German steelworkers win a green steel transition

Site details 

Site name: Salzgitter Flachstahl
Operator: Salzgitter AG
Location: Lower Saxony
Country: Germany
Date: 2015-2033

How steelworkers in Lower Saxony have played an integral role in the transition to next generation steelmaking in Germany, securing their jobs into the future.

Context

The Salzgitter plant in Lower Saxony has been producing steel since 1937, when it was built to make use of domestic ore deposits.1 The production site was publicly owned until 1989 when it was partially privatised, and then fully privatised in 1998 when Salzgitter AG, the current owner, was formed. Today, the state of Lower Saxony retains a 26% stake in the company. IG Metall, Germany’s metalworker union, has been present at the Salzgitter steelworks since it was founded.

As second largest steelworks in Germany, the site produces approximately 4.5 million tonnes of steel each year2, about 20% of the country’s total steel output3, equivalent to approximately half a million buses. The site produces a range of steel products, including for the automotive industry, infrastructure and domestic products. 

The challenge

Heavy industry within the EU are required to pay a price per tonne of CO2 they emit, as part of the EU Emissions Trading Scheme (EU ETS)4.  First established in 2005, the price they must pay gradually increases over time, incentivising investment in decarbonisation technologies amongst high carbon industry.  

Salzgitter AG, in collaboration with workers, identified a significant threat to the long-term financial viability of the plant based on a rising carbon price trajectory under the EU ETS.  

To address this risk, they initiated the SALCOS (Salzgitter Low CO2 Steelmaking) project in 2015, with the aim of decarbonising the production process in order to secure the plant’s future.

What workers did

As a result of German Co-Determination laws (‘Mitbestimmung’), steelworkers have the legal right to participate extensively in decisions that affect production, via Works Councils and Supervisory Boards.5 Supervisory Boards are made up of an equal number of worker and employer positions, and have the power to influence investment decisions and dictate the conditions under which projects can be fulfilled. Works Councils are an elected group of workers who negotiate on behalf of the workforce with the employer, and are a legal right in companies with more than 5 employees.

These laws, together with the strong and longstanding history of union organisation at the site, enabled workers to play a key role in decision-making throughout the green steel transition.

Through their involvement in the company's strategic planning process, workers were involved in the first discussions that initiated the project in 2015. At this point, workers and management agreed that investing in decarbonisation was key to futureproofing the site.

Once this decision was made, workers deliberated and ultimately approved the company’s strategic decision on the technology pathway for the site, to replace blast furnace steelmaking with direct reduced iron (DRI) using green hydrogen, leading to a 95% reduction in carbon emissions from the steel production process.  

A key component of the transition negotiations has been ensuring job security and maintaining pay and T&Cs for all employees. Through the Works Council, workers have secured an agreement that guarantees all existing steelworkers will retain their jobs and existing conditions, and be prioritised for any new positions created in the new production facility. They have also negotiated agreement for Salzgitter to provide flexible up-skilling and retraining for the new DRI technology tailored to workers’ needs, and to be provided within working hours with no loss of pay and delivered on site where possible. 

How were obstacles overcome?

The SALCOS project was prohibitively expensive for Salzgitter to undertake alone. From the outset, it was clear that substantial external capital funding would be required. In order to help secure funding for this first of a kind project, Salzgitter initially developed a pilot demonstration plant to prove the feasibility of hydrogen-based direct reduction technology.

Workers also played a crucial role in securing funding for the project. With support of the wider steelworkers' union (IG Metall), Salzgitter workers undertook extensive campaigning over several years to demonstrate their support for the project and to call on political decision-makers to provide financial support.

The project has now been supported by €1 billion in funding, disbursed through the federal and state governments.  

Shareholder profit expectations also pose an obstacle in the transition to a new technology requiring significant investment. The Lower Saxony state government has retained a 26% stake in 1998 in the company.6 This stake, alongside the 10% retained by Salzgitter, has shielded the site from the stock market and speculative investment, and helped to protect against the threat of corporate takeover, which may have jeopardised the long-term focus on decarbonisation and success of the project.

Security of hydrogen supply was also a key consideration and risk. In April 2024, Salzgitter AG and Uniper SE signed a pre-contract for the supply and purchase of green hydrogen, to be produced in the large-scale electrolysis plant planned by Uniper, which is scheduled to begin operation in Wilhelmshaven in 2028. Salzgitter has also launched complementary on-site hydrogen production facilities driven by wind and solar power that will supply the steel plant.7

What was the result?

The first phase of the project, aiming to produce 1.9 million tonnes of crude steel per year, is planned to be operational by 2026, which will make SALCOS the first operational green hydrogen DRI steelmaking project in Germany. The DRI plant is designed to flexibly use both natural gas and hydrogen, enabling the scale up of green H2 over time. The full project is due to be completed in 2033, at which point it is expected to reduce the site’s CO₂ emissions by 95%.8

Through this transition, workers have been and will continue to be at the heart of the process. From playing an integral role in the preliminary decision to pursue the project, to continual negotiations to ensure job security, retraining, and fair conditions throughout the transition, workers have effectively collaborated with management to ensure that Germany’s first green hydrogen steelmaking project represents a just transition for all workers. As a result, Salzgitter steelworkers’ jobs are now more resilient against the threat of deindustrialisation and offshoring.

Success factors & lessons

Legal inclusion of worker voice: German co-determination laws enabled workers to influence strategic decisions and conditions throughout the transition, including ensuring job retention, pay, and on-site retraining

Public investment: the government of Lower Saxony’s 26% stake in the site shielded the company from takeovers, and ensured a long-term focus on decarbonisation.

Demonstration project: A small-scale hydrogen plant proved feasibility and helped to secure €1 billion in federal and state governments funding.

Union campaigning: workers’ extensive campaigning activity successfully built public support for the project and helped to secure investment.

Hydrogen supply: Partnerships and renewable energy projects addressed risks, ensuring reliable green hydrogen access.

Carbon pricing policy: The existence of a rising carbon price under the EU Emissions Trading Scheme enabled an early recognition amongst workers and the company of the need to invest in decarbonisation in order to secure long-term financial viability, with enough notice for planning to take place in time.