Brussels, 20 October 2016 – EU steel demand is expected to stall in 2017 as uncertainty in the wake of the Brexit referendum may affect confidence and investment while limiting the upward potential for the stock cycle, says the European Steel Association (EUROFER)
EU steel market
EU apparent steel consumption rose by 2.3% year-on-year in Q2-2016 thanks to rising activity in steel using sectors. While stock building in the distribution chain also contributed to the healthy level of steel demand in Q2, the actual inventory rise was somewhat lower than in the same period of 2016, thus having a slightly negative impact on year-on-year demand growth.
In Q2-2016 imports remained at the same level as registered in the first quarter. However, in June imports eased to some extent, reflecting a more cautious attitude from steel buyers towards purchasing from third countries due to the anti-dumping investigations into several steel products undertaken by the European Commission.
EUROFER Director General Axel Eggert said, “This relief was only temporary. Imports in July and August bounced back to the higher levels seen earlier this year. SURV2 data for September show the highest level of finished product imports since October 2015, suggesting that import pressure in the EU will remain high in the future”.
Apparent consumption in the second half of this year is expected to be lower than in the first half, in a reflection of the usual seasonal destocking over this period. Total apparent consumption in 2016 is forecast to rise by 2.2%. However, third country suppliers will benefit most from this modest uptrend in demand.
In 2017, apparent steel consumption in the EU is seen moving sideways. Post-Brexit uncertainties are expected to weigh on confidence, thereby affecting investment. In combination with the ongoing anti-dumping investigations it could also lead to cautious inventory management in the steel supply chain. This will result in an almost neutral stock cycle over the year, thereby offsetting the slight increase in real steel consumption.
EU steel consuming sectors
Activity in EU steel using sectors gained momentum in the second quarter. Underlying activity data confirm the continued strength in the automotive industry and the electric domestic appliances sector. Other sectors were all in positive territory too, but growth rates varied between rather modest and more robust.
Initial estimates for activity in the third quarter of this year are again positive, albeit with output growth not matching the dynamics registered in the preceding quarter. This trend is seen continuing in Q4-2016. Total activity in steel using sectors is forecast to rise by 2.4% in 2016.
Similar growth is expected for 2017. The mild improvement foreseen for global economic growth should benefit export-oriented sector activity. In the EU, activity in the consumer-related sectors is seen remaining strong, while output in the investment-related sectors is not expected to gain much traction.
EU Economic Context
The economic recovery in the EU was sustained in the second quarter of this year, albeit at a slightly lower growth rate than in the first quarter. Growing exports and a mild rise in private consumption were not sufficient to offset stagnation in investment. Sentiment surveys signal that so far the impact of the yes vote in the UK referendum on confidence has been rather minor. Sharp knock-on effects on economic activity and the common currency were absent. Against this background and taking the latest indicators and hard data into account it seems justified to conclude that the EU economy is not on the brink of a major slowdown.
However, uncertainties in the wake of the UK referendum and the risk of global growth remaining stuck in slow motion could have a negative impact on investment and exports.
Economic and Market Report
For the full report, please click here: Economic & Steel Market Outlook 2016-2017
Jeroen Vermeij, Director Market Analysis & Economic Studies +32 2 738 79 36 (firstname.lastname@example.org)
Charles de Lusignan, Communications Manager, +32 2 738 79 35 (email@example.com)
About the European steel industry
The European steel industry is a world leader in innovation and environmental sustainability. It has a turnover of around €170 billion and directly employs 320,000 highly-skilled people, producing on average 170 million tonnes of steel per year. More than 500 steel production sites across 24 EU Member States provide direct and indirect employment to millions more European citizens. Closely integrated with Europe’s manufacturing and construction industries, steel is the backbone for development, growth and employment in Europe.
Steel is the most versatile industrial material in the world. The thousands of different grades and types of steel developed by the industry make the modern world possible. Steel is 100% recyclable and therefore is a fundamental part of the circular economy. As a basic engineering material, steel is also an essential factor in the development and deployment of innovative, CO2-mitigating technologies, improving resource efficiency and fostering sustainable development in Europe.