Germany Mining Report 2009

Despite optimism at the beginning of the year, particularly within the iron and steel sector, the industry was affected throughout 2008 by the deterioration of the global economy. As demand from the automotive sector waned, steelmaking production was impacted with many major companies announcing cuts in production, jobs and working hours in order to reduces costs. Germany's leading steel producer ThyssenKrupp announced at least 4,000 job cuts in April 2009, as well as the reduction in working hours for employees from February-September 2009.

In 2008 Europe and the US were noticeably affected by the economic downturn but the performance of the copper industry was buoyed slightly by demand from China and growing demand in Southeast European countries. It is thought that China is growing its strategic reserves of copper, which could be positive for the industry. Demand for copper wire was also up by 1.1% in 2008, partly as a result of developments in technology of the latest home white goods.

A notable influence affecting the metals and mining industry are the regulations surrounding carbon dioxide emissions. With the phase out of nuclear power, Germany is heavily dependent on coal-fired power plants for energy, and power generators are experiencing significant additional costs to process carbon dioxide emissions. Lower profitability due to the processing costs of CO2 was cited by mining company RAG Deutsche Steinkohle as affecting a decision to invest in a new hard coal plant.

Without nuclear power and facing a long-term declining coal market, the focus of the industry on complying with the reduction of carbon emissions means more investments in renewables and more efficient coal-fired power plants are required. Government subsidies can be applied for both, with EUR2.1bn available between 2008-2011 for research and development of modern energy technologies.

In January 2008 the second stage of the European CO2 emissions allowance trading scheme was launched. Germany has requested certificates for 451.9mn tonnes of emissions. This is 0.3% less than allowed by the European commission and a significant drop from the 499mn tonnes that had been allocated up to 2007. Previously, the allowances for emissions were higher than actual figures, resulting in a surplus of certificates. The reduction of carbon dioxide emission certificates will have a significant impact on German power producers. Currently 390mn tonnes of certificates will be issued free of charge with the remaining amount open for auction, though free emission allowance is set to cease in 2013.

Since the new allocation amount for the second trading period in 2008, a notable difference in the value of the certificates has been affected by reduced supply and increased demand. Where a certificate could have been purchased previously for a few cents, current average value is EUR22. This trading scheme particularly affects power suppliers in Germany more so than other countries who have a higher level of energy from renewable or nuclear sources where carbon dioxide emissions are not so much of an issue.

With Germany's phasing out of nuclear power plants by 2020, the country will be increasingly dependent on coal power plants for energy until alternative energy sources can be developed.