A recent study by Oliver Wyman and IW Consult, commissioned by the German Steel Federation, emphasizes the key role of the steel industry for industrial networks, economic stability and a strong SME sector. It shows how the transformation of the industry can contribute both to achieving climate targets and to strengthening the competitiveness of steel-processing industries. The results are based on analyses of the national accounts, interviews with experts and a survey of 192 steel customers conducted in 2024.
The surveys and analyses make it clear that Germany as a steel location is facing a landmark decision. The results show growing skepticism among customers in the steel industry regarding a successful transformation process. According to the surveys, a failure of the transformation would have serious consequences for investments and jobs in the steel processing industries.
Nils Naujok, Partner Energy and Natural Resources at Oliver Wyman: “The steel industry is an essential part of Germany's value creation network and makes significant contributions to the industrial location through close networking. The decarbonization of the steel industry offers enormous potential for Germany as an industrial location because the carbon footprint of customer industries can be significantly reduced through net-zero steel technologies. However, a failure of this transformation would have a serious impact on the gross value added of important customer industries and the future production capacities of the steel industry. The green transformation must therefore succeed so that it can pave the way for decarbonization and strengthen the resilience of Germany as a business location.”
Hanno Kempermann, Managing Director of IW Consult: “Our analyses of economic sector interdependencies and our company survey of steel processors make it clear: steel is one of the core industrial sectors. A local steel industry is an important factor for the competitiveness of downstream industry, be it as a driver of innovation, higher sustainability standards or as a safeguard for quality advantages. If the steel industry moves away, parts of the downstream industries will also reduce their production at the location.”
Dr. Martin Theuringer, Managing Director and Chief Economist of the German Steel Federation: “The study by Oliver Wyman and IW Consult comes at the right time. Against the backdrop of the current steel crisis, it makes it clear what is at stake, not only for the steel industry, but also for a large number of industrial networks, including the industrial co-shareholdings in Germany, which are highly steel-intensive. The study is therefore a further call for action: action must be taken now at German and EU level to reduce energy costs, create effective foreign trade and carbon leakage protection and establish lead markets for clean steel 'made in Europe'.”
Key points of the study at a glance:
The steel industry in Germany is an indispensable component of successful industrial networks. It not only ensures strategic independence, but is also a key factor for overall economic resilience. Steel-intensive value chains, which consist of the steel industry, steel-intensive customers and upstream suppliers, account for 23% of production value (1,717 billion euros), 17% of value added (591 billion euros) and 12% of jobs (5.5 million) in the German economy. The industrial SME sector in Germany is particularly steel-intensive, as around half of the production value generated in this sector is attributable to the “steel value network”. Around two million people, which corresponds to a share of 37%, work in areas that are considered “steel-intensive”.
A strong domestic steel industry is essential for securing the competitiveness of numerous steel processors, particularly in the SME sector. According to a company survey, 71% of the companies surveyed consider steel from Germany to be characteristic of the “Made in Germany” label. In addition, 80 percent believe that German steel has lower CO₂ emissions than foreign steel. For 69% of companies, German steel is a decisive factor for the stability of supply chains. In addition, 63% state that close networking enables targeted research and development activities.
A successful transformation of the steel industry can further strengthen this strategic advantage. An increasing supply of CO₂-reduced steel enables customers to achieve their own climate targets and expand their customer and supplier network at the same time. 72% of the steel customer companies surveyed expect to be able to reduce their own carbon footprint by transforming the industry. For 81% of the experts surveyed, “green steel” and decarbonization are key topics for the future of their own industries. In addition, the analysis shows that one euro of government start-up funding, combined with steel companies' own investments, can generate three euros in production value in the supplier industries.
The lack of clear framework conditions is currently leading to considerable uncertainty as to whether the transformation of the steel industry can be successfully implemented. Failure would have serious consequences for Germany as an industrial location. Currently, 70 percent of the steel required by the most steel-intensive industries in Germany is supplied by German and European manufacturers. However, only 14% of the companies surveyed believe that it will be possible to successfully convert a large proportion of primary steel plants by 2035. For 81% of the experts surveyed, high energy prices and insufficient availability represent the greatest risks for the failure of the transformation.
Design of the study
This study is based on data and information from various sources. These include market analyses by Oliver Wyman, based on projects with energy suppliers, steel producers and the construction materials industry, as well as interviews with 17 experts from the steel industry, the supplier and customer network, which were conducted between January and May 2024. In addition, IW Consult carried out macroeconomic statistical analyses and calculations to analyze value creation networks, determine the economic contribution of the steel industry, estimate investment effects and develop scenarios. In addition, a telephone survey was conducted with 192 companies from the steel industry's customer sectors.
IW Consult specializes in contract research and services at the interface between science and practice. Its clients include companies, local authorities, associations, ministries, foundations and public institutions. IW Consult supports its clients with evidence-based advice on growth, development and economic issues. With HeyHugo, it offers a regional data platform that contains information on over 100 economic and socially relevant indicators. IW Consult was founded in 1998 and is a subsidiary of the German Economic Institute (IW).
The German Steel Federation (Wirtschaftsvereinigung Stahl) is the voice of the steel industry in Germany, which has set itself the goal of achieving climate-neutral production by 2045 - and thus saving a third of total industrial greenhouse gas emissions. The association, which is headquartered in Berlin, is campaigning for a political framework that will enable a climate-neutral steel industry that will remain strong in the future. With 35.4 million tons in 2023, Germany has the largest steel production in Europe.
Link to the study: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.wvstahl.de/wp-content/uploads/20241216_Oliver-Wyman_Stahl_Studie.pdf
