The European Commission’s proposed safeguard measures on steel imports are poised to significantly bolster the profitability of German steelmakers, according to a recent report by Boston Consulting Group and are drawing cautious but ultimately supportive backing from Berlin. The measures, which involve a near halving of duty-free import quotas and a doubling of tariff rates, are projected to dramatically increase the utilization rates of European steel mills. Warm-rolled band steel, a core product for the industry, could see its utilization jump from 72% to 85%, while the usage of galvanized sheet metal, vital to the automotive sector, is forecast to rise from 81% to a robust 90%. An operational rate of at least 80% is widely considered necessary for consistent profitability within the steel industry.
While downstream industries, particularly the automotive sector, are voicing concerns about potential price hikes stemming from reduced import competition, the German government is largely endorsing the Commission’s initiative. Officials emphasize the strategic importance of a strong domestic steel industry, particularly in supporting emerging sectors like defense. “The fundamental direction is correct” a source within the German government stated, indicating a recognition of the national security implications of relying on foreign steel.
However, Berlin is adopting a pragmatic approach, signaling a desire to meticulously assess the potential repercussions of these measures on downstream processing industries. The government intends to conduct a thorough evaluation of the ripple effects across the wider economy before formally aligning itself with the Commission’s proposal. This delay reflects a delicate balancing act: safeguarding the viability of core domestic industries while mitigating potential inflationary pressures and ensuring the continued competitiveness of German manufacturing as a whole. The outcome will likely shape the broader EU debate surrounding trade protectionism and strategic industrial policy.
