Stahl-Holding-Saar (SHS) has advanced construction of its €4.6 billion (about $5 billion) Power4Steel decarbonization project in Germany, with above-ground works now underway at Dillingen and Völklingen. The update came on September 28 during a visit by Chancellor Friedrich Merz and Saarland Minister-President Anke Rehlinger, as the first of roughly 120 planned buildings reached completion.
Power4Steel is the flagship transformation program of SHS Stahl-Holding-Saar, the holding company behind the Saarland steelmakers Dillinger and Saarstahl. Moreover, the project will replace coal-based blast furnace production with a direct reduction plant and two electric arc furnaces, with first-phase output of 3.5 million tonnes of crude steel per year, according to SHS. That scope converts about 70 percent of the group’s total capacity to lower-CO2 production in a single step.
Lower-CO2 production is also the selling point at Volkswagen’s battery unit PowerCo, whose Salzgitter battery cell gigafactory began production of its first Unified Cells on December 17, 2025, after groundbreaking in 2022. Volkswagen says the plant runs on wind and solar power and emits up to 115,000 tonnes less CO2 per year than comparable conventional factories. In addition, PowerCo plans to ramp Salzgitter to 20 GWh of annual capacity, with scope to expand to 40 GWh.
Power4Steel Construction Moves Above Ground at Dillingen and Völklingen
Following site preparation and foundation work, the Power4Steel project has entered superstructure construction across both sites. The new direct reduction plant at Dillingen will stand about 140 meters high, comparable to a 45-story tower.
SHS Executive Board Member for Technology and Production Peter Maagh said the group is building the new units while existing production lines continue to operate. In addition, the company said the transformation reshapes its raw material and energy mix, production processes, IT systems and cost structure.
Primetals Technologies, Midrex Technologies and the DSD Steel Group were commissioned to build the direct reduction plant under contracts described in an SHS press release on the central plant orders. Primetals and DSD are also building the electric arc furnace for Dillinger.
The Midrex Flex design allows operation on varying mixtures of natural gas and hydrogen. Furthermore, the Power4Steel direct reduction plant is rated at about 2 million tonnes of direct reduced iron per year.
Project documentation filed with the European Commission indicates the works will require about 300,000 cubic meters of concrete and more than 100,000 tonnes of steel. The concrete volume alone would fill roughly 120 Olympic swimming pools.
SHS has scheduled commissioning of the Völklingen electric arc furnace for 2028. The Dillinger furnace and the direct reduction plant are expected to follow in 2029.
Power4Steel Funding Combines €2.6 Billion in Public Support and €1.7 Billion in Bank Loans
Of the €4.6 billion project cost, €2.6 billion (about $2.8 billion) comes from the German federal government and the state of Saarland. As a result, public support covers more than 56 percent of the Power4Steel budget.
In addition, SHS secured a financing package of about €1.7 billion in October 2025 through a consortium of banks, which the group said covers the full duration of the investment. The investment component is backed by the export credit agencies OeKB of Austria and SACE of Italy.
Permits under German federal immission control law for the direct reduction plant and both furnaces were obtained in July 2025. Meanwhile, Chancellor Merz said during the visit that Germany needs its own steel industry, framing the sector as a matter of industrial and technological sovereignty.
Power4Steel Hydrogen Supply Starts Small Before a Larger Ramp-Up
Power4Steel has secured a ten-year contract with French developer Verso Energy for at least 6,000 tonnes of green hydrogen per year from 2029. Verso Energy plans to produce the hydrogen at its CarlHYng project in Carling, France, and deliver it through the mosaHYc cross-border pipeline.
SHS has indicated it could use up to 120,000 tonnes of hydrogen annually in the final expansion stage. Therefore, the contracted volume covers only about 5 percent of the eventual demand.
The group targets a carbon emissions reduction of up to 55 percent by the early 2030s and climate-neutral production by 2045. Additionally, Dillinger and ROGESA set a goal of cutting emissions by 4.8 million tonnes per year within six years of awarding the plant contracts, which allows one of the two Dillinger blast furnaces to be retired by 2030.
Y-SIC Silicon Carbide Venture Extends SHS Into Semiconductor Materials
SHS also presented Y-SIC during the visit. The venture holds a patented process for high-purity cubic silicon carbide, known as 3C-SiC, for the semiconductor industry, and SHS and the state of Saarland participate as industrial partners. Merz said production is scheduled to begin in Dillingen next year.
SHS CEO Stefan Rauber said Power4Steel builds the infrastructure for the steel transformation, while Y-SIC opens a new business area for the group.
Project Overview
- Project Name: Power4Steel
- Developer: SHS Stahl-Holding-Saar, with subsidiaries Dillinger, Saarstahl and ROGESA
- Location: Dillingen and Völklingen, Saarland, Germany
- Project Type: Steel decarbonization, direct reduction plant and two electric arc furnaces
- Project Value: €4.6 billion (about $5 billion)
- Public Support: €2.6 billion from the German federal government and Saarland
- Bank Financing: About €1.7 billion, backed by OeKB and SACE export credit support
- Crude Steel Capacity: 3.5 million tonnes per year in the first phase
- Direct Reduction Capacity: About 2 million tonnes per year, Midrex Flex technology, plant about 140 meters high
- Number of Buildings: About 120 across both sites, the first completed
- Status: Above-ground construction underway as of September 28, 2026
- Target Commissioning: 2028 for the Völklingen furnace, 2029 for the Dillingen furnace and direct reduction plant
- Hydrogen Supply: At least 6,000 tonnes per year from 2029 under a ten-year contract, up to 120,000 tonnes planned
- Emissions Target: Up to 55 percent reduction by the early 2030s, climate-neutral production by 2045
- Construction Jobs: Not publicly disclosed
Project Team
Owner and Developer
- Holding Company: SHS Stahl-Holding-Saar
- Heavy Plate Producer: Dillinger
- Long Steel Producer: Saarstahl
- Pig Iron Joint Venture: ROGESA (official website not confirmed)
- Silicon Carbide Venture: Y-SIC
Plant Suppliers and Contractors
- Direct Reduction Plant and Electric Arc Furnaces: Primetals Technologies
- Direct Reduction Technology: Midrex Technologies
- Plant Construction: DSD Steel Group (official website not confirmed)
- Main Civil Contractor: Not publicly disclosed
Hydrogen Supply
- Green Hydrogen Supplier: Verso Energy (official website not confirmed)
Financiers
- Core Bank: SaarLB
- Export Credit Agency, Austria: OeKB
- Export Credit Agency, Italy: SACE
- Remaining Consortium Banks: Not publicly disclosed
Public Bodies
- Federal Funding: German federal government
- State Funding: Saarland state government
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