Brussels, 25 April 2017 – EU steel market conditions are improving, both on the demand and the supply sides. Finally, EU steel mills are also seeing relief. However, with only two months of trade data available, caution about import pressures appears to be justified.
EU steel market
EU apparent steel consumption ended 2016 on a stronger note than anticipated. Q4 steel demand grew by 7.1% year-on-year due to the combined effect of a higher than expected gain in real steel consumption and significantly lower inventory reduction than was anticipated on the basis of the normal seasonal inventory pattern over the year. Both imports and EU domestic deliveries gained from this rise in demand. For domestic deliveries it was the first significant improvement in year-on-year growth in almost three years and should be seen as the result of the positive impact of anti-dumping duties on supply conditions in the EU steel market.
Director General Axel Eggert said, “Finally we are seeing evidence of EU steel companies also gaining from improving domestic steel demand. The improved balance between import and domestic supply appears to have been sustained over the first quarter of 2017”.
Preliminary data for Q1-2017 signal a 2.1% year-on-year rise in EU apparent steel consumption. Customs data for January and February 2017 show total imports rising by 1.2% year-on-year over the first two months of 2017. This would suggest that also domestic deliveries must have benefited from improving steel demand in the EU.
In 2017 and 2018, EU steel demand is forecast to continue to grow at a moderate rate, reflecting the steady rebound of real steel consumption and a slight increase in inventories, in line with activity in the steel using sectors edging higher.
Mr. Eggert commented, “However, we must not get ahead of ourselves. The key uncertainty for EU steel producers remains to what extent third country imports will exert a negative impact on the demand-supply balance in the EU. Anti-dumping duties may temporarily provide solace, but the risk of circumvention and other suppliers stepping up deliveries looms large, particularly as protectionism spreads in response to global oversupply pressures. The EU needs to tackle vigorously unfair trade and to stand to its promise to address global overcapacities in the framework of the Global Steel Forum”.
EU steel consuming sectors
First data and estimates for Q1-2017 production activity suggest growth of almost 2.5% year-on-year. This mild acceleration in activity would be in line with other signals of industrial activity in the first months of 2017, such as the PMIs and the order assessment surveys from Eurostat.
By sector, the strength of the automotive industry is again confirmed by Q1-2017 activity growth, but production in the metal goods and steel tube sector also expanded at a healthy pace. Meanwhile, activity in the construction and mechanical engineering sectors improved compared with the same period of last year, albeit at a more moderate rate.
Prospects for 2017 and 2018 are mildly positive. Solid domestic demand – with private consumption as key driver in 2017 and investment likely to take over the lead in 2018 – and improving exports will spur activity growth. For the time being, the weakened euro will be supportive to euro area exporters to gain from improving international trade conditions. Total activity in steel-using sectors in the EU is forecast to grow just over 2% per annum in 2017 and 2018.
EU Economic Context
Robust confidence levels and positive economic data suggest that EU economy might have shifted up a gear in the first quarter of 2017, thereby shrugging off an uncertain political backdrop. Domestic demand will remain a key driver of GDP growth in the EU in 2017 and 2018, with solid prospects for private consumption. The outlook for investment remains clouded by uncertainties as it is facing structural changes which keep the growth of gross fixed capital formation lower than in previous economic recoveries. Prospects for the export sector are positive, taking into account evidence that a synchronised and broad-base upswing of the global economy could be underway.
On balance, EU GDP is forecast to grow by 1.7% per annum in both 2017 and 2018.
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.