Brussels, 15 July 2016 – The EU market is only modestly growing, yet imports continue to increase as EU trade defence is still not responsive enough, says the European Steel Association (EUROFER)
EU steel market
EU apparent steel consumption grew 3.1% year-on-year in the first quarter of 2016. Improving business activity at the end-user level and inventory replenishment in the downstream steel supply chain fuelled steel demand. Improving international steel pricing conditions since mid-February and lengthening lead times also explain the increase in buying interest and related stockpiling over the quarter.
EUROFER Director General Axel Eggert said, “Imports rose by 24% year-on-year in the first quarter of 2016, but EU domestic deliveries fell by 1%. This shows that once again third country suppliers gained most from the modest growth in demand and continued to capture a larger portion of the EU steel market. While deliveries from China into the EU remain at an elevated level, suppliers from other third countries such as Japan, South Kora, Iran, Belarus, Russia and Ukraine are increasingly targeting the still relatively open EU market”.
Similar conditions appear to have shaped the market in the second quarter of 2016. EU pricing and supply conditions remained supportive to the purchasing behaviour of EU steel buyers. Demand remained close to the level of the previous quarter, while imports continued to increase.
The outlook for the second half of this year is for apparent consumption to stabilise at around the level of the same period of 2015. The seasonal stock cycle suggests that inventories will be reduced gradually over this period. Steel demand is forecast to rise by around 1% in 2016.
Demand-side fundamentals in 2017 are seen as moderately positive, supported by a steady rise in real consumption and an overall neutral stock cycle.
Mr Eggert added, “So long as global overcapacity persists and authorities elsewhere are more responsive to unfair trade, supply-side distortions will pose a risk to steel market stability in the EU”.
EU steel consuming sectors
EU steel consuming sectors began 2016 on a positive tone: output increased by 1.8% year-on-year. The mild winter resulted in work on construction projects continuing or starting earlier than anticipated. Automotive activity again grew vigorously. The only sector that continued to act as a drag on total growth of output in the steel using sectors was the steel tube sector. First estimates for the second quarter of 2016 are relatively positive and signal the likelihood of a mild acceleration in the production growth of the key steel using sectors in the EU.
The outlook for the second half of this year is relatively healthy, with also somewhat better support for growth from investment-led sectors such as the mechanical engineering and steel tube sectors. In 2017, investment is forecast to continue to moderately strengthen; this will broaden the basis for activity growth in steel using sectors. Also international trade is seen becoming more supportive to growth.
EU Economic Context
Moderately positive economic fundamentals underpin the continuation of the economic recovery in the EU. Domestic demand prospects are relatively healthy, owing to the expected strength of consumer spending. Less clear is the outlook for investment and exports, reflecting heightened uncertainty given business conditions following Britain’s vote to exit the EU, as well as other global headwinds. For 2017, international trade activity is expected to pick up, supported by an anticipated moderate improvement in global economic conditions.
Economic and Market Report
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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.