Germany’s steel industry is in what Chancellor Friedrich Merz has called an “existential crisis,” as rising energy costs and cheaper imports threaten the survival of one of the country’s most important industrial sectors. Speaking after a high-level summit at the Chancellery on Thursday, Merz and Finance Minister Lars Klingbeil signalled a renewed focus on strengthening European production and economic self-reliance.

“If Germany is to invest heavily in defence, it should also be able to prioritise European and domestic suppliers,” Klingbeil said, urging a stronger commitment to local industries. “A little more ‘buy European,’ a little more European patriotism — I think that would help.”

More than half a million jobs in Germany are linked to steel production, from suppliers to manufacturers. But with energy prices soaring and imports from countries such as China undercutting domestic producers, many fear a sharp decline in competitiveness. Merz said he supports a European Union plan to protect the bloc’s steel industry, noting that a joint Franco-German initiative could soon take shape.

A recent study by the University of Mannheim, commissioned by the Hans Böckler Foundation, warned that if steel production were to move abroad, Germany could lose up to €50 billion annually in value added. The study estimated at least 30,000 direct job losses, with ripple effects across industries including automotive manufacturing, mechanical engineering, and electronics.

Steelmaking is highly energy-intensive, leaving German producers exposed to volatile energy prices. To remain competitive, researchers recommend maintaining annual production at around 40 million tonnes. Without this, they say, key industrial supply chains could break down.

Globally, the steel market is under pressure from China’s massive production expansion. State subsidies have allowed Chinese firms to flood international markets with low-priced steel, prompting the United States to impose steep tariffs — including a 50% duty on European steel. According to the European Steel Association (Eurofer), Asia now accounts for about three-quarters of global crude steel output, while Europe’s share has fallen to 14%.

The European Commission has begun imposing anti-dumping duties on some Chinese steel products and is seeking approval to tighten import quotas. Under the latest proposal, duty-free import limits would be halved and tariffs on excess imports could rise to 50%.

Within Germany, attention is turning to high energy costs. Trade unions and industry leaders are calling for the introduction of an industrial electricity rate to ease the burden on heavy industries. Economics Minister Katherina Reiche confirmed plans for a lower electricity price from 2026, though details are still being finalised.

According to the German Economic Institute, the proposed rate could save companies up to €1.5 billion annually. However, experts caution that a short-term measure will not be enough. The University of Mannheim report also calls for stronger investment in green steel technologies to reduce emissions and sustain long-term production.

“An end to steel production in Germany would severely endanger the country’s industrial base, with serious consequences for the economy and social stability,” said Jürgen Kerner, deputy chair of the IG Metall union. “Federal and state governments must do everything possible to safeguard this vital sector.”