The European Commission approved EUR 321.8 million (approx. USD 343.4 million) in additional German state aid (case SA.104276) for Salzgitter Flachstahl GmbH's SALCOS ("Salzgitter Low CO2 Steelmaking") Stage I decarbonisation project. The increment lifted the German federal and Lower Saxony state governments' combined funding commitment for Stage I to EUR 1.322 billion, split roughly two-thirds federal (BMWK) and one-third Land Niedersachsen, after the German government publicly confirmed the top-up on 24 February 2026. Stage I comprises a 100MW electrolyser, a direct-reduction-iron plant, and an electric-arc furnace intended to replace blast-furnace/basic- oxygen-furnace production and cut CO2 emissions from the affected process by up to 95%, targeting start-up from 2027.

Analyst notesShow

Mechanism

The European Commission's DG Competition cleared a EUR 321.8 million top-up to German state aid for Salzgitter Flachstahl GmbH's SALCOS Stage I green-steel project under case SA.104276, notified 2026-02-06. The German Federal Ministry for Economic Affairs and Climate Action (BMWK) and the Lower Saxony state government (Land Niedersachsen) publicly confirmed the increase on 2026-02-24, raising combined Stage I support from roughly EUR 1 billion to EUR 1.322 billion — about two-thirds funded federally and one-third by the Land — after other private financing commitments for the project fell through.

Stage I replaces part of Salzgitter's existing blast-furnace/basic-oxygen-furnace steelmaking with a 100MW electrolyser feeding a direct-reduced-iron (DRI) plant and electric-arc furnace (EAF), targeting up to 95% CO2 reduction versus the conventional route and start-up from 2027. This is an incremental tranche on top of the Commission's original ~EUR 1 billion SALCOS approval (case SA.102063 / IP/22/5968, 2022), not a new project.

Downstream implications

Confirms continued EU/German willingness to backstop flagship green-steel decarbonisation projects with direct capital grants even after cost overruns and financing shortfalls, reinforcing the CISAF/state-aid channel as the primary vehicle for EU steel decarbonisation (see the western-industrial-policy-stack theme, e.g. Germany's EUR 3bn CISAF cleantech scheme SA.121215).
Signals execution risk in first-of-a-kind green-steel projects: the top-up was explicitly needed because other private financing for Stage I did not materialise as planned.
EAF/DRI capacity in Salzgitter's portfolio reduces medium-term reliance on coking coal and iron-ore-via-blast-furnace inputs, shifting demand toward scrap and DRI-grade iron ore plus green hydrogen electrolyser capacity.

Open questions

Publication of the Commission's full non-confidential SA.104276 decision text (compatibility assessment, conditions) was pending as of filing.
Whether the EUR 1.322 billion Stage I total is now considered fully financed, or further tranches are likely given the stated financing-gap rationale for this increment.

Sources

Primary: Niedersächsisches Ministerium für Umwelt, Energie und Klimaschutz — Bund und Land erhöhen Förderung für SALCOS-Ausbaustufe 1 auf 1,322 Milliarden Euro · European Commission — Competition case SA.104276: Aid to Salzgitter for project SALCOS stage I

Secondary: Global Trade Alert — state act 97458 / intervention 154756

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Mechanism

Downstream implications

Confirms continued EU/German willingness to backstop flagship green-steel decarbonisation projects with direct capital grants even after cost overruns and financing shortfalls, reinforcing the CISAF/state-aid channel as the primary vehicle for EU steel decarbonisation (see the western-industrial-policy-stack theme, e.g. Germany's EUR 3bn CISAF cleantech scheme SA.121215).

Signals execution risk in first-of-a-kind green-steel projects: the top-up was explicitly needed because other private financing for Stage I did not materialise as planned.

EAF/DRI capacity in Salzgitter's portfolio reduces medium-term reliance on coking coal and iron-ore-via-blast-furnace inputs, shifting demand toward scrap and DRI-grade iron ore plus green hydrogen electrolyser capacity.

Open questions

Publication of the Commission's full non-confidential SA.104276 decision text (compatibility assessment, conditions) was pending as of filing.

Whether the EUR 1.322 billion Stage I total is now considered fully financed, or further tranches are likely given the stated financing-gap rationale for this increment.