Auto giant sets target to ensure 40 per cent of the steel used in its European plants comes from low carbon sources
The nascent green steel market received a further boost earlier this month, after BMW became the latest high profile brand to commit to a rapid increase in demand for low carbon steel.
The German auto giant announced last week has signed an agreement with Salzgitter AG for delivery of low-carbon steel, which will be produced using gas, hydrogen or renewable power, rather than carbon intensive coal. The company will take delivery of the new green steel from 2026 onwards and has also announced a goal to meet over 40 per cent of demand at its European plants by 2030 from low carbon steel. The move is expected to reduce carbon emissions by up to 400,000 tonnes per year.
“This is an important step in substantially reducing CO2 emissions at source in the supplier network,” said Joachim Post, member of the Board of Management of BMW AG responsible for purchasing and supplier networks. “Our aim is to reduce vehicles’ lifecycle carbon footprint with a holistic approach. With steel, in particular, we are leading the way by sourcing low-carbon steel for our plants in Europe in the future.”
His comments were echoed by Gunnar Groebler, CEO of Salzgitter AG, who said the company was “putting ‘circularity’ at the centre of its new strategy”.
“We firmly believe that closed loops of recoverable materials can only realise their full effect with strong partners,” he said. “We are delighted about the circular economy cooperation with the BMW Group and the agreement to supply green steel to our long-standing customer. Partnering for Transformation – this is how we will translate our new corporate vision into practice.”
The latest deal builds on BMW Group’s existing agreement with Swedish startup H2 Green Steel, which was signed in October last year and will see BMW’s European plants supplied with steel produced exclusively using hydrogen and green power from renewable sources from 2025 onwards – a process that is expected to reduce carbon emissions by around 95 per cent.
Salzgitter is similarly planning to use hydrogen in its production process, replacing the coal currently used in its conventional blast-furnace process with green hydrogen. The company said the process is made possible by so-called direct reduction plants, which use hydrogen to directly reduce iron ore to iron in the solid state. The solid iron is then melted down with steel scrap in an electric arc furnace powered by renewable electricity to deliver low carbon steel.
Salzgitter said it plans to use this method to gradually reduce carbon emissions from steel production to around five per cent of current levels.
The partnership between BMW and Salzgitter will also see the auto giant increase its use of recycled steel in its vehicles. Up to a quarter of the steel in BMW Group vehicles already comes from recycling loops, the company said, but it now plans to increase its percentage of secondary steel to reach up to 50 per cent by 2030. Carbon emissions from production of secondary steel are an average of 50 to 80 per cent lower than from primary steel, it said.
Writing on Twitter, Wido Witeka from the German think tank Agora Energiewende, predicted BMW’s new commitment could herald “a global wave of announcements to use green steel in cars”.
He argued that switching to green steel would typically add less than one per cent to the cost of a new car, while delivering significant emissions savings and environmental benefits. “In other words: while the switch to BEVs required carmakers to invest billions for battery factories and to change manufacturing lines, the switch to green steel will come super easy,” he said. “They buy it, pass on the costs to the end consumer and put a decent margin on top of that.”
BMW’s announcement is also part of a growing trend with rival automotive brands such as Volvo and Mercedes having similarly confirmed plans to source green steel as production comes online in the coming years.