EU’s economic recovery continued in H2-2014 in spite of increased geopolitical and domestic risks and uncertainties. However, the strength of the recovery remained unconvincing. Economic indicators stabilised in the fourth quarter of last year and most of them even improved slightly in December last year and January 2015.
Several factors contribute to a cautiously brightened outlook for economic fundamentals in 2015 and 2016, thereby at least partly offsetting negative factors and uncertainties currently acting as a drag on growth.
EUROFER Director General Axel Eggert: “The combined effect of the weaker Euro and the drop in oil prices will provide a welcome boost to the EU economy. ECB’s quantitative easing programme and the Junckers investment plan should for the time being at least have a positive impact on sentiment. All in all, we expect to see a positive impact on exports, domestic demand and investment in particular”.
Steel user activity grew only hesitantly in H2-2014. Weak business conditions in EU core markets France and Italy and slowing growth in almost all large emerging economies as well as Russian trade sanctions acted as a drag on output growth. Lower oil prices, the weaker Euro and a more accommodative investment climate support the scenario of both exports and domestic demand gaining momentum in 2015 and 2016. This will bolster activity in the steel using sectors, whereas the divergence in performance between the manufacturing industry and the construction sector looks set to narrow.
EU steel demand ended 2014 on a weak note mainly due to destocking. Total demand is expected to have risen 3.3% in 2014. However, imports rising more than 14% implies that EU steel mills suffered a further loss of market share to third country suppliers.
The EU steel market is seen slowly but gradually strengthening further in 2015 and 2016 - with apparent consumption rising respectively 1.9% and 2.6% - driven by growing output in the steel using sectors and the related need for a modest stocking up of inventories in the supply chain and at end-users.
However, business conditions in the steel sector will remain challenging. EUROFER Director General Axel Eggert: “Although the outlook is overall moderately positive for the coming two years, downside risks and uncertainties continue to exist, both with regards to the economic and steel market recovery in the EU. A key concern remains the continuation of high import pressure on our market due to excess production elsewhere being pushed into the international markets, thereby distorting traditional steel trade flows, fuelling competition and depressing prices and profit margins. While this is already the case with Chinese exports, we fear that also Russian exports could rise sharply, as the weak rouble will enable Russian steel mills to target the EU market to compensate for sluggish domestic sales”.
For the full report, click on the link: Economic & Steel Market Outlook 2015-2016
Represented by EUROFER, the European steel industry represents the world leader in its sector, producing on average 170 million tonnes of steel per year with direct employment of 335 thousand highly skilled people. More than 500 steel production and processing sites in 24 EU member states provide direct and indirect employment for millions of European citizens.