The positive post-COVID trend in apparent steel consumption seen throughout 2021 came to an end in the second quarter of 2022, due to ongoing war-related disruptions, poor demand outlook and severe rises in energy prices and production costs. These downside factors impacted the second half of 2022 even more severely and are expected to continue to do so until the second quarter of 2023 as a result of the prolonged effects of Russia’s war in Ukraine and protracted economic uncertainty. In 2022, apparent steel consumption experienced its third annual recession in the last four years with a steeper decline than previously anticipated (-7.2% vs. -4.6%). This was mostly a result of quarterly drops in the third and especially in the fourth quarter of 2022. Apparent steel consumption is set to decrease also in 2023, but at a lower rate (-1% vs. formerly estimated -1.9%), as demand from steel-using sectors is expected to remain severely undermined until at least the second half of 2023.

In 2024, if there are more favourable developments in the industrial outlook and improvement in steel demand, apparent steel consumption is set to rebound (+5.4%). However, the overall evolution of steel demand remains subject to high uncertainty, which is expected to continue to undermine demand from steel-using sectors at least in the first half of 2023. Quarterly positive developments in apparent steel consumption are only foreseen starting from the third quarter of 2023.

EU steel market overview

In the fourth quarter of 2022, apparent steel consumption fell dramatically (-19.3%) following a drop (-4.8%) in the third quarter. This resulted in a volume of 29.6 million tonnes, the second-lowest level ever seen after the second quarter of 2020 (28.6 million tonnes), when mills and industrial plants were shut down due to the COVID-19 pandemic.

Domestic deliveries continued to mirror weak demand and significantly decreased (-15.2%) in the fourth quarter of 2022, which was the third consecutive drop and even steeper than the previous one (-10.5%). Deliveries had strongly rebounded (+11.9%) in 2021, following 2020’s sharp drop (-9.6%), which marked the second consecutive decline in yearly terms after 2019 (-4.2%). As a result of negative developments in the last two quarters of the year, domestic deliveries markedly dropped (-8%) in 2022. In line with the continued and quick deterioration in steel demand, imports into the EU including semi-finished products shrunk over the fourth quarter of 2022 (-32.5%), following a drop in the previous quarter (-17.2%) and resulting in an overall annual decrease (-6.6%). However, it is worth noting that the drops in imports seen in the last two quarters of 2022 essentially mirrored weak demand conditions. Therefore, the share of imports out of apparent consumption remained considerably high in historical terms, even in the fourth quarter of 2022 (23.5%).

EU steel-using sectors

Despite Russia’s invasion of Ukraine and rising energy prices, EU steel-using sector’s output has continued to grow, showing unexpected resilience up to the fourth quarter of 2022, with the Steel Weighted Industrial Production index (SWIP) increasing (+2.5% after +4.4% in the third quarter). In particular, the automotive sector, recorded its third consecutive output increase (+6.8%), after a double-digit one-off increase (+20.3%) in the third quarter (a rebound subsequent to very low output volumes seen one year before). The sector is set continue achieving moderate growth after recording very low output volumes for several quarters, but absolute output volumes are expected to remain well below the levels seen in 2018 (the peak of the previous cycle) even in 2024. After the modest rebound seen in 2021 (+3.3%), output in the automotive sector increased at the same rate in 2022 and is projected to mildly grow (+1.2%) in 2023, thanks to moderately positive developments on both the supply and demand side. However, output is expected to drop again (-1.8%) in 2024.

Output in the construction sector steadily increased in 2022 (+4.8%, after a buoyant +6.7% in 2021), thanks to EU and national supporting schemes both for repair and maintenance as well as for civil engineering. However, the increasing shortage combined with higher prices of construction materials, together with lower residential construction demand due to monetary tightening and higher mortgage rates, are expected to lead to recession in 2023 (-1.6%). A moderate recovery (+1.3%) is foreseen in 2024.

The ongoing energy crisis and the rapid deterioration of the economic and industrial outlook are set to continue taking their toll on growth over the next few quarters. However, the toughest period for the EU industry appears to be over (notably, the last quarter of 2022 and the first of 2023). Nonetheless, the combination of historically high energy prices, low demand and economic uncertainty is expected to weigh on the rest of 2023.

Despite these challenging conditions, steel-using sectors’ output grew (+3.1%) also in 2022 after the post-COVID rebound (+6.7%) in 2021. Growth is expected to slow down over the course of 2023 and notably drop in the second quarter, resulting in an overall limited annual increase (+0.3%). However, this is a slight improvement from the previous outlook, which foresaw a drop (-0.6%), although with wide differences among individual European economies. Steel-using sectors’ output is expected to pick up some speed again in 2024 (+2.3%).