Germany faces threat of creeping deindustrialisation, warns steel boss

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The chief executive of steelmaker Salzgitter has warned that Germany’s big energy users must commit to the country as a base to stave off the creeping deindustrialisation of Europe’s largest economy.

Gunnar Groebler, who joined Germany’s second-largest steelmaker two years ago, told the Financial Times that if manufacturers of materials needed by industry, such as steel or chemicals, were to leave the region due to high energy costs “you run the risk of losing the whole value chain” of production.

His comments come as 32 per cent of surveyed industrial companies in August told the German Chamber of Commerce and Industry (DIHK) that they favoured investment abroad over domestic expansion — double the 16 per cent identified in the previous year’s survey — amid concern over a future without cheap Russian gas.

“If I were to follow that lead, then we are going to deindustrialise this country,” Groebler said, adding that “from a societal perspective, I think we as an industry also have a responsibility”.

The remarks come in a difficult month for German industry as several large climate-related projects, such as long-awaited rail infrastructure investments, have been thrown into doubt after the government froze payments from a climate and transformation fund.

The freeze followed a decision by Germany’s top court that €60bn allocated to the fund, designed to help decarbonise industry, was illegal.

Groebler confirmed that €1bn of subsidies promised by local authorities to help Salzgitter build plants that can run on both gas and cleaner hydrogen were secured, despite the problems surrounding the climate fund.

The company is planning to have the first of these plants running by 2026.

The German steel industry is making a big bet on future demand in Europe for so-called green steel, as it pours billions of euros into a transition that will eventually see it replace gas furnaces with technologies reliant on clean hydrogen and electricity.

Salzgitter, which is based on the outskirts of the eponymous city where it employs 5,500 people, has been bullish on the future of carbon-reduced steel and promised not to use any more coal in its production by 2033, when it expects to have cut its carbon footprint by 95 per cent.

There remains, however, a question mark over how demand for green steel would be affected if large-scale industrial environment-friendly projects were to be scrapped.

“[The funding gap] puts a lot of pressure and responsibility on the German government to actually come up with a tentative solution, and relatively quickly too,” said Groebler.

“I would really urge them to not stop the train [of decarbonisation] because if you stop, you will need much more energy to get rolling again.”