EUROFER: EU economic fundamentals improve, uncertainties remain

Economic indicators stabilized in the fourth quarter of 2014 and most of them even improved slightly in December last year and in January 2015, according to the Economic and Steel Market Outlook 2015-2016/Q1 2015 Report from the Economic Committee of the European Steel Association (EUROFER). The EU's economic recovery continued in the second half of 2014 in spite of increased geopolitical and domestic risks and uncertainties. However, the strength of the recovery remained unconvincing.
 
According to EUROFER, steel user activity grew only hesitantly in the second half of 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. 
 
The EUROFER report pointed out that EU steel demand ended 2014 on a weak note mainly due to destocking. Total demand is expected to have risen 3.3 percent in 2014. However, imports rising more than 14 percent implies that EU steel mills suffered a further loss of market share to third country suppliers.
 
"Although the outlook is overall moderately positive for the coming two years, downside risks and uncertainties continue to exist, both with regard 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," said EUROFER director general Axel Eggert.