Shares in German steel giant Salzgitter AG jumped more than 8% in European trading today after the European Commission approved a €1.1 billion German state aid package to support the company's transition to hydrogen-based steelmaking. The stock hit a session high of €32.45 on the Xetra exchange, making it one of the top performers in the Stoxx 600 Basic Resources index.
The subsidy, granted under the EU's Temporary Crisis and Transition Framework, will finance the construction of a direct reduction iron (DRI) plant powered by green hydrogen at Salzgitter's site in Lower Saxony. The facility is a cornerstone of the company's SALCOS (Salzgitter Low CO₂ Steelmaking) programme, which aims to cut carbon emissions by up to 95% compared with conventional blast furnace methods.
Analysts at Jefferies described the approval as 'a pivotal moment for European steel decarbonisation', noting that Salzgitter is now well positioned to supply low-carbon steel to automakers and construction firms facing tightening emissions regulations. The company expects the new plant to begin operations by late 2028, subject to final investment decisions and hydrogen supply agreements.
The broader European steel sector also gained ground, with ArcelorMittal and ThyssenKrupp rising 1.2% and 2.4% respectively, as investors bet on a wave of state-backed green steel projects. The Stoxx 600 Basic Resources index added 0.9% on the day.
For UK investors and pension holders, the move underscores growing exposure to industrial decarbonisation through European equities. Many UK pension funds hold diversified stakes in European steelmakers via index trackers or active funds. While Salzgitter is not directly listed in London, the company's ADR programme and cross-listed securities offer indirect access. Analysts caution, however, that hydrogen infrastructure remains nascent and cost challenges persist.