German steel production faces major challenges in 2026. Following a historic low of 34.1 million metric tons of crude steel in 2025, the first few months of 2026 show an increase of 9.9%, global overcapacity, U.S. tariffs, and the launch of the Carbon Border Adjustment Mechanism (CBAM) continue to weigh on the industry. At the same time, it is grappling with structural problems that are hindering a sustainable recovery. This is reported in particular by the trade journal Industrieblatt.

This article analyzes the current market situation, the strategies of key players, technological trends such as hydrogen direct reduction, and the regulatory framework that is shaping the future of the industry.

Current Market Conditions for Steel Production in 2026

The German steel industry has been undergoing profound changes since 2022. In 2025, production reached 34.09 million metric tons of crude steel, the lowest level since reunification. However, the first few months of 2026 brought a cautious recovery: In January, production rose by 15% to 3.1 million metric tons, followed in February by a 4.8% increase to 2.83 million metric tons. Overall, this represents a 9.9% increase compared to the previous year.

However, the German Steel Association warns against interpreting this increase as a sustained turnaround, as the extreme decline in 2025 resulted in a very low baseline. The economic situation remains tense: Following a decline in revenue from 5.3 billion euros in 2024 to 50.6 billion euros, a further decline is expected for 2025. Market supply fell to 27 million metric tons in 2024—a decline of one-third since 2017.

The employment situation is also worsening. While the industry still directly employed 90,000 people in 2022, ThyssenKrupp Steel alone plans to cut 11,000 jobs by 2030. In steel-intensive value chains, more than 600,000 jobs are threatened by the crisis.

The Key Players and Their Strategies

ThyssenKrupp Steel, Germany’s largest steel producer, is undergoing one of the most far-reaching restructurings in its history. Under a restructuring collective bargaining agreement with IG Metall, approximately 11,000 of the 27,000 jobs are to be cut by 2030. At the same time, the company is moving forward with the construction of a direct reduction plant (DRI) in Duisburg, which is intended to be powered by green hydrogen in the future. However, CEO Miguel Lopez has questioned the project’s economic viability.

With its SALCOS program, Salzgitter is pursuing the industry’s most ambitious transformation plan. Federal funding has been increased by 322 million euros, and the first DRI plant is expected to enable the production of low-carbon steel products starting in 2027. The complete transition is now scheduled for 2033. ArcelorMittal, on the other hand, has halted its DRI-EAF plans for Bremen and Eisenhüttenstadt and is instead focusing on electric arc furnaces as soon as market conditions permit.

Technology Trends: Hydrogen and Digitalization

The H2-DRI (Hydrogen Direct Reduced Iron) process is considered a key technology for decarbonizing steel production. In this process, iron ore is reduced to sponge iron using hydrogen instead of coal, which can cut CO₂ emissions by up to 95%. In Germany, several DRI projects are in various stages of development: Salzgitter is building its first plant, ThyssenKrupp is assessing its economic viability, and ArcelorMittal has put its plans on hold.

Electric arc furnaces (EAFs), which use steel scrap and electricity, are gaining in importance. All major manufacturers are increasing their scrap content to meet CO₂ targets. However, high electricity prices remain a challenge. In addition to decarbonization, steel manufacturers are driving digitalization forward—for example, through predictive maintenance and AI-supported quality control—to boost efficiency.

Regulatory Framework: CBAM and EU Safeguard Measures

Starting in 2026, the EU’s Carbon Border Adjustment Mechanism (CBAM) will gradually become subject to fees. Steel importers will be required to purchase allowances that reflect the CO₂ content of imported products. This could reduce the competitive disadvantages faced by European producers, but implementation remains complex.

EU FlagsThe existing EU safeguard measures for steel are set to expire in June 2026. The proposed successor mechanism calls for limiting duty-free imports to 18.3 million metric tons per year and raising the out-of-quota tariff to 50 percent. The European Commission has also published the “European Steel and Metals Action Plan,” which aims to strengthen the industry’s competitiveness. A key concern remains the industrial electricity price of 5 cents per kilowatt-hour, which is being called for by the German Steel Association and the IG Metall trade union.

Since March 2025, U.S. tariffs of 25% have been in effect on steel imports, which also affect European exports. Since then, EU steel exports to the U.S. have plummeted by 30%, causing direct sales markets to disappear and resulting in steel from third countries being diverted to the European market.

Challenges and Risks

The OECD warns of a deepening crisis: Global steel capacity rose to 2.445 billion metric tons in 2025, while overcapacity reached a record high of 640 million metric tons. It is projected to rise to 721 million metric tons by 2027. Although China, which accounts for over 50% of global production, has announced production cuts, the real estate crisis could push additional steel onto the world market.

In Germany, demand for steel is suffering due to weakness in downstream industries. The automotive industry is seeing a decline in production due to the shift toward electric vehicles, the construction industry is struggling with high interest rates and construction costs, and the mechanical engineering sector is experiencing a decline in new orders. A genuine recovery in demand is not expected until the second half of 2026 at the earliest.

The transition to green steel production requires investments in the billions, which the industry can hardly manage on its own given declining revenues and margins. The financing of projects such as ThyssenKrupp’s DRI plant remains unclear.

Outlook: Steel Production in 2027 and Beyond

Industry experts expect production to reach 36 to 37 million metric tons in 2026, representing an increase of 6 to 8% compared with 2025. However, this level remains below the pre-crisis mark of 40 million metric tons.

Salzgitter’s first green steel products are expected to be available in 2027. The gradual tightening of the CBAM will strengthen the competitive position of European producers, but will also increase domestic costs. Further restructuring is likely, as the industry is struggling with decarbonization, overcapacity, and weak demand. U.S. tariff policy and Chinese overcapacity remain the biggest risks.

The key question remains: Can the transition to green steel production succeed before the industry’s economic foundation erodes? The answer depends on the political will to set competitive industrial electricity prices and create demand markets for green steel. 2026 will be a pivotal year for Germany’s future as a steel-producing nation.

Conclusion

Steel production in 2026 is showing the first signs of recovery but remains in a structural crisis. The industry must simultaneously address decarbonization, competitiveness, and the revitalization of demand.

Despite financial pressures, companies should invest in green technologies and diversify their markets. Policymakers must streamline approval processes for hydrogen and DRI projects, expand subsidies, and strengthen trade policy measures against unfair imports.