Steel consumption in Germany: gradual slowdown

Steel consumption in Germany fell to 27 million tons in 2024, the lowest level since the mid-1990s. Based on the results of the current year, the Association of German Steel Manufacturers (WV Stahl) expects a further decline to 26 million tons.

This negative forecast is confirmed by data from the Association of German Metal Traders (BDS), according to which domestic steel sales by BDS companies in January-September 2025 fell to 7.3 million tons, compared to 7.4 million tons a year earlier. Last year’s figure was 0.1% lower than in the first nine months of 2023.

There is no reason to talk about a rapid decline in the German steel market. We can only observe a gradual slowdown. GMK Center investigated what is really happening.

Macroeconomic situation

One of the main problems facing the German economy is the excessively high cost of electricity for industry. This is linked to the “green” transformation of the energy sector – the development of renewable energy sources and the move away from fossil fuels.

Green electricity is, by definition, more expensive than traditional electricity. There is also instability caused by natural factors. For example, at the end of August, Western Europe experienced calm weather, so electricity generation at wind farms could only cover 8% of Germany’s daily energy consumption.

In 2024, WPPs still accounted for 27.9% of all generating capacity. The price on the day-ahead market rose to €123.56/MWh. For comparison, in neighboring France, electricity rose to €66.02/MWh, although the weather was similar. There are 57 nuclear reactors still in operation there, while Germany has abandoned not only coal-fired power plants but also nuclear power plants.

The second reason is the Ukrainian-Russian war, which has caused energy prices in Europe to rise. This year, electricity for industry in Germany has begun to rise again after a slight decline last year. It is now almost three times more expensive than during the COVID crisis.

The automotive and construction industries, which are the main consumers of rolled steel, are not energy-intensive sectors, but the metallurgical and cement industries are. German car manufacturers and construction companies are facing constant increases in material prices and are unable to pass these costs on to their customers.

In a survey conducted in Germany by the European Construction Industry Federation (FIEC) in early 2025, 55% of construction company executives cited energy and construction material prices as the main risk factor for their businesses.

The second fundamental problem is the high cost of loans for purchasing homes and cars, caused by the monetary policy of the European Central Bank (ECB). From July 2022 to September 2023, the ECB raised its key interest rate from 0.00% to 4.5% as part of its efforts to combat inflation caused by a sharp rise in energy prices. The rate on 10-year mortgages in Germany rose from 1% to 4.23%, meaning that the cost of servicing such loans increased fourfold.

In June 2024, the ECB returned to easing monetary restrictions. The discount rate began to decline, reaching 2.15% after September 2025. Current German mortgage rates are at 3.43%, which is still too high for potential customers, similar to car loans, which currently have rates in the 6-9% range. Domestic demand does not play a major role for the German automotive industry.

Market situation

The automotive industry is the calling card of the German economy, as it represents its achievements in domestic and foreign markets.

According to the German Association of Automobile Manufacturers (VDA), passenger car production in the country increased by 1% to 3.9 million units in January-November. Exports remained at last year’s level of 3 million units. New car sales in Germany increased by 1% – to 2.6 million units.

This is far from the 3.6 million units, the best pre-crisis result achieved in 2019. The reason for this is the significant increase in the cost of car loans.

Only 34% of domestic demand was met by local car manufacturers, with importers accounting for two-thirds. Imports of new cars into Germany are subject to a 10% duty plus 19% VAT. Even with such a markup, cars from Turkey, China, and India remain more preferable for German buyers.

We can talk about insufficient tariff protection of the domestic car market in Germany. This is another factor determining the low demand for sheet metal.

In terms of external problems, the main blow to the German automotive industry was the 25% tariffs on car imports to the US, introduced by Donald Trump and effective from April 2, 2025.

In August, he agreed to reduce the tariff on cars from the EU to 15%. Even this tariff significantly reduces the competitiveness of German cars in the US market, which was the main export destination for German manufacturers. In 2024, Germany accounted for $71.3 billion of the total $240.1 billion in US car imports.

The situation is no better in the German engineering industry, the second largest consumer of flat steel. From 2018 to 2023, production fell by about 20%, and the number of jobs in the industry by more than 200,000. In 2024, output fell by 8% and capacity utilization was below 80%, according to the German Engineering Federation (VDMA).

In a survey conducted by the VDMA in November last year, 61% of companies predicted job cuts in 2025. These expectations are being confirmed, as new orders fell by 1% in January-October.

“Machinery and equipment production continues to stagnate,” noted VDMA Chief Economist Dr. Johannes Hernand.

The decline in the construction sector, the main consumer of long products, is clearly illustrated by the reduction in permits for new projects. In 2023, the figure fell by 27%, the sharpest decline since 2007. In 2024, a further decline of 17% was recorded, including a 20.4% decline in residential construction and a 5.8% decline in industrial, warehouse, and commercial construction.

Earlier, the federal government set a target for the industry: to build 400,000 new housing units per year. However, in 2023, 294,000 units were built, and in 2024, 215,000 units, which was the lowest level since 2010.

Another indicator is the increase in the number of bankruptcies among German construction companies. In 2022 and 2023, the figure increased by 12% annually, accelerating to 19% in 2024.

There is a simple explanation for this trend. Expensive mortgages are reducing potential demand for new housing from households, while the profitability of production is being eroded by rising construction material costs. Between 2022 and 2024 alone, these costs rose by 30%.

In January-September of this year, the number of new housing construction permits increased by 11.7% to 200,000 units. Last year’s figure was the worst in 15 years, so it is premature to talk about the German construction industry emerging from the crisis, as it is to talk about a recovery in demand for long-rolled products.

Future prospects

Analysts agree that the ECB will continue to lower its key interest rate in 2026. Loans for new homes and cars will become more accessible, but will still not return to pre-crisis levels. The VDA forecasts a slight recovery in the German car market of 2%, to 2.9 million sales.

Local automakers will not be able to benefit from this, as Chinese companies will continue to increase their car deliveries. German car exports will decline by 1% to 3.2 million units, as the prospects for a trade deal between the US and the EU, which would eliminate import duties on cars, remain unclear. Car production in Germany will decrease by 1% to 4.11 million units.

The outlook for mechanical engineering is no better. The VDMA forecasts a 5% decline in production by the end of 2025, which will be the worst performance in the industry in recent years. The expected 1% recovery in 2026 will only partially alleviate the situation. Demand for flat-rolled steel in Germany will continue to decline.

The same applies to the consumption of long products. The crisis in the German construction industry, as in the economy as a whole, is caused by fundamental rather than situational reasons, so there will be no rapid change in the trend.

The Munich-based Institute for Economic Research (IFO) forecasts an 18% decline in housing construction in the country by the end of 2025 and a 44% decline between 2023 and 2027.

“High construction costs in Germany are currently hindering a rapid recovery of the market,” noted IFO economist Ludwig Dorfmeister.

The industry could be helped by the government’s plans to modernize the railway infrastructure in 2024–2027 (€40 billion has been allocated for this program) and the continued development of wind energy. In the first half of 2025, 1 GW of new capacity was commissioned in the country, with a total of 2.2 GW expected for the year as a whole.

The outlook for next year is optimistic. In 2025, the Federal Network Agency (BNetzA) held two tenders, at which companies were granted permits to build wind farms with a total capacity of 7.851 GW, which is a record figure.

Further progress is facing challenges due to the end of government subsidies. The German Wind Energy Association (BWE) is proposing a number of legislative changes to restore the investment attractiveness of such projects. Even if they are approved by the Bundestag in 2026, they will only come into force in 2027.

In early December, the European Steel Association (EUROFER) raised its forecast for construction growth in the EU in 2025 to 0.1% and predicts a 3% increase in steel consumption in 2026. There are no grounds for such optimistic forecasts in Germany.

A recovery in steel demand in the country is only possible after structural reforms in the energy sector and the adoption of laws stimulating investment, including in real estate and production assets. The effect of these measures will not be immediate.

Much depends on the resolution of trade disputes with the US and the strengthening of tariff protection for the domestic market, primarily in the automotive segment. Without these conditions, German steel consumption will continue to decline.

The entry into force of the CBA on January 1, 2026, will have an additional negative impact on the market. Charging importers for the “carbon footprint” of steel products will lead to a reduction in foreign supplies, which will drive up domestic prices in Germany.

Current HRC quotes in Northern Europe are €610/t EXW. According to calculations by consulting firm Jefferies, the introduction of the CBAM, along with a 50% reduction in steel import quotas proposed by the European Commission, will lead to an increase in HRC prices to €750/t.