A recent study shows that the multiplier effect increase the value of each unit of steel used by industry by a factor of 2.7, and the effect on employment is even greater at 6.5. Two in every three jobs in German industry rely on steel as the basic raw material of production.
Addressing a meeting last week, Hans Jürgen Kerkhoff President of the German steel institute (VDEh) said that the experiences of the past three years have led to two important findings.
– Countries with a strong industry have recovered more quickly than those without.
– Germany is particularly well placed mainly due to the strength of German industry.
The specific advantages of having a local production network in Germany has a strong effect. The steel industry is contributes to this value-added network without which the success of German industry would be unthinkable.
The strong roots in the steel industry is based on the economic multipliers. The Rhenish-Westphalian Institute for Economic Research (RWI) has calculated that every Euro of additional demand for steel, the value of industrial production increases by another €1.70. The overall effect is therefore to increase the value output by a factor of 2.7.
The multiplier factor for employment is even greater at 6.5. The output and employment multipliers of the steel industry are far greater than in most other industries. This is explained by the fact that a large number of industries are tied to steel production – from the business services sector on trade and energy to secondary raw materials. With steel production so wide, the spillover effects on various sectors of the economy are large.
Two economic studies by RWI in Essen and the consulting firm Booz & Co highlight the importance of steel as an input material for key German industries. For example, the value of the steel content in machinery manufacture is over 20% of the total, in the automotive industry it is 14% and in electrical engineering and construction around 10%.
In the steel and metal processing sector the value content is around 60% of the wholesale purchase price. Together, these industries account for 3.5 million jobs in Germany, which is two out of every three workers in German industry.