Salzgitter receives 1 billion euros in funding to decarbonise steel production

BERLIN (Reuters) - Salzgitter, Germany's second-largest steelmaker, has been handed almost 1 billion euros ($1.10 billion) in government funding for its hydrogen-based steel production project, the economy ministry on Tuesday.

Through its SALCOS project, Salzgitter aims to set up a 100-megawatt electrolyser, a direct reduction unit and an electric arc furnace to replace part of its conventional blast furnace route.

The project will produce around 1.9 million tonnes of raw steel and cut more than 2.5 million tonnes of carbon emissions a year, according to the ministry.

In October, the project received European Commission approval as an Important Project of Common European Interest (IPCEI).

"With our substantial funding, Salzgitter can now enter the implementation phase and realize this flagship project," Economy Minister Robert Habeck said in a statement.

The project is part of Germany's energy-intensive industry's attempt to shift to greener production as Europe's biggest economy aims to become carbon neutral by 2045.

The steel sector is responsible for 30% of industrial greenhouse emissions in Germany.

To support industrial companies in the green transition, Berlin also plans to set up a programme this year that will see companies receiving subsidies in exchange cutting carbon emissions.

($1 = 0.9111 euros)

(Reporting by Riham Alkousaa, Editing by Friederike Heine)