The Cologne Economic Institute (IW Köln) has called for steel production to remain in Germany and Europe, and warns against relocating entire production stages.
In a recent study seen by Kallanish, it discusses challenges like high energy costs and low availability of hydrogen, against the backdrop of the steelmaking energy transition. European mills’ transition has been questioned by some who recommend that ironmaking via the DRI route be left to countries with abundant energy supply, for example in the Middle East.
IW Köln underlines that Germany’s manufacturing industries are intensely interwoven in a value chain characterised by international strength and sizeable exports. If parts of the chain break away, others will follow. According to IW Köln, half a million jobs in Germany are directly dependent on the steel industry, when including suppliers and direct customers. When ancillary steel-based industries are also taken into account, this figure could rise to 5 million jobs, the institute points out.
It also underlines the importance of regional proximity between business partners, and highlights security as one factor. Many overseas locations with low energy costs lack other basic prerequisites, like political stability and a functional transport infrastructure.
IW Köln concedes that imports of hydrogen and sponge iron could play a role in the German steel industry, which might need to reposition itself in an adjusting value chain.
In a reaction piece on LinkedIn, Salzgitter chief executive Gunnar Groebler agrees with IW’s findings. “A comparison limited to production costs is short-sighted. It ignores overall costs, risks and reliability of supply,” he writes.
A functional circular economy in Europe will only work on short distances, because transport costs are becoming the crucial driver to an increasing extent, Groebler writes. “You can always get your steel cheaper somewhere else. But what is the price for losing capacities?” he asks.
Author: Christian Koehl
