The German steel industry has recovered rapidly from the deep slump in production during the recession. However, the force of the upswing has subsided noticeably. Accordingly, crude steel production is expected to stagnate in the course of this year as well as in the coming year. This is one of the findings of the RWI’s current steel report. Rising costs from more expensive raw materials and declining steel prices may cause the number of employees in the steel industry to drop further. The worldwide crude steel production may initially subside and is only expected to increase again slightly in the coming year.

The German steel industry has recovered from the economic crisis relatively quickly. In the first half of 2010, crude steel production has already reached 94% of its value for the first half of 2007. This is the highest quantity produced since reunification. This puts Germany ahead of the EU and the USA, which produced 82% and 84%, respectively, of the quantity prior to the crisis in the same timeframe. In the process, German steel production benefited from both domestic and foreign demand. Steel users’ domestic production has boomed since the second half of 2009. At the same time, exportation increased dramatically, particularly in the second quarter of 2010. However, importation has increased even more dramatically, primarily due to rising investment in construction, since the majority of the steel for construction used in Germany is imported. However, warehouse stocking may have contributed significantly to the increase in crude steel production.

The revenue situation of the German steel industry had improved by the spring of 2010. This was caused by relatively low prices for iron ore, scrap steel and coke, as well as relatively high steel prices by long-term comparison. However, the costs of raw materials have risen since the spring, while steel prices ended up falling again during a slump in demand.

Forecast: German crude steel production is expected to stagnate over the course of this year and in 2011

On the whole, the RWI expects German crude steel production to stagnate over the rest of this year and during the coming year. Production is expected to decline in the second half of the year after a dramatic increase in the first half of the year. Steel production is anticipated to increase by 36% this year on average, but it is expected to decline in the coming year by an average of nearly 2% due to a statistical trough. Domestic demand is expected to expand in only a restrained manner, since steel users’ production is estimated to increase by only a small amount in 2011. Exports may even decline slightly after the increase, which had previously been strong up to that point. Warehouses are not expected to send out any stimuli either. Production may only continue to rise over the course of the coming year.

The revenue situation of the German steel industry is likely to deteriorate. Raw materials are expected to remain expensive, but higher steel prices may be difficult to assert, especially since demand is estimated to remain flat. The German steel industry’s “sandwich position” between suppliers with a great deal of market power on the procurement side and the big consumers with a stronger position for negotiations (such as the automotive industry) on the sales side is proving to be problematic once again. The high prices of raw materials are also hitting the industry especially hard, since it predominately needs to cover its demand for ore on the market and cannot fall back on a raw material basis of its own. Rising cost pressure may cause the number of employees in the steel industry to decline further in both this year and the next.

Worldwide crude steel production will also hardly increase in 2010 and 2011

Due to the crisis, crude steel production had fallen by a good 20% worldwide at the turn of 2008/2009 in comparison with the previous year. However, it did increase noticeably as of April 2009, and even exceeded the level of the previous year by 28% in the first half of 2010. China was the main engine which propelled this development. But the production of crude steel is currently falling again due to seasonal adjustments. Reasons for this include the fact that the industry production ended up developing nearly sideways. In addition, steel users currently appear to be supplied by their high stock levels. Another factor is that about 50 outmoded steel plants in China have been decommissioned for environmental protection reasons, and several steel plants may have used their stockpiles for production in the spring of 2010, when higher iron ore prices were announced.

The RWI predicts that worldwide crude steel production will not expand much in 2010 and 2011. The perceptible decline is even expected to continue for the time being. A slight increase is only expected to take place in the course of the coming year if international economic activity is livelier. For the yearly average for 2010, the RWI expects crude steel production to rise by 13.5% in the first half of the year due to the favorable developments. Since production is entering 2011 at a statistical low point, the production quantity may roughly correspond to that of 2010, on average, in spite of the anticipated upturn over the course of the year.

For further information, please contact:
Prof. Dr. Roland Döhrn, Tel.: +49 81 49-262, email
Sabine Weiler (RWI Press Office), Tel.: +49 81 49-213, email

This press release is based on the „Stahlreport“, which is a part of the „RWI : Konjunkturbericht“. It is available (only in German) as a pdf file at www.rwi-essen.de/publikationen/rwi-konjunkturberichte.