Green steel from Germany: uncertain future

Germany's green steel industry faces uncertain future as consulting firm PwC warns that domestic production lacks competitiveness. The situation has raised concerns among trade unions, with fears of potential job losses and the possible abandonment of local steelmaking operations. In a recent study published on Monday, PwC concluded that there is no economically viable primary steel production scenario for Central Europe, regardless of whether the steel is produced using hydrogen-based or traditional coal-based methods. This assessment highlights the challenges posed by high energy and raw material costs in countries such as India and the Gulf region, which offer greater competitive advantages. The outlook for Germany’s steel sector is bleak. Overcapacity persists globally due to declining demand from automotive manufacturers and reduced domestic consumption. Since 2008, over 100,000 jobs have been lost in European steelmaking, and further layoffs are anticipated. New EU import tariffs aim to protect local producers against cheaper competition from China, India, and Turkey, but these measures may not be sufficient to reverse the trend. According to PwC, conventional blast furnace technology is increasingly uncompetitive compared to alternative methods, driven not only by rising carbon prices but also by the efficiency of existing facilities in regions like the Gulf. PwC points to Oman as a growing hub for green steel production. In the special economic zone of Duqm, Indian steel company Jindal is constructing multiple modern direct reduction plants with a combined capacity of five million tons per year. These facilities, set to begin operation early next year, will initially run on Omani gas before transitioning to hydrogen, which can be produced affordably in the sun-rich southern Arabian country. This shift underscores the global realignment of steel manufacturing towards regions with lower production costs and access to renewable energy sources. Meanwhile, transformation efforts within Central Europe are facing setbacks. PwC reports that nearly half of the announced European green steel projects have been postponed, halted, or scaled back. ArcelorMittal has abandoned its transformation plans for plants in Bremen and Eisenhüttenstadt, allowing promised billions in funding to expire. Thyssenkrupp has delayed the procurement of green hydrogen for its direct reduction plant in Duisburg, stating it is operating “on the edge of economic viability.” These developments highlight the difficulty of transitioning to sustainable practices while maintaining profitability. Trade union representatives, including those from IG Metall, caution against abandoning the steel industry altogether. They argue that steel is a critical input for downstream sectors such as construction, machinery, and automotive manufacturing. A spokesperson noted that roughly two-thirds of industrial employment in Germany is tied to steel-intensive industries. The loss of domestic production could disrupt supply chains and weaken Germany’s industrial base. Economist Patrick Kaczmarczyk adds that the current wave of new green steel projects is shifting toward regions around the Strait of Hormuz, including Oman. However, tensions in the region, particularly related to the Iran conflict, have led to sharp increases in fuel prices. While projects in Oman avoid this bottleneck, disruptions along the Red Sea route due to attacks by the Houthi rebels have also impacted logistics. Despite these challenges, the move toward regional hubs for green steel reflects broader shifts in global industrial strategy, emphasizing cost-effectiveness and sustainability.