German Steel Industry Faces Billions in Losses If Production Moves Abroad, Study Finds

A recent economic study has highlighted the significant financial risks associated with relocating Germany's steel production overseas. According to research conducted by economists at the University of Mannheim and supported by the Hans Böckler Foundation, the German economy could experience annual losses exceeding 50 billion euros if domestic steel manufacturing is outsourced and a global supply crisis occurs.

The study models a scenario in which leading steel-exporting nations, such as China, sharply reduce their exports to Europe due to geopolitical tensions or disruptions in international supply chains. In such an event, German industries that rely heavily on steel--including construction, metal production, machinery manufacturing, electronics, and automotive sectors--would face substantial increases in steel prices. These cost hikes would, in turn, diminish productivity and economic output within these key sectors.

The authors of the study emphasize that the effects would not be limited to the industrial sector. Higher production costs and reduced output would ultimately impact household incomes, thereby weakening domestic demand across the German economy. The analysis also warns that the gradual decline of the steel industry could have further-reaching consequences, particularly for regions with a strong historical dependence on steel manufacturing, such as Duisburg, Eisenhüttenstadt, Bremen, and the Saarland.

Drawing on international examples from the United States and the United Kingdom, the researchers note that economic downturns in industrial regions frequently coincide with political instability and the rise of populist movements. They caution that the erosion of central industries like steel not only undermines economic strength but can also challenge democratic stability by fueling social discontent.

To safeguard against such risks, the study recommends maintaining an annual domestic steel production capacity of at least 40 million tonnes. In 2024, Germany produced approximately 37 million tonnes of crude steel, indicating that current levels are just below the proposed threshold. The researchers advise that half of Germany's steel demand should be met using low-carbon direct reduction methods, while the remaining half should come from recycling steel scrap in electric arc furnaces. This approach is seen as crucial for both ensuring supply security and supporting climate-friendly manufacturing.

To achieve these goals, the study calls for increased investment in modern, environmentally sustainable production facilities. Strengthening the steel sector's competitiveness and resilience is presented as a national priority, especially in the context of ongoing geopolitical and economic uncertainties.

These findings are expected to inform discussions at an upcoming meeting in the Federal Chancellery, where government representatives and industry stakeholders will consider measures to enhance the competitiveness of Germany's steel industry and secure its future role in the national economy.