The manufacturing industry and construction sector in the EU benefited in 2017 from an investment-led domestic upturn and improving exports. A healthy outlook for these steel users bodes well for the EU steel demand in 2018 and 2019. The supply side situation could, however, continue to be negatively affected by import distortions.
EU steel market overview
EU28 apparent steel consumption grew by 1.1% year-on-year in the third quarter of 2017. By contrast, the second quarter had been characterised by a contraction in domestic deliveries from EU suppliers due to a sharp increase in third country imports. Overall, domestic deliveries rose by 4.4% year-on-year.
Imports grew by around 8% year-on-year over the first half of 2017, the trend turned negative in the third quarter of last year. Total steel imports fell by almost 14% year-on-year.
This decline has occurred in the context of improving in global steel prices – largely driven by the Chinese market – which narrowed the gap between EU domestic prices and imports. Other restraining factors include the moderation of imports, particularly from China, but also other countries affected by the imposition of anti-dumping and anti-subsidy measures by the European Commission. However, other third country suppliers have triggered increased exports to the EU, substituting for this drop.
Similar market conditions are expected to have shaped the supply-demand situation in the fourth quarter of 2017.
EU28 apparent steel demand is estimated to have risen by 1.9% in 2017.
Axel Eggert, Director General of EUROFER said, “Prospects for the continued recovery of EU steel demand are positive. The expected strength of most steel-using sectors bodes well for the demand side of the EU steel market. The supply side situation could, however, continue to be negatively affected by import distortions.”
EU steel-using sectors
2017 has been a strongly expansionary year for steel-using sectors in the EU. The performance across countries and steel-using sectors became increasingly synchronised over 2017. In particular, growth dynamics in Central Europe improved significantly compared with overall rather weak momentum in 2016.
Individual sectoral performances are varied. The steel tube sector posted the strongest year-on-year jump in production activity, followed by the mechanical engineering sector, electrical domestic appliances and construction. As had been anticipated, growth in automotive output moderated somewhat.
The outlook for 2018 and 2019 is positive, although activity in steel-using sectors will settle back into a more moderate pace of expansion owing to waning momentum in the tube sector and automotive industry. Underlying economic conditions remain supportive to a steady pace of expansion in other sectors.
Output in the EU’s steel-using sectors is forecast to grow by 2.2% in 2018 and by 1.8% in 2019.
EU economic context
EU economy remained on a favourable growth track in the second half of last year. GDP growth was driven by robust investment, solid private consumption and strong exports.
Conditions look right for the EU economy, expected to maintain an above-trend growth rate in 2018. Economic sentiment in the euro area and EU28 has been going from strength to strength over the course of 2017 and January this year saw a further increase in confidence. Investment is expected to remain a key driver of growth, reflecting robust domestic and external demand. Private consumption will also continue to perform well. However, exports may be impacted by the enduring relative strength of the euro and an expected – though mild – moderation in global trade growth.
The EU economy is forecast to return to a more sustainable growth rate in 2019 as EU monetary policy tightening may begin to dampen investment growth.
EUROFER forecasts EU GDP growth of 2.2% in 2018 and of 1.9% in 2019.
Economic & Steel Market Outlook, 1Q 2018 [PDF]