During his presentation speech at the SteelOrbis Fall 2022 Conference & 87th IREPAS Meeting held in Monaco on October 9-11, Alessandro Sciamarelli, director, Economic and Market Analysis Department EUROFER, the European Steel Association, said that economic growth in the EU has been slowing down since the third quarter of 2021 due to continued downside factors, such as high energy prices, very high inflation and supply chain issues.
The war in Ukraine has further slashed GDP growth prospects for all advanced economies, he continued, noting that the US has technically entered a recession starting in the second quarter of 2022, and that the EU could follow in the final two quarters of the year. Germany could be in recession in 2023, he noted, but predicted that other European economies may follow.
“There is a lot of uncertainty going on and many industries are being impacted by soaring energy prices,” Sciamarelli said. “The main channels impacting recession in Europe include inflation within individual economies that’s taking place at a level that has not been seen since 1985. Energy inflation in September in the European area was 41 percent, which has created an enormous cost burden for European industries.”
However, although natural gas costs in the EU have increased 15-20 times, EUROFER believes that inflation should not exceed 10 percent.
“The current energy shock is more serious than previous oil shocks, but the impact on Western economies, the EU in particular, could be lower,” he continued.
In terms of economic predictions moving forward, although apparent steel consumption is expected to decrease in 2022, by approximately 2.5 percent, and, although another forecasted drop in apparent consumption in 2023 is likely (around -2%), there are positives to report within the market.
For example, Sciamarelli said that data show that the construction sector has been the most resilient, and will continue to grow into 2023 (although it is only expected to grow by 0.7 percent next year). The automotive sector, on the other hand, which has been declining since 2019, is expected to grow by more than 15 percent in 2023.
“High energy prices, natural gas in particular, are expected to stay until at least the first quarter of 2023,” Sciamarelli concluded. “The macroeconomic outlook is quickly getting worse, and with a possible stagflation scenario, inflation in EU countries will continue to stay around current levels until at least the third quarter of 2022. A technical recession in the EU is likely in the third quarter and the fourth quarter of 2022, and, while there will be a possible improvement in the second quarter of 2023, it is subject to wide uncertainty due to several unpredictable factors, such as still-high energy prices and possible rationing of natural gas.”