrap, is nowhere near enough to meet the demand from the steel industry for the production of virgin steel. And even though the amount of scrap metal will increase in the next few years, it still won’t be enough. According to World Steel, the volume of collected scrap in 2023 stood at around 450 to 500 million tons. On top of this, there was about another 200 to 250 million tons of new scrap from waste and steel production and steel processing, so we are talking about a total of approximately 700 million tons of scrap in 2023. More than 50% of all manufactured steel products are used for infrastructure – and infrastructure is very, very long-lasting. In other words, we’re not talking about recycled cars, washing machines, or dryers, but about buildings, bridges, and roads. And that is why scrap metal returns to the cycle at such a slow rate.

Host Ute Neuhaus: Okay, so the amount of available scrap is limited. But the demand for scrap is surely increasing, because, on the one hand, there are political factors at play and, on the other hand, there is the possibility of swapping scrap and perhaps also primary steel and primary ores. What exactly does this mean for companies? 

Sandrina Sieverdingbeck: That’s all correct. Regulation is increasingly driving the desire to make greater use of secondary material. The EU has set up the Circular Economy Action Plan for this purpose, and the electrification of the steel routes is leading to scrap being used with greater flexibility. This means that demand for scrap will increase accordingly. So what will happen in the future? This is a question that we also asked ourselves, and as a result, we developed a scrap forecast model through 2035 together with an external partner in order to see how supply and demand will develop in Germany, in the EU, and also worldwide. There will be an oversupply of old scrap, and this is precisely the result of the fact that the applications that have increasingly been introduced into the cycle will, with increasing steel production, reach the end of their useful life over time and be fed back into the steel cycle. If we consider the topic of new scrap, however, we have to realize that there will be a shortage in the future, and that even in the near future, a shortage of new scrap. In other words, demand exceeds supply. And high-quality flat steel applications, such as those implemented by Waelzholz, mainly require new scrap. Production in the EU is not going to increase. On the contrary, we expect recycling rates to continue to improve. This means that the amount of new scrap will remain limited.

Host Ute Neuhaus: Have all sources truly been exhausted?
 
Sandrina Sieverdingbeck: Yes, they really have. The recycling rate of steel applications is extremely high. Only 2% remains unused. 

Dr. Gierse: Anything else would be surprising, because scrap, especially new scrap, is an economic good that retains its value. And, of course, all steel processors who produce scrap will endeavor to market this valuable commodity in a sensible way. 

Host Ute Neuhaus: Okay, but how does that fit together when we think about regulation? The End-of-Life Vehicles Directive springs to mind. And targets for recycling rates. Will we in Europe implement this in the form of an EU loop, so to speak, Dr. Gierse?

Dr. Gierse: Yes, that is certainly a logical and not a wrong or bad idea. We just have to ensure we take a balanced approach. It’s of no use to anyone if recycling quotas are set that can’t be met because the necessary quantities of scrap simply aren’t available. We operate internationally, worldwide. And in this context, it is absolutely clear that we need a comprehensive understanding of recycling and a comprehensive implementation of recycling. Ultimately, however, we will not be able to avoid including virgin production based on DRI, green hydrogen or DRI gas, for example, as a crucial element in crude steel production. 

Host Ute Neuhaus: Then I’d like to come back to the topic of regulation. What needs to happen at the policy level?

Sandrina Sieverdingbeck: The EU’s efforts to promote the circular economy are generally to be welcomed, especially when it comes to designing steel applications in a recycling-friendly way and creating incentives that lead to better sorting. This is ultimately also a safety issue, because lithium-ion batteries are increasingly being thrown away with household waste. And unfortunately, that ultimately leads to burning scrap yards. And according to the German Association for Water, Wastewater, and Waste, 30 such fires actually already occur across Germany every day. Okay, so where can policymakers still intervene? Well, there are also increasing calls for a ban on the export of scrap. And that simply means stricter export rules to strengthen the domestic scrap market and recycle more scrap locally. But we will continue to have a surplus of old scrap in the future. For this reason, it still makes sense for such types of scrap to be collected and recycled by foreign structural steel manufacturers. So why should exporting be banned in this case? 

Dr. Gierse: Ultimately, such export bans also have their pitfalls. I would like to give you an example of this. Turkey produced 34 million tons of steel last year, about three quarters of which was produced in EAFs. This ultimately leads to a scrap demand in Turkey of roughly 26 million tons per year. Turkey, as a young economy, doesn’t produce this quantity of scrap and therefore can’t cover its demand by itself – not by far. This means that they import about three quarters of the scrap they need. If the EU were to impose an export ban on scrap, it would mean that large parts of the Turkish steel industry would have to be shut down. To be perfectly honest, I don’t think that this is politically enforceable.

Host Ute Neuhaus: In all areas related to green steel, there is one thing we see again and again: it is complex and multifaceted. We’re now approaching the end of this podcast episode. Mrs. Sieverdingbeck gave us insights into how the processes of collecting, processing, and utilizing scrap steel at DEUMU actually work. Together, we discussed the conditions that would have to be met to enable the use of more scrap in steel production and therefore the production of greener steel. We also learned that there is a great deal of technical potential, that the measures naturally cost money, and that the steel industry wants to exploit this potential. But we also talked about the major showstopper, the limiting factor, namely the insufficient quantity of scrap that is available. And that is likely to remain the biggest sticking point when it comes to increasing the global recycling rate. Which in turn leads to the question of how EU policy requirements can be met at all with scrap steel in short supply. I’d like to thank you both very much, Mrs. Sieverdingbeck, Dr. Gierse, for your time and for explaining the various aspects and interrelationships around the topic of scrap steel so clearly and helping us understand them better. Of course, this doesn’t answer all of the questions surrounding “steel to zero.” Today, we discussed how the End-of-Life Vehicles Directive relates to EU requirements for steel recycling quotas. Another EU directive is currently also of concern to everyone involved in steel. Namely, CBAM, the European border adjustment mechanism for carbon emissions. In an upcoming episode of our podcast Steel to Zero, we will discuss the ideas behind this, the opportunities and risks for European companies and, in this context, the developments in the global steel industry towards climate neutrality. Our guest will be someone who develops strategies and instruments for the transformation towards a climate-neutral industry on a scientific basis and who is therefore very well informed about the latest developments and ideas. Dear listeners, thank you for joining us for this episode. Stay well informed and subscribe to the sustainability podcast Steel to Zero from Waelzholz.

DO THE UNDERLYING POLITICAL CONDITIONS SUPPORT THE PATH TOWARDS A GREEN INDUSTRY IN GERMANY AND EUROPE?

Ute Neuhaus: Steel to Zero – how steel will go green. The sustainability podcast by Waelzholz. The steel industry is facing the historic task of becoming climate neutral within a few years. In the first episodes of our podcast series, we looked at this – arguably the greatest transformation in the history of steel – from different perspectives. But at the moment, the industry’s focus, especially in Germany and Europe, is less on transformation and more on job cuts and site closures. This is because the industry in the aforementioned countries is in the midst of a crisis. Last year, German crude steel production totaled just 35.4 million tons. This is the lowest figure in 14 years, since the global financial crisis in 2009. The reasons: high energy, raw material, and labor costs, a lack of orders, and growing competition  from Asia. The consequences: the competitiveness of the steel industry is declining, the tendency to relocate to non-European countries is increasing. The necessary transformation of the European steel industry is extremely costly. Can political instruments such as the Carbon Border Adjustment Mechanism, CBAM , prevent emission-intensive companies from relocating? Can they increase the competitiveness of the German steel industry? Will the EU’s regulations around carbon emissions help decarbonize steel globally? Or is the EU sidelining its steel industry with all of this? My name is Ute Neuhaus and I’m very excited to hear my guests’ answers to these questions today. I’d like to warmly welcome Frank Peter, managing director of Agora Industrie, and Dr. Matthias Gierse, who served for many years as the Director Sales and Purchasing of Waelzholz, a Hagen-based manufacturer of cold rolled steel strip, to the studio. Hello and welcome!

Dr. Matthias Gierse: Nice to be here, Mrs. Neuhaus.

Frank Peter: Hello, and ditto.

Host Ute Neuhaus: Mr. Peter, what exactly does Agora Industrie do?

Frank Peter: Agora Industrie is an independent think tank that focuses on issues related to the transformation of industry. We work with stakeholders from business, politics, and civil society. In doing so, it is important to us to adopt an international perspective that is as practical as possible in order to effectively cover all elements related to transformation. We work using a science-based approach, and we usually publish large studies, always with the aim of analyzing what conditions need to be changed to make a transformation towards climate neutrality necessary and, above all, possible.

Ute Neuhaus: Mr. Peter, the steel market is changing. You said that you work closely with the industry, and internationally as well. How do you assess current global developments, and to what extent are these international and global developments geared towards a green transformation at all?

Frank Peter: With the Green Deal, Europe has certainly set a benchmark here that will advance the transformation of the industry as a whole. That said, Europe is no longer alone in this. Things are in flux internationally, particularly in the steel sector. Our green steel tracker, a tool available on our website, shows that projects for around 180 million tons of production capacity for DRI and electric steel plants are currently scheduled for implementation and construction internationally by the early 2030s. This means that the steel market as a whole is truly moving towards  a lower carbon footprint. And in this respect, countries such as South Korea, Japan, the United States, and China are leading the way. Even India is planning such projects. And this isn’t really surprising, because if you look at it, a large number of countries around the world have set climate neutrality targets for themselves. Whether the target  date is 2040, 2050, 2060, or 2070 is not really that important. Given the lifespan of the average steel plant, it is clear that in all these countries, the next investment cycle will already determine whether these climate neutrality targets can be achieved in the long term. In this respect, we view this international development as a positive trend, but also not really a surprise.

Ute Neuhaus: Yes, India 2070, China 2060 – but that’s still a long way off compared to Europe and especially Germany. Here, the aim is to already be climate neutral by 2050 in Europe and 2045 in Germany. So, does this mean the others are all too slow, or are the European climate targets too ambitious? And what are India’s and China’s ideas when it comes to becoming climate neutral? They both plan to build more coal-fired power plants for now, right?

Frank Peter: The International Energy Agency recently published its new World Energy Outlook, which makes it clear that renewable energies are being expanded worldwide, and countries like China and India are at the forefront. This means that the foundations are already being laid in both countries for a real switch to renewable energies and green electricity for their energy supply, which is ultimately also a basis for truly climate-neutral steel production, because the move away from the coking coal route is taking place in both countries to an extremely large extent through the use of electric arc furnaces, on the one hand, and the hydrogen route, on the other, which in turn potentially has its origin  in green electricity. In this respect, the restructuring of the global energy system is a movement that will provide a solid basis for the steel industry to follow suit with climate neutrality.

Dr. Matthias Gierse: Nevertheless, it has to be noted that other countries haven’t adopted a Green Deal like the EU has. The Green Deal sets climate targets for industry that need to be met in a very short period of time. Given the current underlying conditions, I don’t believe that these targets can be achieved.

Frank Peter: I’d like to provide a slightly different context in that respect, if I may. From our point of view, the transformation to green steel is now truly taking place on an international scale. And this is not only being driven by regulations or the regulatory framework. There is also a clear interest from businesses downstream, for example from car manufacturers, who are increasingly relying on green steel within their own supplier structures. This means that there is a legitimate hope that this change will not only be driven by regulatory frameworks, but also, theoretically, by private sector interests, because green steel in cars can sometimes be a very good marketing strategy. And then, of course, we also have the regulatory system. Europe isn’t the only place where the introduction of a border adjustment mechanism, also known as CBAM , is being discussed or is currently taking place. Similar discussions are also taking place in the US.
In other words, it is becoming very, very clear that it will be easier to trade in green products on large centralized markets in the future. From our point of view, this development is already driving considerations, investment considerations in countries like China and India, to invest in the green production of raw materials, especially steel, at an early stage.

Dr. Matthias Gierse: Waelzholz is, of course, also adapting to this change. The measures required to electrify processes currently powered by gas and to switch to green hydrogen have been defined. However, this will require significant amounts of renewable electricity and green hydrogen, which are not yet available . What costs will ultimately arise from the use of an increasing amount of renewable energy in the coming years is also still entirely unclear. At the end of the day, we also have to persuade customers to bear the additional costs of these processes compared to conventional ones.

Ute Neuhaus: Let’s stick with the global steel market for a moment, Dr. Gierse. Waelzholz also procures steel internationally. The company is internationally active, with factories in Europe, North America, South America, and Asia. And how do you, as a steel processing company, perceive the green transformation there in concrete terms?

Dr. Matthias Gierse: Indeed, we do. We purchase 800,000 tons of steel worldwide in the regions you named. In this process, our approach is firmly rooted in the principle of “local for local.” This means that we purchase the steel where it will ultimately be processed. We currently get all the grades we need for our production locally everywhere. Achieving carbon neutrality through political regulation is not an issue outside Europe. As a centrally planned economy, China has clear plans, but with a considerable delay compared to Europe’s ambitions. In the United States, the majority of steel production is already scrap-based, meaning that it has a smaller carbon footprint than in Europe. Brazil generates the vast majority of its electricity from renewable sources, namely hydropower, wind, and solar energy. In addition, vehicles on the road there use renewably produced ethanol, and steel production is based at least in part on charcoal, which is also manufactured using renewable methods. It is only in Europe that companies have to deal with regulations that are supposed to serve the transformation, but ultimately threaten international competitiveness.

Frank Peter: You’re probably alluding to the European emissions trading scheme in particular, i.e., that you have to pay for pollution permits. And I have to say that these fundamental questions of introducing emissions trading are also being discussed right now in China, for example. China has piloted emissions trading in the power sector and is now considering expanding emissions trading at the provincial level, for example in Shanxi, to include industrial companies. This means that most likely emission allowances have to be purchased there in the future in order to produce steel. In my view, a lot is happening also there at the regulatory level. In countries like India, for example, ideas are also being discussed – admittedly at a very, very early stage – of introducing such an emissions trading system for industry.

Ute Neuhaus: Let’s take a closer look at Europe for now. A total of 1.9 billion tons of steel were produced worldwide in 2023, 126 million tons of which were produced in the EU. Germany, in turn, is the largest producer in the EU, with 35.4 million tons. What significance does the global steel market have for the steel industry in Germany and Europe, and vice versa, Dr. Gierse?

Dr. Matthias Gierse: In view of current developments, it is important to note that two-thirds of German exports are steel-intensive, i.e., based on steel production in Germany. In addition, there are six additional jobs in the supplier industry for every one job in the steel industry. A very large number of companies, especially small and medium-sized enterprises, are part of a large value creation network that would be severely damaged by the collapse of the domestic steel industry. In addition, steel plays a very central role in the energy transition: wind and water power, generators made of electrical steel strip, electrolyzers for green hydrogen – all inconceivable without steel production.

Frank Peter: Steel is a central component of the German value chains. That’s why it is important that the green steel of the future is also produced in Germany in order to maintain the existing value chains, but also the innovation chain, because in many respects, steel is always at the beginning of innovative business models, new ideas, and products. And that is a major driver for development in Germany. It would be very, very important to keep this value chain intact in Germany, too, from production to processing.

Ute Neuhaus: Now German steel production, and not just German steel production, but also European steel production, has declined very sharply. Europe is faltering. What do you think are the reasons for this, Dr. Gierse?

Dr. Matthias Gierse: Indeed, Europe is in the throes of a structural crisis that has ultimately affected all sectors of the economy. The steel industry is particularly suffering from the weakness of the construction industry. In this context, it is important to note that around 50 percent of the steel produced globally is used in infrastructure. But the automotive industry is also in decline. Ultimately, the war in Ukraine and the war in the Middle East have led to inflationary developments that have increased energy prices and, above all, wages and salaries so dramatically that we have already lost a good deal of our international competitiveness. This is now being reflected in the markets.

Ute Neuhaus: But shouldn’t developments be considered in terms of individual steel materials? For example, electrical steel strip for generators and motors is the steel material of the electrified future. And just two years ago, enormous growth rates were being predicted for non-grain-oriented electrical steel strip. According to the figures quoted, demand in Europe is expected to increase from 1.9 million tons in 2020 to 4.4 million tons in 2030. Doesn’t that represent an opportunity for the steel industry?

Dr. Matthias Gierse: Well, the great hopes placed in the quantitative development of these steel grades have not materialized and, in my opinion, they are not likely to materialize in the near future either. Massive capacities have been built up in China over the last ten years, and these have been flooding onto the European market for some time due to weak demand on the Chinese market. And not just as raw materials – it is important to be clear about this – these are imports that also take place via parts, components, and finished products, among other things.

Ute Neuhaus: How is this trend and the current downturn affecting Waelzholz?

Dr. Matthias Gierse: Well, we are definitely feeling the impact. At the same time, we’re facing very tough competition from imports due to high energy and labor costs, where the safeguards introduced by the EU have not been effective for some time. Overall, however, Waelzholz is well equipped thanks to its broad product range and international positioning and can at least soften the blow of the downtrend in Europe and the downtrend in the electrical steel strip product segment.

Ute Neuhaus: But these developments will have an impact on the transformation. Isn’t that right, Mr. Peter?

Frank Peter: First of all, it is very likely that in the current crisis, companies lack sufficient capital to invest due to the poor economic situation. Nevertheless, the steel industry needs to undergo a rapid transformation now in order to remain fit for the future. The basis for this is the European emissions trading system, which is gradually reducing the availability of emissions for industry. As early as 2040, it will no longer be possible to produce steel in Europe while continuing to emit carbon on a large scale. Carbon contracts, for example, can help to ensure that production is climate neutral at an early stage, thereby giving companies the opportunity to invest in the transition early on. In addition, we must succeed in further boosting demand for green steel in order to also signal to companies that green steel will become the market standard in the long term. In our view, there is currently no way around this transformation, despite the difficult economic situation.

Dr. Matthias Gierse: We actually view the carbon contracts as a net positive in terms of subsidizing running costs. Unfortunately, the way they are designed means that medium-sized companies can hardly benefit from this funding program for climate-neutral production processes. To name just one requirement: the verified carbon emissions savings needed to participate in this program must be at least 10,000 tons of Scope 1 and Scope 2 emission annually. Even large SMEs often cannot actually reach that figure. In addition, funding grants must be fully implemented within three years, which is completely unrealistic in the case of, for example, green hydrogen, due to the lack of the necessary conditions.

Frank Peter: The first round of carbon contracts for difference has just concluded. Recently, companies have also received the first funding approval notices from Germany’s Federal Ministry for Economic Affairs. Surprisingly, this included a large number of SMEs. Having said that, we still need to learn from this round of carbon contracts and see how we can adapt the tools currently available to make them even more attractive to medium-sized companies.

Ute Neuhaus: Okay, so carbon contracts are one element in the transformation of the steel industry. What other options are there and which path did you take at Waelzholz, Dr. Gierse?

Dr. Matthias Gierse: First of all, let me be clear: as a company, Waelzholz fully stands behind the Paris Agreement. We are just as aware of ongoing climate change as we are of the need to do something about it, including at medium-sized industrial companies. We published our first voluntary sustainability report in accordance with the GRI Standards at the end of last year, in anticipation of the reporting requirement for companies of our size that will come into force in 2026. This year, we will be bringing our sustainability reporting into line with the new European ESRS standard and will then be reporting on more than 1,000 data points in the field of sustainability. Ultimately, however, the cost-benefit ratio is truly sobering. We developed a key performance indicator system at great expense in terms of time and human resources invested that cannot be applied to other regulations because there is currently a lack of standardization. The reality is that companies have to track their key figures in order to comply with EU policies in numerous different ways: as part of the CSRD reporting requirement, for various bank questionnaires as part of the EU taxonomy, within the scope of the new ESPR Ecodesign Directive, for digital product passports, and additionally as part of the CSDDD European Supply Chain Directive. It’s bureaucratic madness. Another problem is the bureaucracy that our customers create themselves. The EU has promulgated regulations that do not contain specifics on how compliance is to be demonstrated or verified. This leads to self-made bureaucracy, especially when it comes to automotive OEMs demanding that their large suppliers provide various different forms of evidence for a wide range of topics. I couldn’t even begin trying to list the plethora of different formats here. This is asking way too much of medium-sized companies.

Frank Peter: Indeed, bureaucracy is a topic in its own right, including in the context of transformation. One thing is clear, though: as long as there are huge differences in steel grades on the market, including in terms of their impact on the climate, we will probably not be able to avoid a certain amount of reporting. But it must, of course, remain practical.

Ute Neuhaus: Okay, let’s return to the topic of international competitiveness and the impact of EU regulations on it. Surely there is some connection here, right? What does it look like?

Dr. Matthias Gierse: Yes, there is definitely a connection. At Waelzholz, we are reliant on international markets. The Americans are showing us how it’s done. They have significantly reduced their carbon emissions and they are investing. While we are increasing the burden through excessive bureaucracy. In addition, free trade relations are more at risk than ever before due to the geopolitical changes and developments of recent years. We in the SME sector feel all of this.

Frank Peter: Yes, transformation takes time. Nevertheless, it is important that we now also get investments off the ground in Europe. And to bridge this period of time and create a level playing field, what is known as a border adjustment mechanism called CBAM was created in Europe to enable companies to invest in Europe as well.

Ute Neuhaus: Briefly for those not familiar with the subject: what exactly is CBAM and how does it work?

Frank Peter: The aim of CBAM is to harmonize the underlying conditions between product manufacturers in and outside the EU, to protect European industry from cheap imports of emission-intensive raw materials, and to eliminate incentives for carbon leakage, i.e., migration to countries with lower ambitions.

Dr. Matthias Gierse: Not only that: starting in 2026, companies that want to import emission-intensive goods into the EU will be required to purchase CBAM certificates. These are intended to offset the difference between the carbon price paid in the country of production and the higher price of emission allowances in the EU Emissions Trading System.

Ute Neuhaus: So, there is a connection between CBAM and the ETS allowances, i.e.,  the allowances for carbon emissions in the EU?

Dr. Matthias Gierse: Yes, there is a connection. CBAM will be gradually expanded in the period from 2026 to 2034. At the same time, the free allowances under the EU ETS will be phased out gradually for the sectors concerned.

Ute Neuhaus: What effect will this have on the economy?

Dr. Matthias Gierse: Well, so far industrial sectors such as steel have received an allocation of carbon allowances free of charge in order to prevent companies from losing competitiveness or relocating outside the EU. This free allocation is scheduled to end in 2032 under the new carbon border adjustment mechanism, CBAM. As the exchange-traded ETS allowances gradually become scarcer, the price increases. The producers of raw materials are forced to pass on these price increases. The current structure of the CBAM thus leads to a chain reaction in pricing. The reduction in the free allocation to commodity producers from 2026 onwards and the obligation for commodity importers to purchase ETS allowances will lead to an increasing scarcity. This in turn will directly increase the cost of the allowances, which in turn will increase the cost of raw materials originating in the EU. The result is that customers have to accept higher and ever-increasing prices for raw materials originating in Europe.

Ute Neuhaus: But in principle, isn’t it fair that if the price of allowances in Europe increases, imports with higher carbon emissions will also cost even more through the CBAM?

Dr. Matthias Gierse: A fair implementation of CBAM requires conditions that do not exist today. Let’s take a look at China or India. Who is calculating the carbon footprint of the imported products and according to what rules? Who is confirming that the carbon footprint declared at the border is correct? Reliable and legally certain values are essential because they cost real money. Are there multilateral agreements in place, for example between the EU and China, on the methods of assessment, measurement, and certification? No. All of these issues remain unresolved. How are we supposed to levy import duties on ETS allowances at EU borders in accordance with WTO rules under these circumstances? Another serious problem is the value creation network. Currently, CBAM ends in the second value-added stage. But the entire value creation network is burdened with the more expensive raw materials. As a result, the CBAM creates massive pressure to migrate on those companies in the value chain that are not covered by the system. The exodus of industrial companies has already begun. This problem has been recognized politically, but in my opinion, there is little that can be done to rectify it. Finally, the CBAM completely ignores the export economy; it only deals with the import side. But roughly 50 percent of Germany’s gross domestic product is currently generated by the export of goods and services. Waelzholz exports around 50 percent of the goods produced at its German sites, with 25 percent of this figure going to countries outside the EU. All in all, we generate 65 percent of our revenue outside of Germany. How can we ensure that we remain internationally competitive from our base in Germany given the constant increase in the cost of raw materials – not to mention the cost of energy and labor?

Ute Neuhaus: Mr. Peter, how do you view the effectiveness of the European carbon border adjustment system? Can it prevent carbon leakage and boost international competitiveness?

Frank Peter: That’s a good question, and one that honestly cannot be answered conclusively at this point. We are currently in the pilot phase of the European CBAM, the introductory phase, which is essentially focused on collecting data and establishing these mechanisms. And as for the specifics, Dr. Gierse is right: there are still many unanswered questions. The issue of exports, for example, is still unresolved. There are some ideas floating around about how we can implement this, but nothing has been finalized yet. And there is still a need to agree on the procedures, the arithmetic, the methodologies for calculating carbon emissions. We are now in an important phase, the pilot phase, in which the outstanding issues will be addressed accordingly. But it is also an unresolved question or an important phase of the CBAM’s introduction, because there is now the possibility of perhaps taking diplomatic action again, of negotiating agreements with the USA or China that might ultimately even lead to the CBAM not being needed at all. However, it is clear that some form of protection against carbon leakage is necessary to protect the companies undergoing transformation in Europe. There is no easier way at the moment; it isn’t an ideal tool, but to achieve this transformation, it is essential to really push for this compensatory mechanism at the border. Otherwise, the companies in Europe will be even more at risk and the transformation will simply not be possible.

Dr. Matthias Gierse: But at this point, we simply can’t afford to experiment in this context either. The erosion of industrial production in Europe has already begun. The decline in steel production described at the beginning is just one example. Many manufacturing and industrial companies are currently deciding to turn their backs on the EU.

Frank Peter: It is certainly not the aim for it to lead to an erosion of the European industrial base. I do, of course, see the risk of poor implementation. Which is why I want to once again emphasize that we are in the pilot phase. This is extremely important in order to evaluate the experiences gained during this time and to draw the appropriate conclusions.

Ute Neuhaus: If you consider poor implementation to be a possibility, what would you consider a successful implementation? What’s the right way to do it?

Frank Peter: For a successful transformation, many factors need to work together, for which policymakers ultimately have to set the regulatory framework. On the one hand, the manufacturing industry needs green energy and raw materials at competitive prices. The necessary infrastructure must be built for this. The second element is to transform the production processes. We won’t be able to sufficiently reduce carbon emissions with the methods currently in use. In this context, financial hedging instruments will be needed to enable companies to adapt their production. Thirdly, a framework must be established to ensure that green products become the market standard. The last element needed is the creation of rules for fair trade, in which the CBAM will play a central role.

Dr. Matthias Gierse: In my opinion, the conditions for decarbonization must be standardized internationally. Otherwise, the European and German steel processing industry will lose out. We can’t take comfort in the fact that China and India also have plans to decarbonize, because their implementation is 10 to 20 years behind the EU’s plans. This is more than enough time for all of Europe to end up completely deindustrialized.

Ute Neuhaus: Are there any other solutions, any other ideas for political frameworks to promote the green transformation of industry in Europe without jeopardizing international competitiveness?

Dr. Matthias Gierse: At present, in my opinion, there aren’t any alternative solutions that wouldn’t negatively impact European industry. The only conceivable solution would be multilateral agreements with comparable rules and therefore globally comparable production costs. That said, I believe the chances of getting the relevant countries to adopt such regulations are slim to none.

Frank Peter: Germany has tried to initiate a climate club at the international level, in which members agree on such rules with each other. So far, however, such initiatives are still too limited in scope. Another possibility would be to push for sectoral agreements, for example specifically for the steel industry. Until there is a solution in this regard, we will have to try to help with alternatives such as a border adjustment regime.

Ute Neuhaus: Mr. Peter, earlier you also mentioned that one of the keys to success could be to create the framework for green products to have a market. The term “key green markets” comes to mind here. What is the idea behind this and the impact?

Frank Peter: Well, key green markets are all about boosting demand for low-emission raw materials such as green steel in order to make the switch to climate-friendly production more attractive. The public sector, for example, is one of the major sources of demand for steel and cement through its construction and infrastructure projects. If public procurement contracts include quotas for the use of green steel, for example, this will create demand for green steel and thereby strengthen companies in the transformation process overall.

Ute Neuhaus: So that’s another political instrument. What role does the political involvement of business and interest groups play in a successful transformation?

Frank Peter: The transformation to climate neutrality is a job for society as a whole. That is why Agora Industrie’s mission is to support the transformation of industry towards climate neutrality. In this context, we work on the basis of scientific analyses and regularly engage in dialog with representatives from the worlds of politics, business, civil society, and industry in order to find practical solutions. The challenges described by Dr. Gierse regarding the implementation of certain regulations are an important starting point for us to refine and improve policy instruments. This fall, for example, we jointly published the new edition of the study “Climate-Neutral Germany” at the Agora Think Tanks, in which measures are listed and calculated for all sectors, and where we specifically focus on implementation.

Dr. Matthias Gierse: We are also trying to communicate our ideas to politicians through our own association structure and also through the Federal Association of German Industry. This goes as far as participating in round table discussions organized by the EU Commission. Political involvement is important for the value creation network and for Waelzholz, as it allows us to clearly show politicians the threat to our international competitiveness and the consequences of the erosion of industrial value creation. First, however, the basic underlying conditions for a successful transformation in Germany and Europe need to be created: renewable generation of affordable electricity and hydrogen and the corresponding infrastructure, which must also include imports. Germany was dependent on energy imports in the past and will continue to be so in the future. All stakeholders must commit to the transformation taking place here. The level of investment involved is enormous, which is why viable financing concepts also need to be developed.

Frank Peter: We also see opportunities in the transformation of the steel industry, however. Steel is an important primary material for technologies that will make climate neutrality possible in the first place. That is why the steel industry is a crucial player in the transition to a climate-neutral industry as a whole. The efforts to mitigate climate change will only be successful if the steel we use in the future is green. The projects currently planned in Germany are also of international significance because they pursue innovative technical approaches. Developments in Germany are being followed very closely. I experience this again and again on my travels. Attention is focused squarely on Europe, where people are looking to see what progress we are making with the transformation.

Ute Neuhaus: The path to climate-neutral steel remains complex. The destination is clear, but we need to tread carefully along the way. Mr. Peter, director of the think tank Agora Industrie, and Dr. Gierse, long-standing Director Sales and Purchasing of Waelzholz, discussed their sometimes quite controversial views on this topic today. In principle, they agree – the transformation must succeed, and political involvement is necessary to create the right underlying conditions, both on the part of the steel value creation network and on the part of research institutes such as Agora Industrie. I would like to express my sincere thanks to both Frank Peter and Matthias Gierse for joining me on the podcast today. Thank you for your time and for your lively discussion.

Frank Peter: Thank you. It was my pleasure.

Dr. Matthias Gierse: Thank you. I enjoyed it.

Ute Neuhaus: In today’s and past episodes, we learned a great deal about the European and international steel markets and the paths to transformation. In the next episode of our Steel to Zero podcast, we want to take a look at how the green transformation is being put into actual practice – how is a company in the steel value creation network approaching the green transformation? What are the opportunities and challenges? This is what I’ll be discussing with two experts who are helping guide the transformation process at Waelzholz in Germany and at its international locations. Dear listeners, thank you for joining us for this episode. To stay up to date on all the latest developments, I invite you to subscribe to the sustainability podcast Steel to Zero from Waelzholz.

THE PATH TO GREEN STEEL: HOW WAELZHOLZ IS REDUCING ITS CARBON EMISSIONS

Host Ute Neuhaus: Steel to Zero – how steel will go green. The sustainability podcast by Waelzholz. Steel is an indispensable material for the energy transition. However, at almost 30 percent, it also accounts for a significant share of industrial carbon emissions in Germany. So when we talk about Europe’s climate neutrality, the ultimate goal of the Green Deal to become climate neutral by 2050, we also have to talk about the transformation of the entire steel value chain. Almost two years ago, in our first Steel to Zero podcast series, Dr. Buddenberg and Dr. Gierse outlined the roadmap the Waelzholz is pursuing to reliably offer its customers green steel in the future. The key building blocks on Waelzholz’s path were: purchasing decarbonized raw materials, using renewable energies in its own processes, and developing an accounting model for passing on carbon savings to customers. How far along is the company on this journey? What has been achieved so far? Where are the hurdles and what are the obstacles? And what expectations and requirements do customers and perhaps other stakeholders have? Today I’d like to talk about this with two guests from Waelzholz. My name is Ute Neuhaus, and I’d like to warmly welcome Dr. Heino Buddenberg, CEO of Waelzholz, to the studio.

Dr. Heino Buddenberg: Hello Mrs. Neuhaus.

Host Ute Neuhaus: ... and with him, we have Mr. Baroudi Zelit, the head of the Brazilian subsidiary Waelzholz Brasmetal, the person who has been instrumental in addressing the issues of decarbonization and the accounting model in recent years and is a specialist in these topics. Hello Mr. Zelit.

Baroudi Zelit: Hello Mrs. Neuhaus.

Host Ute Neuhaus: Dr. Buddenberg, a good two years ago, we discussed how Waelzholz plans to initiate decarbonization within the company. What has happened since then? 

Dr. Heino Buddenberg: A lot has happened at Waelzholz in the last two years. From the roadmap that we presented at the time, some parts of which were, dare I say it, formulated in a rather vague way, we developed a holistic sustainability strategy and defined what we wanted to achieve in the respective Scopes 1, 2, and 3 by means of specific measures. To refresh your memory:
Scope 1 refers to direct emissions from direct combustion, which in our case is mainly natural gas. Scope 2 refers to indirect emissions, primarily from electricity. Scope 3 refers to upstream production, mainly in the steel industry.

Host Ute Neuhaus: And which measures had the greatest impact on the company’s carbon footprint? What did you focus on? 

Dr. Heino Buddenberg: We focused very heavily on looking at Scope 3 because, at well over 90 percent, Scope 3 accounts for the majority of our total carbon emissions. Now of course when it comes to Scope 3, that fact is that we only have an indirect influence on it, because it applies to our suppliers, the steel industry itself. But our Scope 3 emissions also include our scrap disposal in production, where we have tried to achieve benefits for ourselves with corresponding efficiency programs. With regard to Scope 1 and 2, we decided to focus on Scope 2 and obtained guarantees of origin for the electricity we procure. In the 2023/24 fiscal year, we were able to obtain these guarantees for over 80 percent of our electricity consumption, meaning we covered this amount with green power. As far as Scope 1 is concerned, we haven’t yet been able to take action in the area of our fuel gas use because an alternative to natural gas in the form of green or low-emission hydrogen is simply not physically available and therefore can’t be considered. At the same time, we also endeavor to make all these processes transparent and verifiable for our customers. 

Host Ute Neuhaus: The key words were process and energy efficiency. But energy efficiency? There comes a point when you reach the limits of what you can do. So what do you do after that?

Dr. Heino Buddenberg: Yes, we have been able to achieve efficiency gains in non-core process energy consumption, whether it be in lighting, ventilation, air conditioning, or similar. But you’re absolutely right, when it comes to our core processes of rolling, annealing, and the like, our standards of quality for the material are essentially decisive and also determine energy consumption. This means we can only take action in the area of external energy procurement. And here we have to bear in mind that hydrogen, with current market prices of around 8 euros per kilogram, would be an extremely expensive alternative to natural gas and, from a logistical point of view, would only be available in the medium term through pipelines – here I’m referring to a possible hydrogen core network. Alternatively, electricity can be used, and it can be used much more cost-effectively than hydrogen, but this would require massive investments as well as the reliability that we can actually procure the electricity we need from renewable sources. These are the conflicting factors we are currently dealing with and we are trying to establish our decision matrices within this context.

Host Ute Neuhaus: So now we’ve actually come to the topic of energy, which is at the center of Waelzholz’s process, and what will or will not be possible. But let’s back up and take another look at the primary material, the green steel that Waelzholz needs to make green cold rolled steel strip. And that is currently a hotly debated topic once again. And we know that the road to actual green steel is a long one. How far along is the steel industry in this regard?

Dr. Heino Buddenberg: Well, all the well-known steel manufacturers now have low-emission products in their range, but, if we’re honest, only in minuscule quantities so far. On top of that, there’s the fact that steel that is actually manufactured with fewer carbon emissions – and I’m not talking about steel that has a different carbon footprint than steel melted in blast furnaces due to the utilization of the EAF route, but rather about a real reduction in carbon emissions throughout the entire process chain – is significantly more expensive or will be significantly more expensive than today’s steel. The capacities that are necessary for this in the steel industry – I’m referring to direct reduction with hydrogen here – are currently being developed, partly through EU-funded projects, and will reach our markets in 2027. But we have to realize today that the products melted this way will be significantly more expensive than the regular ones available today. What matters here is that it isn’t a subsidy provider that enables the use of these steels, but that at the end of the day, customers are also willing to pay the additional costs for a low-emission steel world. And by that I don't just mean our direct customers, but also, ultimately, the end users of products made of steel – the consumers. 

Host Ute Neuhaus: Okay, and when we talk about someone having to pay something, then of course they want to know what it is they have to pay, and then it always comes down to the product-related carbon footprint, or PCF. And that actually makes this footprint a kind of currency, a fairly significant currency. What criteria are used to determine its value? How can I, as a customer, be sure that what I’m being told is true?

Dr. Heino Buddenberg: This evaluation is carried out in accordance with the relevant standards and regulations, which are also certified or verified by external auditors. But you are absolutely right, these standards are still somewhat unclear and open to interpretation in some parts, so it is still difficult to follow truly standardized rules in a complete supply chain or in a complete value creation network. We ourselves offered to work on revising and more clearly articulating these norms at the European level, as did others in our network, and we are trying to standardize them there.

Host Ute Neuhaus: But the fact is that this hasn’t yet been truly standardized – and I believe there are actually standards that already aim at promoting this, such as ISO 14067 – but if that isn’t the case, then customers are not going to accept it in the long term. No one is going to say, “sure, I’ll pay the amount you indicate,” if it isn’t standardized and regulated.

Dr. Heino Buddenberg: No, that is exactly what we are talking about when we say we need to have harmonized and standardized frameworks. And to be honest, we not only need this in Germany and Europe, but actually globally. This is a complex political and regulatory process, but we can only go along with it, because there’s no way around it. 

Host Ute Neuhaus: But that means – let’s say I’m a customer, a customer of Waelzholz, and I’d like to purchase a material with reduced carbon emissions. Mr. Zelit, what do I do in this case? What does your model look like?

Baroudi Zelit: So, Waelzholz has developed a process that can be used to precisely calculate the PCF of all products and transparently and verifiably pass on the desired reduction in carbon emissions to the customers. The methodology of this process has also been audited and validated by an external certification company. The first audit took place in 2022. Another review took place at the end of 2023. The accounting tool meets all the requirements set out in ISO 14067 for the accounting system and the collection of greenhouse gas-related data necessary to calculate a complete carbon footprint based on cradle-to-gate accounting principles. In other words, we fulfill the corresponding requirements. 

Host Ute Neuhaus: What exactly does that look like? How do you collect the data that allows you to say, “yes, we can now also assign a carbon footprint to your specific product”?

Baroudi Zelit: We have collected all the data in the system that we need to ultimately determine the product carbon footprint. In order to pass on the reduction in carbon emissions desired by a customer, we created an accounting model that is similar to a savings account: first, the carbon savings are paid into the account and later these credits can be withdrawn, i.e., allocated to a customer’s item. The advantage is that the level of savings is flexibly scalable. This means that the customer can also specify the desired level of savings. Moreover, the reduction in carbon emissions is separate from the manufacturing process, so that the customer receives a product with lower emissions but with the same product characteristics.

Host Ute Neuhaus: How exactly does this process work? Do you first have to carefully calculate the emissions of all products so that the emissions reductions can then be properly accounted for and passed on? That sounds like a fairly sophisticated model. How do you keep track of the amount of carbon savings in the account and how do you ensure that the data is correct?

Baroudi Zelit: Yes, the system allocates absolute amounts or percentage payments, depending on the customer’s preference. The system balances the account directly. In this process, transparency and validity are our top priorities. The data is verified externally by a third party after it has been entered. Only then is the product released for sale. The customer can request that the validated declaration and/or the PCF be indicated on the delivery note. In addition, each emissions reduction is allocated a certificate with the corresponding details of the reduction and a QR code that can be used as proof of verification.  

Host Ute Neuhaus: Now steel with reduced carbon emissions is not available in infinite quantities. How do you intend to allocate the limited supply of steel with reduced carbon emissions to customers?

Baroudi Zelit: So, the CO₂ committee, which consists of representatives from Sales, Purchasing, and Controlling, has a complete overview of the account. This group regularly compares the available quantities with the customer orders that need to be fulfilled. The system is continuously monitored. In addition, the model has a certain safety margin built in.

Host Ute Neuhaus: Okay, so Waelzholz is an international company, and for now you have introduced the accounting model in Germany. Do you already have plans to introduce the accounting model in other countries?

Baroudi Zelit: Yes, we do. We at Waelzholz want to establish a global standard, including at our locations in the United States, South America, and Asia. The PCF calculation tool and accounting tool are currently also being rolled out in Brazil and then in China – the target here is the end of 2024. By implementing the accounting model, we are creating the conditions to be able to offer our customers steel with a reduced carbon footprint on a global scale.

Host Ute Neuhaus: So Waelzholz is setting a standard for itself for the time being, for all of its sites. And actually, one could certainly imagine or at least hope as a customer, that this wouldn’t just stay a Waelzholz standard, but that this excellent model could also be rolled out and used as a blueprint. Dr. Buddenberg, would that be possible? 

Dr. Heino Buddenberg: Ultimately, that is indeed a very real possibility, because the accounting tool and the PCF tool work exactly like a product calculation, and at the end of the day, that applies to every product. Our product with its PCF is the Scope 3 of our customers. And if customers then apply the same logic to their products as we do in our process, it can be forwarded and aggregated to the customer’s end product. As I’m sure you can imagine, however, it would take a considerable amount of effort to convert an entire industry or the global industry with all its digital systems to such a logic. This will require a corresponding level of effort from every market participant.

Host Ute Neuhaus: That means it would then once again be a question of standardization and how Waelzholz participates in the standardization process so that the criteria, the ones that are currently being set, are the same for everyone. 

Dr. Heino Buddenberg: That’s right, but if you look at it closely, the standardizations aren’t that complex when you look at them. You just have to ensure that accounting is properly applied in this area as well, regardless of whether it’s in accordance with the Waelzholz standard, US GAAP, or IFRS, because the rules of proper accounting apply worldwide. 

Host Ute Neuhaus: Are there any other areas where Waelzholz and the industry as a whole need to get involved? I’m thinking of infrastructure development: What is happening at the political level, what influence and input is the cold-rolling industry exerting?  

Dr. Heino Buddenberg: Yes, in order to ultimately be able to deal with the consequences of the energy transition, we also do a bit of policy advising when it comes to influencing infrastructure development in our country and in Europe. Secondly, there is development work to be done in the steel industry itself, in adapting our grades and specifications to the somewhat different processes of the steel industry in detail. And, of course, if we consider the topic of electrification, there’s the further development of our production lines in terms of their characteristics, their processing capabilities, in this overall context. 

Host Ute Neuhaus: Okay, so we have now covered the tools and systems, and the accounting model. But let’s get specific: does Waelzholz have a product with a reduced carbon footprint in its product range? Is there a product I can purchase today?

Dr. Heino Buddenberg: Yes, there really is. In fact, we already have customers who purchase products with reduced carbon emissions. One customer springs to mind who requested a 60 percent reduction. This is a customer with a highly refined product, that is, a product with an extremely high carbon footprint and, let’s say, a high degree of consumer proximity. This customer purchases this product, but of course they can only do so as long as our emissions reduction account is full, which it currently is. But that brings me to the crucial point: we need the supply of emissions reductions that we have to generate and we have to be able to offer them. But at the end of the day, the customer must also want to pay for it and be able to pay for it, which in turn usually depends on their customers.

Host Ute Neuhaus: Are you saying that the customer doesn’t really want to at the moment?

Dr. Heino Buddenberg: At the moment, the economic conditions in Germany and Europe are such that companies are more focused on their own financial health and the price of purchased goods is given more weight than the carbon emissions that may be relevant some time in the future. But I’m actually quite optimistic that this is only a temporary situation, and that at the end of the day, the market will bow to European and global targets.

Host Ute Neuhaus: Mr. Zelit, Dr. Buddenberg just said that the account has to be filled in order to also offer emission reductions to customers who want a 60 percent reduction in carbon emissions – which sounds like a lot to me. How do you ensure that the account is always filled, or, shall we say, filled with the appropriate amount? 

Baroudi Zelit: In the example above – a 60 percent reduction – we have, of course, ensured that we will be able to deliver the material with reduced emissions over the entire term of the contract. The CO₂ Committee ensures that there is always a sufficient stock. This means that we are always comparing the input and output. 

Host Ute Neuhaus: In other words, on the purchasing side, you also have to make sure that you cover that?

Baroudi Zelit: That’s correct. We’ve signed various memorandums of understanding (MOUs) with steel suppliers in order to ultimately ensure that we have a certain level of security in this inventory.

Host Ute Neuhaus: Okay, so you basically say, this is the amount we will probably need, and then you enter into contracts or MOUs with various suppliers. 

Baroudi Zelit: Yes, that’s right. 

Host Ute Neuhaus: So you have created an important basis for continuing to offer your customers steel strip with reduced carbon emissions, even if demand isn’t that high at the moment. On the other hand, one naturally wonders: what’s the use of all this? Is it even worth it? Couldn’t you just as easily say: “you know what, no, we aren’t going to do that, nobody wants it anyway”? Dr. Buddenberg?

Dr. Heino Buddenberg: The steel industry has been and remains a major emitter of CO₂. Thirty percent of industrial carbon emissions are attributable to steel. That’s why it is absolutely essential that the industry begins the process of transforming itself. But of course, as with many things in the political sphere, the steel industry can’t do it alone. It won’t succeed if it is viewed as an isolated project. Instead, policymakers and local government officials need to create the conditions for markets to begin working with green steel. This means that the steel industry needs customers who use green steel, and this industry needs end customers who actually demand these properties in steel for their products, whether they are cars, furniture, or household appliances. That is why at Waelzholz, we are focusing on this approach and have tried to document it, to outline it, and to publish it in our sustainability strategy. We see ourselves as a leader in our industry in this area, and we are also getting involved in associations and political discourse to ensure that it has a broad impact.

Host Ute Neuhaus: Does this mean that even if the underlying conditions aren’t yet great, Waelzholz will continue to pursue its path towards transformation as systematically as before?

Dr. Heino Buddenberg: We believe that transformation is inevitable and irreversible, and that is why we have decided that if we are already in such a process, then we want to be at the forefront of shaping the industry and further advancing the transformation process. This is because we are convinced that it is sensible and necessary in the long term and, under the right conditions, the right way for the industry to remain competitive in Germany and Europe, if that is what Germany and Europe want.

Host Ute Neuhaus: The path to green cold rolled steel strip is an essential component of a holistic sustainability strategy, and therefore also of Waelzholz’s strategy. And this year you will publish your second sustainability report on a voluntary basis. Mr. Zelit, what are the challenges involved? 

Baroudi Zelit: The first challenge is actually understanding the European Sustainability Reporting Standards (ESRS) at all, which provide the framework for sustainability reporting.
And to start implementing them in your own company is no easy task, especially for medium-sized companies. It involves a lot of work and a lot of communication. That’s why we started by developing our own strategy that ultimately covers the three areas of ESG: environment, social aspects and governance. After that, we implemented the first processes and, as already mentioned, communication. Communication requires a great deal of effort, especially when it comes to collecting data internationally. As you know, we are active in a number of different regions. And that’s not to mention the human and financial resources required.

Host Ute Neuhaus: I’d like to pick up on that, because you mentioned medium-sized companies. How do medium-sized companies manage this at all? How did you do it? Did you hire people to do the extra work? 

Baroudi Zelit: No, we didn’t do that. Many areas throughout the entire organizational structure at Waelzholz are involved with different aspects of sustainability. We have an Environmental Department and an energy management system we use to prepare various reports. Nevertheless, producing our first sustainability report was no mean feat. To do it, we had to redistribute many tasks. This was only possible thanks to the hard work and dedication of everyone involved. But we also believe that all of this will ultimately pay off in the end and bring long-term added value by building and controlling processes and, above all, by implementing measurable KPIs.

Host Ute Neuhaus: So it’s a lot of work. But voluntary reporting has already helped a great deal on the road to greater sustainability. And you just mentioned the reporting requirements set by the EU, the ESRS, the European Sustainability Reporting Standards, which haven’t even been published for that long and are only now providing specific content. Are you already compliant with these guidelines? 

Baroudi Zelit: No, but that’s not the point for the time being, since we’re in the voluntary reporting period. The important thing now is to create transparency first, which we also currently have done, to identify gaps, and then comes continuous improvement. This means that we have to continuously work on this in order to ultimately close the gaps and meet the reporting requirements in two years. We see it as a marathon, not a sprint. The sustainability report is subject to continuous improvement; corresponding points have been identified. And we are continuously working on it.

Host Ute Neuhaus: Especially since the be-all and end-all of the sustainability report and the sustainability objectives is the materiality analysis that is included in it and which has to be done. What is material for Waelzholz in terms of sustainability? 

Baroudi Zelit: So, we defined a total of eleven key areas of action, including climate change and environmental protection, recycling management, the handling of resources, appropriate working conditions, training and skills development for our employees, but also political participation.

Host Ute Neuhaus: Now, you could say that for an energy and resource-intensive company like Waelzholz, many aspects are obvious. But I think that what now sounds obvious to us, or at least to me, is the result of a rather elaborate process, isn’t it? 

Baroudi Zelit: Indeed, we have already implemented high or double materiality standards here in accordance with the EU CSRD Directive.

Host Ute Neuhaus: What is that exactly? 

Baroudi Zelit: In simple terms, double here means that we have to assess sustainability issues both in terms of how they affect our company, i.e. possible opportunities and risks, and in terms of how they affect the respective issue. 

Host Ute Neuhaus: Well, it sounds like a really extensive and multifaceted document. And one that focuses on the important issues and, as I understand it, is not just an expression of, but also part of the transformation process at Waelzholz, because it promotes it and, well, steers it in the right direction. Dr. Buddenberg, how would you sum up the past two years and the steps Waelzholz has taken towards climate neutrality?

Dr. Heino Buddenberg: So, climate neutrality at Waelzholz and the transformation of the steel industry or the transformation of Europe’s energy systems, is a generational challenge that we have to face. But for a company that was founded in 1829, sustainability is in our DNA and an essential part of our corporate philosophy. That’s why I’m hopeful that we will not only succeed in meeting the challenges, but that we will also be able to set an example in our industry and, at the end of the day, chart a positive course.

Host Ute Neuhaus: With this concluding comment, we have reached the end of today’s episode of the Steel to Zero sustainability podcast. Dr. Buddenberg, Mr. Zelit, thank you for bringing us up to date on the latest developments at Waelzholz. Thank you very much, both of you.

Dr. Heino Buddenberg: Thank you, Mrs. Neuhaus. Thanks for this interesting conversation.

Baroudi Zelit: Thank you, Mrs. Neuhaus. 

Host Ute Neuhaus: You sacrificed your time. Many thanks to both of you and Mr. Zelit, have a safe flight back to Brazil. 

Baroudi Zelit: Thank you. 

Host Ute Neuhaus: Dear listeners, thank you for once again joining us for this episode. How steel will go green remains a challenge for every company in the steel value network.
The transformation of the steel industry is inevitable, however, and the industry has set out on this path. To stay up to date on all the latest developments, I invite you to subscribe to the sustainability podcast Steel to Zero from Waelzholz.