The German steel federation is urging the new government to act to sustain the country's steel production, the largest in Europe and seventh worldwide, with a position paper aimed at ensuring the sector's competitiveness and sustainability, a WV Stahl spokesperson told Platts, part of S&P Global Commodity Insights, on Feb. 24.
According to the association, addressing electricity costs -- which account for 20-40% of steelmakers' expenses -- is crucial. WV Stahl recommends an immediate reduction in transmission grid fees to the levels set for 2023, retroactively effective Jan. 1, 2025. This measure is essential for maintaining industrial operations in Germany and facilitating a transition to a more sustainable economy.
Electricity pricing remains a pressing issue, with current costs nearly double those before the crisis. Rising grid fees have exacerbated the situation, imposing additional financial strain on the industry. The association emphasizes the need for policymakers to revitalize Germany's industrial strength, highlighting challenges from low-priced imports and high electricity costs, which added Eur300 million ($313 million) in grid fees for steelmakers last year.
WV Stahl also calls for the new government to tighten existing EU safeguard measures and develop a permanent instrument to replace the safeguards expiring in summer 2026.
In 2024, German crude steel production rose by 5% year-over-year to 37.2 million mt, but overall production has been in recession, remaining below the 40 million mt mark for three consecutive years. Since 2017, the market has lost one-third of its volume, reflecting critically low demand and challenges in the manufacturing sector.
As the EU enforces stricter climate regulations, carbon leakage poses a significant challenge for the steel industry. The association urges urgent discussions with the European Commission and Council to revise the Carbon Border Adjustment Mechanism (CBAM), advocating for changes to prevent circumvention, extend protections to downstream sectors, and exempt steel exports from CO2 costs, all to be implemented by 2025 in preparation for the CBAM's rollout on Jan. 1, 2026.
Additionally, a federal steel action framework is needed to outline measures that enhance competitiveness and support the industry's transition to climate neutrality. Germany primarily produces steel via the blast furnace route, the most polluting method, contributing to 7%-8% of global greenhouse gas emissions and over a quarter of the country's industrial CO2 emissions.
To achieve low-carbon steel production, the conventional blast furnace-converter route must transition to hydrogen-based direct reduction, with direct-reduced iron plants in Germany expected to pair with Electric Arc Furnaces (EAF), with initial projects set to operationalize by 2026.
To support this transition, four major German steel manufacturers secured funding commitments in 2023 and 2024 as part of the Important Projects of Common European Interest (IPCEIs) focusing on hydrogen and low-carbon technologies.
The demand for renewable electricity in the steel industry is set to surge with the shift to climate neutrality. Currently, the steel industry relies heavily on self-generated electricity, but hydrogen-based DRI plants will require grid electricity. WV Stahl indicates that Germany's current external electricity demand is 12 TWh, which is expected to rise to 24 TWh by 2030, alongside an additional requirement for hydrogen electrolysis, projected to produce 850,000 tonnes of hydrogen or 28-29 TWh.
Following the Feb. 23 election, the Christian Democratic Union, led by Friedrich Merz, is poised to govern Europe's largest economy. Before the elections, Merz emphasized the need for a transition to "green steel" that does not harm the steel industry in January, despite facing criticism for questioning the rapid shift to hydrogen fuel due to the higher costs of green steel compared to traditional methods.
Platts assessed hot-rolled coil in Northwest Europe at Eur605/mt ex-works Ruhr on Feb. 21, which was stable day over day.
