The most important developments for German steel

The German Steel Federation is the voice of the steel industry in Germany, which has set itself the goal of achieving climate-neutral production by 2045, thereby saving one-third of all industrial greenhouse gas emissions. We asked Dr. Yannik Sparrer, Head of Industry Policy & Circular Economy, where the steel industry currently stands regarding trade protection, the production and demand for low-emission steel, and the circular economy.

It remains to be seen how these new instruments will play out. Dr. Yannik Sparrer provided a more detailed assessment of the political developments on August 27th during the Tacto webinar, "Steel Industry 2026: Political, Economic, and Circular Economy Developments."

Interview

Mr. Sparrer, what is the German Steel Federation currently focusing on most intensely?

Yannik Sparrer: We have categorized our topics into three main areas. The first is foreign trade policy, which is about creating a "level playing field" for companies producing in Germany. The second is energy and climate policy, particularly energy costs. And the third is lead markets—the question of how to generate demand for low-emission steel from Europe. I am co-responsible for this third area.

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Let’s start with the first point. A new trade protection instrument has been in effect in Europe since July 1st. What is it intended to achieve?

The new instrument provides for annual duty-free quotas of approximately 18.3 million tons. If these are exceeded, tariffs apply. This is intended to prevent the EU market from being overwhelmed by imports and to enable steel companies to achieve sufficient capacity utilization domestically. Now, we need to analyze exactly how this instrument works and whether it is truly having the desired effect.

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You say "desired effect." What is the instrument supposed to protect against?

The global environment has become significantly tougher in recent years. Global overcapacity is rising, China is exporting at record levels, and other major markets, particularly the USA, are making market access more difficult. This increases the risk that surplus volumes will be diverted to the comparatively open EU market. The new EU steel regime is designed to limit the negative effects of global overcapacity on the EU steel market while simultaneously allowing controlled market access for traditional supply flows.

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Are you seeing this pressure in the production figures yet?

The crude steel production of recent years documents the massive pressure the steel industry in Germany has been under. A crisis-level demand met with massive imports from outside the EU. We are very grateful to policymakers in Berlin and Brussels for taking our plea for help seriously and, in time before the previous protection expired, launching an effective yet balanced instrument that protects steel producers while also considering the interests of the steel-processing industries. From our perspective, the EU Commission must now quickly close the remaining regulatory gaps.

Production figures have recovered slightly recently. However, there is no talk of a sustainable turnaround yet: projected for the full year, crude steel production would be around 37 million tons, still below the 40-million-ton mark required for economically viable capacity utilization. Key customer sectors such as construction, mechanical engineering, and the automotive industry have only shown weak performance so far this year.

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Beyond the economic situation, there have been many disruptions recently: the Strait of Hormuz, low water levels on the Rhine, and problems in rail transport. How significant is this?

That plays a secondary role. In my view, Hormuz hasn't played a major role for us; other sectors were and are much more affected. For raw materials—iron ore, coal, and natural gas—procurement is diversified. Low water levels significantly impair deliveries, but this depends heavily on the location. Those located directly on the Rhine feel it much more than others. And there were problems transporting raw materials to the steel industry by rail. The renovation is correct and necessary, but as a result, some plants were truly at the limit of their raw material supply. For a blast furnace that runs around the clock, that is a real challenge.

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Let’s stay with demand, which you described as the big issue. What can policymakers do there?

There are several approaches. The new trade protection instrument has created an important prerequisite for ensuring that demand actually reaches steel companies in Germany and Europe. Furthermore, it is important to create demand for low-emission steel by having the state say: We will procure it ourselves here in Europe. A third approach is private-sector incentives, for example in the automotive sector: companies could buy low-emission steel from Europe and receive credit for it, instead of having to pay under fleet emission limits. Similar things could be considered for the wind or rail sectors, though they aren't as far along yet.

What must be understood is that many customer industries are under enormous international cost pressure. As long as strategic resilience—meaning diversification and local procurement—is not mandated from a higher level, it will always be up to the purchasing department to get the best quality at the lowest cost. A change in thinking is needed there, both in companies and in politics.

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That brings us to your third focus area, lead markets. Is the path to low-emission steel a German development or a global trend?

It is a global trend. The steel industry is responsible for seven to nine percent of CO₂ emissions worldwide. If we take climate protection seriously, it is a necessity to decarbonize this industry. In Germany, but also in other countries like Sweden and Spain, steel plants are being built to supply this market. In China and the Middle East, capacities are being prepared for the European market. So it shows: things are happening, and not just in Germany. We must succeed in managing the transition to climate neutrality in Germany, otherwise other countries will do it. At the same time, we have the European Emissions Trading System, which means there will continue to be a cost signal through CO₂ costs in the future. At the end of the day, low-emission steel will be the new norm. The question is what contribution we want to make here in Germany and Europe. Brussels and Berlin have clearly committed to a steel industry in Europe for reasons of resilience.

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When this transition happens, what does it mean for the raw materials side?

Continuing down this path directly supports the circular economy. We need steel scrap in the appropriate qualities and quantities. The good news is that we already have a significant amount of steel scrap in Europe today. Now, the goal is to keep this vital secondary raw material here and process it. This is the direct link between industrial decarbonization, resilient supply chains, and the circular economy.

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And what regulatory changes are companies facing?

There is quite a lot on the horizon. The steel industry will be one of the first sectors where the digital product passport is enforced. A decision on how low-emission steel is defined for the steel label is expected by the end of the year. The Industrial Accelerator Act sets the framework for the use of low-emission steel in public procurement and subsidies. At the same time, automotive manufacturers are expected to receive flexibility options for meeting their fleet emission targets through the use of low-emission steel. My advice is to prepare for this rather than wait. Those who implement these changes early can certainly turn them into a competitive advantage.

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If you had to pick one point that procurement managers should be focusing on right now, what would it be?

The fact that the framework is shifting on several fronts simultaneously. Trade protection is new, the economy will eventually turn around, lead markets for low-emission steel from Europe are emerging, and requirements for documentation and emissions are coming regardless. Those who consider these factors early, rather than waiting until they become mandatory, will gain a head start. This applies just as much to the digital product passport as it does to the question of how to involve suppliers early on in the topics mentioned above.