German steel production is unlikely to reach pre-pandemic levels in 2021, with capacity utilization estimated at 75% next year, according to an analysis by German economic research institute RWI.
In the report published Oct. 12, Germany’s crude steel production in 2020 is predicted to be 15% lower than 2019 and will not be made up next year as demand from the automotive industry is expected to increase only moderately.
“We expect crude steel production of 37.5 million mt (+ 11%) for 2021. This means that around 75% of the capacity would be utilized,” the report said.
The decrease in steel production is, however, only partly to blame on economic downturn due to the pandemic. Figures show that steel use has already started to dwindle in the autumn of 2018. Automotive production rates have been falling since then as the car industry has been unable to return production to where it was before the emissions testing scandal.
Investment in the construction industry, which supported steel demand in 2020 is set to decrease next year too.
The German steel industry is also set to be a net steel exporter this year due to shrinking domestic demand and safeguard measures for finished steel imports.
The report highlighted that the drop in production during the first wave of the pandemic was more severe than during the financial crisis of 2008-09 and that it will take the industry longer to recover from the pandemic than the financial crisis, making job cuts of up to 4% inevitable next year.
The German steel industry is also at risk of structural overcapacity as the drive toward electric vehicle production is likely to shift car production outside of Germany and shake up the well-established automotive supply chain as EV producers are likely to source steel from producers closer to the production site.
— Laura Varriale
