BERLIN: Thyssenkrupp AG is carrying out a review of its plans for a green steel project that may lead to its eventual cancellation, Handelsblatt reports, citing internal documents.

The German steel company is considering halting construction of the planned direct reduction plant, which could trigger the repayment of government subsidies worth around €500mil (US$549mil), Handelsblatt said, citing unidentified company sources.

The government has started talks with the company over concerns its ailing steel unit wouldn’t be able to reimburse the funds on its own, the report added.

Apart from cancelling the project, the company is looking at three other options involving switching to different types of ovens, Handelsblatt said, citing industry sources and the documents.

A spokesperson for Thyssenkrupp Steel told the newspaper that the group remains committed to the green transformation, adding that the board of directors has informed the supervisory board about expected cost increases.

“The situation is currently being evaluated.

"At present, we assume that the direct reduction plant can be realised under the given conditions,” the spokesperson said.

A spokesperson reached by Bloomberg said possible cost increases in the construction of the plant will have no impact on subsidies promised by the federal and state governments.

Ending the green steel project would be a setback for the German government and the industry’s bid to become more climate-friendly.

The government’s €2bil aid package to Thyssenkrupp was approved last year by the European Union. 

 - Bloomberg