Germany’s metals and processing industry is facing a significant downturn, raising alarms about the future of Europe’s industrial landscape. The ongoing struggles within this sector highlight critical vulnerabilities in the European Union’s ability to meet the ambitious objectives outlined in the Critical Raw Materials Act (CRMA).
The convergence of high energy costs, geopolitical tensions, declining industrial demand, and fierce global competition is exacerbating Germany’s industrial decline. This situation not only threatens Germany’s economic stability but also jeopardizes Europe’s broader efforts to establish resilient supply chains for essential raw materials.
Production Declines and Employment Challenges
Recent statistics from Germany’s Federal Statistical Office (Destatis) reveal that metal-processing production in March 2026 was 12.9% below pre-war levels, reflecting the severe impact of the Russia-Ukraine conflict and subsequent energy crisis. The fallout on employment has been equally troubling, with approximately 16,000 jobs lost in the metals sector since early 2022. This decline underscores the precarious state of one of Europe’s key manufacturing industries, which has historically been a cornerstone of economic strength.
CRMA Aspirations Confront Harsh Realities
The CRMA was designed to enhance Europe’s strategic autonomy by reducing reliance on external suppliers. By 2030, the EU aims to process at least 40% of its strategic raw material consumption within Europe, source 25% through recycling, and diminish dependence on single suppliers like China. However, achieving these targets faces significant obstacles, particularly in refining and processing sectors that demand substantial energy inputs and stable investment conditions.
Energy Costs: A Major Competitive Disadvantage
The energy crisis has severely impacted Europe’s energy-intensive industries, including metals and chemicals. Germany has been particularly affected due to its historical reliance on affordable energy and integrated supply chains. The surge in electricity and natural gas prices threatens not only current production but also future investments in critical mineral processing facilities crucial for sectors such as lithium and nickel.
China’s Dominance in Mineral Processing
As Europe grapples with these challenges, China’s dominance in critical mineral processing compounds the issue. Chinese firms lead in various segments of the value chain—including rare earth refining and battery precursor manufacturing—benefiting from lower energy costs and substantial state support. In contrast, nations like the United States, Canada, and Australia are rapidly advancing their own integrated supply chains through aggressive subsidies and strategic financing.
Temporary Measures Insufficient for Long-Term Stability
The German government has introduced temporary electricity support measures for energy-intensive sectors from 2026 to 2028 to alleviate immediate financial pressures. However, experts caution that such short-term solutions will not resolve deeper structural issues affecting competitiveness. Investors looking at long-term projects require stable economic conditions rather than temporary relief.
The Western Balkans: A Strategic Asset for Europe
The evolving situation presents an opportunity for Serbia and the Western Balkans as European policymakers recognize their strategic importance for future raw materials development. Serbia boasts significant potential in lithium production and strong copper output capabilities, alongside existing industrial infrastructure and a favorable geographic position near EU markets.
A Broader Industrial Survival Challenge
The discourse surrounding critical raw materials has shifted towards a broader consideration of Europe’s industrial survival. While initiatives to expedite mining permits and foster domestic extraction are underway, these efforts may falter without addressing fundamental competitive conditions. High electricity costs, complex permitting processes, financing challenges, and weakened manufacturing competitiveness remain significant hurdles.
Germany’s Metals Sector: A Stress Test for European Industry
The ongoing struggles within Germany’s metals industry serve as a stress test for Europe’s entire industrial strategy. The continent faces a delicate balancing act among decarbonization goals, strategic autonomy, industrial competitiveness, energy transition policies, and economic resilience. Whether Europe can effectively navigate these intertwined challenges will be a defining question for its economic future over the next decade.
