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Economic and steel market outlook 2021-2022, third quarter
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In 2020, the COVID-19 pandemic slashed steel consumption and the overall economic outlook across the EU and the world. Shutdown measures, implemented by governments from March 2020, severely impacted manufacturing activity and steel-using industrial sectors, particularly over the second quarter that marked the trough of the pandemic-led cycle.
Some of the measures that had the greatest impact on the economy and the industry were loosened as of June 2020, though many social measures remain in effect or were reinforced until early 2021.
As a result, steel-using sectoral output experienced considerable quarter-on-quarter rebounds over the third and the fourth quarters and, at an even faster rate, over the first quarter of 2021. This was driven by the stronger-than-expected recovery of industrial sectors, whose output recovered the losses experienced during the pandemic.
Although the general economic recovery in the EU appears to be uneven and exposed to risks (full implementation of vaccination plans, COVID-19 variants etc) the recovery in steel-using industries and in steel demand should continue through 2021.
EU steel market overview
EU28 apparent steel consumption increased (+3.6%) year-on-year in the fourth quarter of 2020, that was the first quarterly growth since the fourth quarter of 2019, and so it did in the first quarter of 2021 ( +0.9%). Apparent steel consumption in the first quarter amounted to 36.3 million tonnes.
The volume for the first quarter of 2021, albeit to a lower extent than in the preceding quarter, reflects another improvement in demand levels from the record low seen over the second quarter due to the severe disruption brought by the COVID-19 pandemic that had marked the trough of the cycle.
Mirroring the improvement in demand, domestic deliveries in the EU in the first quarter of 2021 increased (+1%, after the growth of +4.6% recorded in the fourth quarter of 2020).
Data for the first quarter also showed the continued downturn in imports from third countries compared to apparent consumption. After the record drop (-25.4%) in the third quarter of 2020, imports from third countries dropped – albeit less severely - also in the fourth quarter of 2020, (-5.4%) and in the first quarter of 2021 (-2.5%), that is the nineth consecutive quarterly drop.
EU steel-using sectors
The COVID-19 outbreak has further hit EU industrial sectors at a time when these had already been experiencing a severe downturn and were coping with serious challenges. Over the course of 2019, business conditions in the manufacturing industry had continued to deteriorate. This downward trend gained speed in the second half of 2019, particularly in the automotive industry.
This resulted in a pronounced slowdown in output growth in steel-using sectors, which then culminated in unprecedented drops over the second quarter 2020, mainly as a result of the severe lockdown measures imposed by governments in March and April 2020. The second quarter marked the trough of the industrial recession.
The loosening of lockdown measures over the third quarter allowed industrial activity to restart, with a considerable rebound in output compared to the record lows seen in the preceding quarter, which continued – at an even faster rate – over the fourth quarter of 2020 and up to the first quarter of 2021, driven by faster-than-expected recovery in output in some sectors (domestic appliances and automotive in particular).
This has happened despite considerable problems in the global supply chain, particularly for the automotive sector (rising transportation costs, rising fuel costs, shortage of components etc). Steel-using sectors’ output growth over the fourth quarter was still negative (-1.4%), i.e. the fifth consecutive quarterly drop, but at a much lower rate than the third quarter (-6.8%).
This paved the way for a stronger acceleration in industrial recovery over the first quarter of 2021, despite persistent economic uncertainty due the ongoing pandemic across the EU. As a result, steel-using sectors’ output fell grew (+2.6%) in the first quarter of 2021, that was the first quarterly increase since the third quarter of 2019.
The industry in the EU has recovered the output loss experienced during the pandemic, but activity remains exposed to fragility and risks, due to persisting uncertainty around vaccination plans and ongoing consequences of the pandemic.
 We remind readers that the figures for the EU contained in this Report refer to the EU27 (without the UK) and no longer to the EU28 as it was in previous Reports.
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