Salzgitter HKM Electric Arc Furnace: Green Steel Innovation Reshaping Europe's Automotive Supply Chain

On July 28, 2026, Salzgitter AG's wholly-owned subsidiary HKM (Hüttenwerke Krupp-Mannesmann GmbH) signed a contract with Italian technology provider Tenova for the supply, installation, and joint commissioning of an electric arc furnace (EAF) at its Duisburg plant. With a tap weight of 285 tons and an annual capacity of 2.5 million tons, the facility will become Germany's largest EAF and the EU's second-largest. The project is backed by €200 million in public funding from the German federal government and the state of North Rhine-Westphalia (NRW) under the "Federal Industry and Climate Protection" funding program. Construction begins in August 2026, with completion targeted for 2029.

But beyond the headline numbers, this project carries implications that extend far beyond a single steel plant. It signals a turning point where green steel in Europe transitions from pilot-scale demonstration to commercial-scale reality, and the automotive supply chain sits directly in its path.

Most electric arc furnaces currently operating in Europe fall within the 100–150-ton tap weight range. HKM's 285-ton EAF represents a step-change in single-furnace capacity. That scale matters for a specific reason: it shifts green steel from a premium niche product to a volume commodity.

To put this in perspective, the European automotive industry consumes approximately 15–20 million tons of steel annually. HKM's planned operating output of around 2 million tons per year could cover roughly 10–15% of that demand. This is not merely "one more green steel supplier entering the market", but a fundamental redraw of the green steel supply curve. For automotive component manufacturers who have struggled with whether green steel can be procured at scale, this project offers a concrete answer.

The technology chosen for this project is Tenova's Consteel® system, a continuous scrap charging technology that distinguishes itself from conventional batch-fed EAFs in three critical ways.

First, scrap is continuously fed into the furnace via a conveyor system, where it is preheated by the furnace's off-gas before entering the melt. This waste heat recovery reduces electricity consumption by 20–30% per ton of steel. Second, the continuous feeding mode significantly reduces peak power demand on the electrical grid, making the furnace more grid-friendly and easier to integrate with renewable energy sources. Third, the system offers raw material flexibility. It can handle varying ratios of scrap, DRI (direct reduced iron), and HBI (hot briquetted iron), which future-proofs the operation as hydrogen-based DRI becomes commercially available.

This technology selection reflects an emerging industry consensus: EAF combined with scrap and DRI/HBI is becoming the mainstream decarbonization pathway for European steel, offering the most pragmatic balance of energy efficiency, carbon reduction, and engineering maturity.

The transition from blast furnace (BF-BOF) to electric arc furnace represents more than a change in equipment. It is a fundamental shift in the carbon profile of automotive steel.

Traditional blast furnace long-process steelmaking relies on iron ore and coking coal, producing approximately 2.0–2.2 tons of CO₂ per ton of steel. EAF-based short-process steelmaking, powered by scrap and DRI, can reduce carbon intensity by 60–80%. For automotive OEMs and Tier 1 suppliers tracking their Scope 3 emissions, this difference is material.

Equally significant is the quality dimension. A persistent industry assumption has held that EAF-produced steel, particularly from scrap-based routes, cannot meet the stringent surface quality and residual element requirements of automotive exposed body panels. HKM's new EAF, equipped with ABB electromagnetic stirring (EMS) technology and the Consteel continuous charging system, is explicitly designed to produce steel grades meeting automotive exposed panel standards. This directly challenges the "green steel equals lower-quality steel" perception and removes one of the last technical barriers to green steel adoption in automotive applications.

For the supply chain, the implication is clear: as more integrated steelmakers transition from blast furnaces to EAFs, the volume of conventional high-carbon steel will gradually shrink, and green steel will become the new default, not a premium alternative.

The timing of HKM's EAF project is not coincidental. Its 2029 completion date aligns precisely with the acceleration of the EU's Carbon Border Adjustment Mechanism (CBAM) free allowance phase-out schedule.

This alignment reveals a deliberate strategy: European steelmakers are timing their capacity transitions to complete before CBAM carbon costs reach full impact. By 2029, when HKM's EAF comes online, steel produced through conventional blast furnace routes will already face meaningful carbon cost penalties, giving EAF-produced green steel a growing competitive advantage that widens every year.

For non-EU suppliers, the CBAM timeline creates a parallel urgency. From 2028, CBAM expansion will extend to approximately 180 downstream product categories, including automotive components. Steel-intensive parts exported to the EU will bear carbon costs based on embedded emissions, and if actual emissions data is not provided, the EU's default values will apply. For Chinese steel, the default value of 3.169 tons of CO₂ per ton of steel is approximately 102% higher than actual production levels, creating a disproportionate cost burden for exporters who have not established measured emissions reporting.

⊙ Related Reading: How CBAM Is Changing Who Gets To Supply Europe's Auto Industry

The commercialization of green steel in Europe creates three layers of impact across the automotive supply chain:

1. Direct Carbon Cost Exposure

From 2028, CBAM expansion will bring automotive components and other steel-intensive downstream products within its scope. For component suppliers exporting to the EU, every ton of steel embedded in their products will carry an additional carbon cost. Suppliers without verified emissions data will face the highest cost burden, as default values significantly overstate actual emissions for many producers. This creates an immediate need for transparent, third-party-verified carbon accounting across the supply chain.

2. OEM Green Procurement Requirements

Major European OEMs have already established supply chain decarbonization targets:

• Volkswagen Group: 30% Scope 3 reduction by 2030
• BMW: Green electricity commitments for key suppliers
• Mercedes-Benz: Green steel procurement agreements already signed

These requirements are cascading through Tier 1, Tier 2, and Tier 3 suppliers. The question for component manufacturers is no longer "if" but "when" they will be asked to provide carbon footprint data, demonstrate green steel usage, or sign low-carbon commitments. The HKM project accelerates this timeline by making green steel commercially available at scale. OEMs can now specify green steel in their requirements knowing that supply exists.

3. Competitive Landscape Restructuring

European localized suppliers who can directly source green steel from facilities like HKM will gain a structural advantage: lower embedded carbon, lower CBAM exposure, and natural alignment with OEM Scope 3 targets. Non-EU suppliers relying on conventional high-carbon steel will see their traditional cost advantages progressively eroded by rising carbon costs. This dynamic may drive a near-shoring trend, where OEMs shift procurement of steel-intensive components toward European suppliers with verified low-carbon supply chains.

However, this shift also creates opportunities for proactive non-EU suppliers. Those who build carbon accounting capabilities, secure green steel supply channels, and transparently communicate their low-carbon readiness can differentiate themselves, even against European competitors. The key is moving before customer requirements make it mandatory.

The commercialization of green steel, symbolized by the HKM electric arc furnace project, creates a narrow but actionable window for automotive supply chain participants. Four priorities deserve immediate attention:

1. Build a Carbon Footprint Accounting System

Implement cradle-to-gate carbon accounting aligned with CBAM methodology. Cover raw material procurement through product delivery, and ensure data is third-party-verifiable. Suppliers without measured emissions data will face the highest CBAM costs, building this capability is not optional.

2. Evaluate Green Steel Procurement Channels

Assess the feasibility of sourcing low-carbon steel from European green steel producers (such as Salzgitter/HKM) or domestic low-carbon alternatives. While green steel currently carries a 20–40% premium, this gap is expected to narrow as large-scale EAF capacity comes online. Early procurement relationships will secure supply before demand peaks.

3. Proactively Engage Customers on Green Readiness

Do not wait for customers to issue green procurement requirements. Initiate conversations with key European accounts about their decarbonization timelines, understand their supplier expectations, and communicate your preparation progress. This is where the principle of "trust built before the contract" becomes tangible. Carbon transparency is the new foundation of customer confidence.

4. Establish Carbon Data Transparency as a Competitive Differentiator

Suppliers who can provide verified, product-level carbon footprint data before it is mandated will stand out in a market where most competitors are still unprepared. Treat carbon data transparency not as a compliance burden, but as a marketing asset and a trust-building tool.

The HKM electric arc furnace project confirms that green steel in Europe has moved from concept to commercial reality. For the automotive supply chain, the question is no longer whether green steel will reshape the industry, but whether suppliers will be ready when it does.

Sources:

• Salzgitter AG Official Press Release: https://www.salzgitter-ag.com/en/newsroom/press-releases/details/salzgitter-ag-launches-transformation-of-hkm-with-germanys-largest-electric-arc-furnace-26788.html
• Tenova Official Announcement: https://tenova.com/newsroom/latest-tenova/tenova-supply-germanys-largest-electric-arc-furnace-hkms-transformation