A looming crisis within Germany’s steel industry threatens hundreds of thousands of jobs and casts doubt on the nation’s climate ambitions, according to a new report by the Institute for Economic Affairs (IW). The analysis reveals that approximately 605,000 German jobs are directly or indirectly reliant on the steel sector, encompassing suppliers and customer industries.
The current predicament stems from a complex interplay of factors, chiefly exacerbated by the ongoing war in Ukraine and the associated energy crisis. Prior to 2022, Germany’s steel production enjoyed relative competitiveness; production costs were measured at around €440 per ton, comparable to those in the United States (€430 per ton). However, by 2023, costs surged to €550 per ton, despite the initial volatility of energy prices having seemingly subsided. The planned transition to “green” steel utilizing hydrogen technology presents further significant cost escalation, with projections estimating an additional 50% increase to €810 per ton.
The report highlights the detrimental impact of global geopolitical shifts. While China aggressively subsidizes its steel industry, the United States, under the Trump administration, has implemented tariffs to restrict steel imports – severely limiting the export opportunities for German manufacturers. This creates a skewed playing field where German companies struggle to compete effectively.
The IW argues that current relief measures, such as the industrial electricity price scheme, are insufficient to address the scale of the problem, providing only a comparatively modest €1.5 billion in annual relief. The institute advocates for a more targeted and robust approach, emphasizing the necessity of permanent and substantial reductions in energy prices extending beyond the current industrial electricity rate.
Crucially, the IW calls for a dedicated and comprehensive support system for the transition to “green” steel, suggesting the implementation of climate protection contracts. Furthermore, the institute underscored the urgency of modernizing Germany’s energy infrastructure, including significantly enhancing the efficiency of the power grid and rapidly developing the necessary infrastructure for hydrogen production. Without decisive and coordinated action, the report concludes, Germany risks losing substantial employment and jeopardizing its stated climate goals, raising serious questions about the nation’s industrial competitiveness and long-term economic stability.