Hardly any purchase in German industry is made without steel, and few materials are as early in the value chain. This is precisely why political decisions from Berlin and Brussels have such a rapid impact on the cost structures of purchasing industries. Crude steel production in Germany stood at 34.1 million tonnes in 2025, around 9 percent below the already low level of the previous year, marking the fourth consecutive year it has remained significantly below the 40-million-tonne threshold. At the same time, a new EU trade defense instrument, rising electricity demand, and the emergence of lead markets for low-emission steel are changing the framework for procurement.

Yannik Sparrer (Head of Industry Policy & Circular Economy at the German Steel Federation) and Torben Hinrichs (Topic Lead Steel at Tacto) provide an overview in this webinar of where the German steel industry stands in 2026 and what the current legislation means for purchasing industries. For over 150 years, the German Steel Federation has represented the interests of German steel producers—from medium-sized electric steel plants to integrated steel mills—before policymakers, industry, and associations.

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Geopolitical developments and the new EU trade defense instrument

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Global overcapacity is the starting point for almost all trade policy discussions. According to OECD data, it currently stands at around 640 million tonnes and is projected to rise to 745 million tonnes by 2028. To put this in perspective: that is more than five times the annual steel consumption of the EU. Capacity is being built up primarily in China and India, with China accounting for more than 50 percent of global steel production and seeking alternative sales markets due to weak domestic demand.

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With the U.S. Section 232 measure and a 50 percent tariff on steel and steel-intensive products, European exports to the U.S. have collapsed. This led to diversion effects, with volumes increasingly being shipped to Europe. The European Commission responded with a new trade defense instrument that came into effect on July 1st. It provides for a duty-free import quota of around 18 million tonnes, which the Commission can adjust based on demand trends. There is currently no time limit, and country exemptions exist only for the EEA states of Iceland, Norway, and Liechtenstein. If the quota is exceeded, a 50 percent tariff applies. In a survey of participants, this specific instrument was the most frequently cited change of the past twelve months, and the future of import regulations was identified as the greatest uncertainty.

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Electricity demand and energy costs in an international comparison

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The transformation of production is fundamentally changing the industry's cost structure. Today, integrated steel mills are largely self-sufficient in electricity through the use of byproduct gases. As blast furnaces are gradually replaced by electric arc furnaces combined with direct reduction plants, this self-sufficiency is lost. Even a transition of just 50 percent of primary steel production will nearly double the demand for electricity from the grid, from around 12 to approximately 23 terawatt-hours.

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In terms of cost levels, Germany lags behind in an international comparison. After peaking in 2023, electricity procurement costs have normalized, but grid fees have risen significantly due to delays in grid expansion. Since 2026, a temporary budget subsidy has cushioned this impact, though how long this will last is the subject of ongoing budget discussions. From the industry's perspective, an all-in level of 50 euros per megawatt-hour is considered competitive. Compared to the U.S. and China, Germany is currently at a factor of two or higher, and even within Europe, it remains above the day-ahead prices in Spain, France, and Sweden.

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Transition to climate neutrality and lead markets for low-emission steel

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The steel industry is responsible for about 7 percent of German and approximately 9 percent of global CO2 emissions. The potential for impact is therefore significant: primary steel accounts for over two tonnes of CO2 per tonne of steel, while secondary steel ranges from 0.5 to 0.6 tonnes. In the future, these two routes will blur, as traditional secondary steel plants can also use direct reduced iron or hot briquetted iron. This creates room for procurement teams to define technical requirements and scrap usage standards in collaboration with suppliers.

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To stimulate demand, policymakers are working on lead markets. The Commission's proposal for the Industrial Accelerator Act stipulates that 25 percent low-emission steel must be used in public procurement and funding programs. The Automotive Package aims to create a credit mechanism through which manufacturers can offset up to 7 percent of their fleet emissions using low-emission steel; a start date from 2035 is being discussed, possibly earlier. Both are based on a standardized green steel label, which is being prepared as part of the Ecodesign Regulation. Initial proposals are expected by the end of the year. Sparrer points out that the German Steel Federation is prohibited from making statements on cost trends due to antitrust laws, but notes that the additional costs relative to the final product are often low—for example, less than 1 percent for a passenger car, while achieving around 20 percent in emission savings.

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The steel industry is a circular economy

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Steel is 100 percent recyclable, and 85 percent of all steel ever produced is still in use. With the transition to electric arc furnaces, major German plants are entering the scrap market more aggressively, making scrap a strategically scarcer input material. Sparrer advises procurement organizations to discuss return models with suppliers and customers early on, such as closed-loop approaches where material is returned to the steel producer. From a regulatory perspective, the Circular Economy Act announced for the autumn, the discussion regarding mandatory usage quotas for secondary raw materials under the End-of-Life Vehicles Regulation, and the digital product passport—which is among the first use cases for steel—are also coming into play.

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Conclusion

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Yannik Sparrer’s analysis shows that the framework conditions for steel procurement are currently shifting on several fronts simultaneously: import regulations, energy costs, requirements for low-emission materials, and the obligation to provide proof along the supply chain. Torben Hinrichs explains the implications for procurement: First, cost transparency is becoming a prerequisite for reliable negotiations, for example through bottom-up should-costing based on publicly available market data. Second, the administrative burden of compliance resulting from CBAM, material compliance, and the digital product passport is growing so significantly that it can hardly be managed in day-to-day operations without automation.

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Yannik Sparrer (Head of Industry Policy & Circular Economy, German Steel Federation) and Torben Hinrichs (Topic Lead Steel, Tacto) provide an overview of the state of the German steel industry in 2026: the new EU trade defense instrument with an 18-million-ton duty-free import quota, the nearly doubled electricity demand due to the transition to electric arc furnaces, the emerging lead markets for low-emission steel, and the growing importance of scrap as a raw material. They also outline the resulting requirements for cost transparency and compliance in procurement.