EUROFER: Weaker euro and low oil prices to boost domestic demand and exports

The slight improvement in GDP growth in the fourth quarter of 2014 combined with the recent uptrend in economic indicators bode well for a more broad-based gain in economic momentum in the EU, according to the Economic and Steel Market Outlook 2015-2016/Q2 2015 Report from the Economic Committee of the European Steel Association (EUROFER). The weaker euro and low oil price will provide a major boost to domestic demand and exports.
 
EUROFER said that low energy prices, low inflation, falling unemployment and rising wages facilitate spending decisions. Robust growth is forecast for Spain, the UK and Germany. Investment growth is expected to strengthen from 2016. "The current slump in investment in the EU needs to be reversed or else industry is at risk of losing its competitive edge. So far, weak confidence, difficult access to finance and uncertainty about the impact of EU energy and climate change policies on running a business in the EU have kept companies standing on the sidelines. The European Central Bank's accommodative monetary policies in combination with national and EU initiatives to stimulate investment could help the private sector become less risk-aversive," said EUROFER director general Axel Eggert.
 
"The first customs data for the steel trade in early 2015 fuel concerns that imports will remain at an elevated level as long as excess production, mainly originating in China, is being pushed into the international markets at cut-rate prices, thereby distorting traditional steel trade flows. As such, China's supply glut is hurting the profitability and viability of the global steel sector," he added.
 
According to EUROFER, destocking curtailed EU steel demand in the fourth quarter of 2014. The 3.9 percent rise of apparent steel consumption in 2014 was largely absorbed by imports from third countries. The EU steel market is expected to strengthen mildly further in 2015-2016. However, the key uncertainty for EU steel producers is whether third country imports will prevent them again from benefiting from the mildly positive trend in EU steel demand.