Salzgitter AG (SZGG.DE), Germany’s second-largest steelmaker, is negotiating with regulators to avoid future gas rationing, claiming that its output is critical to Germany’s broader energy security plans and local city heating.

Salzgitter is one of several significant corporations seeking exemption from rationing if Russia’s gas supply is further reduced, as it is presently supplying only a fifth of planned amounts via the Nord Stream 1 pipeline.

Salzgitter manufactures the pipes required to connect two proposed LNG terminals to the national grid, giving the company a significant role in Germany’s efforts to minimize dependency on Russian energy.

“We are thus part of the solution to the question of greater energy independence,” Salzgitter CEO Gunnar Groebler told Reuters.

Asked if Salzgitter might have to halt operations, the CEO who took charge last year said: “We’ve been getting the question again and again: What will happen if Salzgitter is completely shut down? I would say that this is relatively unlikely.”

Groebler, a former executive at Vattenfall (VATN.UL), stated that his company was also a district heating supplier to the city of Salzgitter, giving it a key role in local energy delivery.

Heat created by the company’s production operations is fed back into the district heating system, which, according to Groebler, might be impacted if production were to cease: “That’s about 100,000 residents who would then have no hot water and no heating.”

Salzgitter is also the third-largest supplier of drinking water in the German state of Lower Saxony, where it is situated and owns a 26.5% share in the steelmaker, according to Groebler, which adds to the issues if Salzgitter is forced to close.

Germany is presently in the second stage of a three-step emergency plan, with gas rationing being the final stage. Industry accounts for almost one-quarter of all gas use in Germany.

Groebler, 50, stated that Salzgitter was in discussions with Germany’s network regulator, which would be in charge of rationing, and that the problem was being discussed with the Federal Network Agency, which has sent questionnaires to industry about their consumption.

Salzgitter is a member of the German Steel Federation, which is in discussions with the regulator as well.

According to Groebler, Salzgitter lowered its energy use by more than 20% compared to last year, owing in part to lower steel demand forecast in the second half of the year.

He explained that just three of the four heating furnaces for the hot strip mill in Salzgitter were operational, adding, “This is economically driven … but of course it is also our contribution to the current savings discussion.”

Source: Reuters


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