SHS Secures EUR 1.7 Billion Financing Package for Green Steel Transformation

German steelmaker SHS — Stahl-Holding-Saar Group announced the completion of a EUR 1.7 billion financing package for its Power4Steel decarbonization program, which will replace blast furnaces at two German sites with hydrogen-based direct reduction and electric arc furnace steelmaking. The sites are expected to begin producing up to 3.5 million tonnes of CO2-reduced steel annually from 2028 or 2029.

SHS, the holding company for steelmakers Dillinger and Saarstahl, has set a target to achieve fully climate-neutral steel production by 2045, with an interim target of a 55% CO2 reduction by 2030. Under the Power4Steel project, a new direct reduction plant and two electric arc furnaces are under construction at production sites in Dillingen and Völklingen, gradually replacing conventional blast furnaces and converters. The EUR 1.7 billion financing package was secured through a consortium of national and international banks, with investment financing supported by Austrian export credit agency OeKB and Italian counterpart SACE.

Steelmaking accounts for 7% to 9% of global fossil fuel greenhouse gas emissions and is recognized as one of the most challenging industrial sectors to decarbonize. Hydrogen-based direct reduction of iron ore, combined with electric arc furnaces, eliminates most of the process emissions associated with blast furnace steelmaking, but requires access to large volumes of low-carbon hydrogen and electricity. SHS's Power4Steel program represents one of the largest industrial decarbonization projects currently underway in Germany, with additional support provided by both the German federal government and the Saarland regional government through equity contributions and direct financial support.

The completion of the financing package is a significant milestone in the green steel sector, demonstrating that major transformation projects can secure full funding despite the capital-intensive nature of steelmaking decarbonization. For global steel markets, including the Indian steel sector — one of the world's largest and fastest-growing — the SHS experience offers insights into the financing structures and policy support mechanisms required to support the transition to low-carbon production. India's steel industry will face increasing pressure from carbon border adjustment mechanisms and customer demand signals as European green steel production scales up.

Key figure — 3.5 million tonnes of CO2-reduced steel annually from 2028/29