Germany’s steel industry is facing a critical juncture. Despite being Europe’s largest producer, steel output continues to decline sharply. In May 2025, crude steel production dropped 6.4% year‑on‑year to 2.98 million tonnes, while total output through the first five months fell 10.8% to 14.43 million tonnes—a clear signal of sustained contraction across the sector  . At the same time, traditional blast furnace-based oxygen steel slumped 13.1%, though electric steel produced via scrap saw a 9.3% year‑on‑year rise, marking the first growth in that segment in 2025  .

Industry leaders are sounding the alarm. The German Steel Federation (WV Stahl) warns that domestic demand remains weak, and rising imports of low-cost Chinese steel along with soaring energy costs threaten to hollow out the sector completely. They urged the government to act quickly, including restoring €5.5 billion in energy cost subsidies within its first 100 days to maintain operational viability for domestic steel producers  .

Germany has also pledged billions in financing to build a green steel future. Major players like Thyssenkrupp and Salzgitter are investing in hydrogen-based steelmaking, with public funds around €7 billion committed so far—including a proposed industrial electricity subsidy program worth up to €10 billion by 2030, to help offset extreme power costs that are double U.S. levels  . Salzgitter, in particular, expects to reduce production emissions by over 95% once its green hydrogen plant is online by 2026  .

Yet, Europe’s green transition is encountering severe headwinds. A recent Financial Times analysis detailed how only a tiny percentage of EU steel output currently uses hydrogen-based processes, despite aggressive emissions reduction goals. Energy prices and infrastructure bottlenecks are forcing even major investors like ArcelorMittal to turn down public subsidies for hydrogen technology projects in Germany due to prohibitive costs  .

As urgency mounts, Germany’s steel leaders warn that, without bold policy intervention, the risk extends beyond collapsing output—it threatens the integrity of entire manufacturing supply chains. Industry figures stress that failing to sustain domestic steelmaking could accelerate deindustrialization across the country’s high-value sectors