Relocation of steel production from Germany threatens billions in losses

The loss of its own steel production could cost Germany up to €50 billion annually, according to a study by economists at the University of Mannheim, published ahead of an industry summit in Berlin, DF reports.

Analysts warn that the German economy will be extremely vulnerable in the event of a global steel crisis if the country’s companies close or relocate their production abroad. According to their calculations, if major steel exporters, such as China, reduce supplies to Europe due to geopolitical conflicts or supply chain problems, steel prices for German consumers will rise sharply.

This will lead to higher prices for products in industries such as construction, mechanical engineering, metallurgy, and automotive manufacturing.

“The increase in costs will reduce production and value added in these sectors,” say report authors Tom Krebs and Patrick Kaczmarczyk.

They also emphasize that the decline in household income will have a negative impact on domestic demand.

The study emphasizes that even a gradual decline in the steel industry will have not only economic but also political consequences. Regions with a high concentration of steel mills — Duisburg, Eisenhüttenstadt, Bremen, and Saarland — may experience social decline. The experience of the US and the UK shows that the decline of industrial regions is often accompanied by the rise of populist movements.

Analysts believe that Germany should maintain production at a level of at least 40 million tons of steel per year, half of which should be produced using low-carbon direct reduction technologies. This will require significant investment in the green modernization of the industry.

German Chancellor Friedrich Merz supported the measures proposed by the European Union to protect European steelmakers. He also confirmed his cabinet’s commitment to securing steel production and jobs in the country.