Interview with industry expert Prof. Dr.-Ing. Heinz Jörg Fuhrmann

"Not all of the potential that can be leveraged in the short term has been exhausted"

The ongoing energy crisis poses major challenges for the global economy. Energy-intensive sectors such as the metal industry and mechanical engineering are particularly affected. What does this mean for the green transformation? What consequences must companies expect? And which measures are worth taking in order to make a leap forward in terms of sustainability? Prof. Dr.-Ing. Heinz Jörg Fuhrmann, industry expert and long-standing CEO of the steel company Salzgitter, answers these and further questions in our interview.

Mr. Fuhrmann, in your view, what opportunities does the energy crisis resulting from the Russia-Ukraine war offer for the green transformation?

FUHRMANN The only chance this offers is that the transformation will proceed more quickly in certain regions such as the EU, because the structural energy shortage in these regions, which is likely to persist in the medium term, will make it necessary to act more quickly. From a purely environmental perspective, this may be positive, but from the point of view of taxpayers and the economy, hasty action under massive pressure is clearly harmful.

Gas is likely to remain in short supply and expensive for the foreseeable future. What does this mean for energy-intensive sectors such as the metal industry and mechanical engineering?

FUHRMANN Nothing good. The prerequisite for a planned transformation of all energy-intensive industries in the EU – and especially in Germany, where we are conducting a globally unique experiment with the almost simultaneous phase-out of nuclear power, lignite, and hard coal – was the availability of sufficient volumes of natural gas at competitive prices on a global scale. This prerequisite no longer exists. Liquefied natural gas (LNG) will not come close to filling this role. It is more expensive than pipeline gas in terms of conversion and transportation costs. In addition, it is less reliable – ships can change course and sail toward higher prices, as experienced in 2022 – and its price volatility is disproportionately higher. 

To what extent can the price brakes for electricity and gas help the industry in these difficult times?

FUHRMANN Umbrellas, price caps and price brakes may be good as short-term crisis response mechanisms. However, government intervention in the form of dirigisme and subsidies is limited by WTO conflicts with trading partners and – even more importantly – by taxpayers' ability and willingness to pay, as well as the government's ability to take on more and more debt. 

When it comes to energy efficiency, what measures are worthwhile for companies in general, and for specific industries?

FUHRMANN The maxim is to set priorities and not to subsidize on the watering can principle. The ratio of investments and the use of green energy – in the form of electricity or derivatives such as green hydrogen – to the emissions reduction that can be achieved with them varies extremely from industry to industry. If we are serious about reducing CO2 emissions quickly and effectively, we should start where it is most useful. To this effect, for example, converting metallurgical processes makes more sense than producing synfuels. 

In addition, under the given and foreseeable environmental conditions, it makes sense for companies to systematically check their individual options for reducing energy costs. Often, not all of the potential that can be leveraged in the short term with a manageable investment of resources has been exhausted. 

What further steps make sense in the short term to drive the green transformation forward?

FUHRMANN Well-dosed incentives that do not destroy the market and competition should be established, for example for the use of green materials. Contracts for Difference may be useful here. I am not overly keen on the intended EU border adjustment, i.e. a tariff on – however this is defined – emissions-intensive products from third countries. Conflicts with the USA or China, for example, are foreseeable here, which the EU will find difficult to withstand. 

Taking the example of eco-friendly steel from Germany: How do you assess the willingness of the markets to pay more for a climate-neutral product?

FUHRMANN To the extent that the competitive position of steel customers is not impaired, this willingness actually exists. The decisive factor is the attitude of the end customers, i.e. the consumers, especially if the utilization rate is higher. If they are willing to spend more money on an ecologically better product – similarly to food – that's okay. On this point, I'm rather optimistic – provided our level of prosperity allows it. 

 

About Prof. Dr.-Ing. Heinz Jörg Fuhrmann:

After around twelve years at Klöckner-Werke, in 1996 Prof. Dr.-Ing. Heinz Jörg Fuhrmann became a member of the Executive Board of Preussag Stahl AG, which was renamed to Salzgitter AG two years later. In 2011, the engineer with a doctorate was appointed CEO. He retired from his function in 2021, having achieved a record result. Mr. Fuhrmann was Chairman of the Senate of the Fraunhofer-Gesellschaft until the end of 2022 and, in addition to his position as Senior Advisor at Horváth, is Chairman of the Employers' Association of the German Steel Industry and a member of the Climate and Environmental Advisory Board of the European Investment Bank. He holds several supervisory board mandates in Germany and abroad. 

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