Long before the coronavirus pandemic turned everything upside down, upheaval was a feature of life at Thyssenkrupp.

News that Sanjeev Gupta's Liberty Steel Group has made an offer to buy Thyssenkrupp's steel operations comes as no surprise given that the once mighty German industrial conglomerate has been urgently trying to redefine and restructure its entire operation since last year.

The company had already secured a tie-up for its steel division with the European wing of India's Tata Steel in 2019, only for the European Commission to block it on competition grounds. The collapse of that deal forced Thyssenkrupp to intensity its efforts to get its house in order.

Martina Merz was appointed as chief executive at this time last year specifically to oversee the process of cutting costs and streamlining the sprawling, heavily indebted conglomerate. The first task was to sell the company's highly successful elevator business.

That was achieved earlier this year when private equity groups Advent and Cinven sealed one of Europe's largest buyout deals for €17.2 billion ($20.3 billion). That means the next target for Merz's reorganization plan is to secure a deal for Thyssenkrupp's huge but struggling steel unit.

Money on the table

Although the value of Liberty Steel Group's bid was not publicly revealed, a representative of the investment bank Jefferies told the Financial Times the institution estimated that the the nonbinding offer values the steel unit at about €1 billion. It is far from inevitable that a deal with UK-based Liberty will be done though.

The terms of the nonbinding offer mean that Thyssenkrupp is free to consider offers from other suitors. Merz said earlier this year that the experience with Tata meant that Thyssenkrupp had learned "not to commit ourselves to one option too early."

Political opposition in Thyssenkrupp's North-Rhine Westphalia heartland to a merger or takeover involving an overseas firm like Liberty is significant. An all-German merger with Salzgitter remains possible for that reason. Yet any deals or mergers will also face being potentially torpedoed by the EU, due to antitrust reasons.

There is also opposition from German trade unions. The IG Metall union says it is strongly against a deal with Liberty and has called for state support to prevent job losses. However, the state doesn't appear willing. Peter Altmaier, the German economy minister, said he did not believe nationalization was "the right response at the moment" and that it "would not solve the sector's problems."

A tempered steel industry

The steel industry in Europe certainly has faced its own particular problems in recent times.

Steel is the most commonly used metal in the world. The European steel industry turns over around €170 billion a year and employs more than 300,000 people directly. It remains a huge industry, but its place in the global picture has shrunk over the last 20 years or so due to the rapidly increasing share of crude steel production taken by China and to a lesser extent India.

Back in the year 2000, Europe was still the world's biggest steel producer, accounting for a quarter of global production. Yet as it has ceded the stage to China, many of its companies still retain huge, expensive capacities of production associated with earlier times.

That existential problem has been compounded by the even more pressing problem of the need to invest in climate friendly "green steel" production. Then came the coronavirus pandemic, which had a massive impact on the European car industry, one of the most important clients for the steel business.

Kiran Ahmed, an economist with Oxford Economics, expects the European steel industry to have a "post-pandemic bounce" but ultimately sees the industry entering a period of prolonged decline relative to current volumes quite soon.

"The global industry is faced with high levels of overcapacity given it has historically been seen as an essential industry with individual countries fostering domestic production," he told DW. "We expect production in the Eurozone and the UK to begin declining in the latter part of the decade, once the pandemic-induced bounce peters out."

But Thyssenkrupp's steel division has had its own special issues. Just after the 2008-09 financial crisis, it lost billions after investments in the US and Brazil went disastrously wrong. Since then it has struggled to make money. It has warned that it could lose up to €1 billion this year alone due to the pandemic and in particular, its exposure to the car industry.

The future is smaller and greener

Even allowing for a recovery from the pandemic, of which there are some early signs in the steel business with rising steel prices, the bigger question of Europe's steel future in the context of climate-friendly policies looms large.

Ingo Schachel, head of equity research at Commerzbank, told DW that firms like Thyssenkrupp require a lot of investment in green steelmaking, but said he saw a way for the EU steel industry as a whole to survive if the right policy moves are made by the bloc.

"There are good political reasons for Europe to maintain a certain European steel industry and make sure that it produces steel in a carbon efficient way," he said. "Whether they find the right means to make it possible and to create market mechanisms that incentivize green European steel production — that could well be, but the next three to five years will be quite decisive."

They will likely be decisive for Thyssenkrupp, too, whatever deal is done regarding its steel business. For the 27,000 workers still employed at its European steel operations, the best hopes for those eager to remain in steel production in the future are likely to be tied up in those possible green policies.

The EU is considering a carbon border tax that would impose charges on goods, including steel, produced in countries with lower environmental standards. That could give a new birth of freedom to European steel producers, so long as they cement their status as leaders in so-called "green steel" production.

Yet in order for the old steel producers such as Thyssenkrupp to fit smoothly into this new era, they will likely have to make themselves much smaller in order to make the switch.