Germany

The German recycled steel market remained stable in the first two months of the third quarter owing to stable domestic and export demand. But in September, prices fell unexpectedly sharply in a difficult market environment. Both for old and, particularly, new recycled steel, volumes decreased noticeably, although supply was able to meet demand during the month.

Steel consumers have curbed their production, meaning that volumes of new recycled steel are likely to continue their decline over the remainder of the year. Some consumers have reduced their production capacities or introduced short-time working. While availability of consumers is likely to be sufficient, some have high inventories of semi-finished and finished products and are having difficulty finding specific sales opportunities.

The economic downturn in Germany is set to have continued throughout the summer quarter. There is a possibility that GDP will have stagnated or declined slightly from July to September following a 0.1% contraction in the spring. With two consecutive quarters of negative growth, experts are referring to this as a technical recession. The heightened economic uncertainty is having a negative impact on companies’ investment activity. Additionally, higher financing costs are still having an effect, particularly on demand for capital goods and construction services. Despite favourable conditions in which wages are rising faster than prices, private consumption is still not picking up. For example, sentiment indicators and private vehicle registrations suggest that consumers are continuing to hold back on spending.

The business climate in the German automotive industry has deteriorated further and expectations have become gloomier, according to the ifo Institute. Strong competition from Chinese electric vehicles and global economic fluctuations mean that Germany’s car manufacturers are under increasing pressure. The country’s largest car manufacturer Volkswagen can no longer rule out plant closures in Germany and is looking for ways to save billions of Euros as part of a cost-cutting programme.

The automotive industry also fears that China will respond to the targeted anti-dumping duties on its electric vehicles with counter-tariffs or other measures that could affect the competitiveness of German-made cars in China. This comes at a time when the automotive industry is already struggling with the growing number of domestic competitors. While most vehicles sold in China are manufactured locally, many high-end models continue to be imported from Germany. From January to August 2024, German factories produced 2.7 million cars - 2% fewer than in the same period of 2023 and 14% fewer than in the first eight months of 2019, according to the German Association of the Automotive Industry (VDA).

Additional bad news has come from the German steel industry. A meeting between its representatives and the government brought no resolution other than lip service to the problems of overcapacity, outdated plants, high energy costs and competition from cheap imports.

In August, steel companies in Germany produced just under 2.9 million tonnes of crude steel, almost unchanged from the low level of the same month last year. Although an overall year-on-year increase of 4% to 25.4 million tonnes was recorded in the first eight months of the year, production remains at a low level.