Economic data confirm that the recovery in the EU is taking hold, although growth momentum remains rather modest. Relatively robust indicator levels suggest that the recovery may gain traction over the remainder of this year and into 2015 as economic growth steadily becomes more balanced across growth factors. Rising investment will provide the main thrust behind the improvement in domestic demand expected for this year and next. This will reduce EU’s dependence on exports as driver of economic growth and result in the economic recovery becoming broader and more self-sustained.
There is also evidence that the recovery is broadening from a regional perspective, as the outlook for the more vulnerable countries in the Eurozone periphery is brightening, owing to reforms which strengthen particularly the export sector. In contrast, the recovery in France and Italy struggles to gain some strength.
Activity in the steel user sectors rose in Q1-2014 more robustly than foreseen. EUROFER Director General Gordon Moffat: “Although the Q1 growth rate was flattered by the weak activity level of Q1-2013, underlying sector strength is clearly improving. Especially automotive production is gaining traction, but also the construction sector is finally seeing somewhat better market conditions in several EU countries”.
The forecast for the remaining quarters of this year shows activity steadily increasing further, with total growth of the steel using sectors projected at 3-3.5% in 2014 and 2015. A key factor in this growth scenario is the expected rebound of EU investment following underinvestment in the recent past. Especially investment in machinery and equipment is seen picking up, but also construction investment will rebound moderately.
EU steel demand growth in Q1-2014 was revised up to 7% y-o-y, reflecting improving end-user activity and the corresponding need for distributors and end-users to adapt inventory levels. Q2 estimates signal a continuation of this positive trend.
Gordon Moffat: “The problem is that while demand is strengthening moderately, so far this year imports have been growing more rapidly than domestic deliveries, which means that they are taking a larger share of the market. Imports look set to remain high in the remainder of this year and in 2015, if third countries continue to aggressively offload overproduction on the international markets. That would be a bad message for the EU steel sector which is already suffering from extreme margin pressure”.
EU apparent steel consumption is forecast to increase 3.7% in 2014 and by almost 3% in 2015. Particularly this year but also in 2015, higher growth of third country imports may result in imports - at least partially - absorbing the expected rise in demand.
For the full report, click on the link: Market Report 2014 July
Represented by EUROFER, the European steel industry is the world leader in its sector with a turnover of about EUR 170 billion and direct employment of 350 thousand people, producing 170 million tonnes of steel per year.