EUROFER: First green shoots of recovery in EU steel market

Thursday, 04 February 2010 16:12:17 (GMT+3)   |  
       

On February 4, the European Confederation of Iron and Steel Industries (EUROFER) released its report entitled "Economic and Steel Market Outlook 2010-2011." The report states that economic momentum in the EU should gradually gain further strength this year, adding that progress will be slow and surrounded by uncertainty, though the risks are now much more balanced than a year ago.

According to the report, the recovery will also take hold in the steel consuming sectors. Activity in the manufacturing sector will be supported by improving international trade and inventory replenishment. The outlook for the engineering industries and automotive manufacturers has become slightly more upbeat. In contrast, perspectives for the construction sector have darkened, mainly due to a further deterioration in the non-residential sector. On balance, output in the steel using sectors will rise 0.6 percent in 2010. A further strengthening is expected for 2011 with growth accelerating to 3.5-4 percent.

Commenting on the outlook for 2010, EUROFER director general Gordon Moffat said, "We are seeing the first green shoots of recovery and there is confidence that this will translate into a further improvement in EU steel market fundamentals".

According to EUROFER, orders and deliveries have recently risen compared with the depressed levels registered in the final months of 2008 and the first half of 2009. Low imports and reduced levels of domestic supply have resulted in supply currently being much better aligned with still weak demand levels. Nevertheless, apparent consumption is estimated to have fallen by almost 35 percent in the whole of 2009.

Low inventories at the start of 2010 will be supportive to market dynamics gradually gaining strength during this year. Any further improvement in demand side fundamentals should trigger a corresponding need to replenish inventories from their current low levels. This will provide the major boost to the 12.5 percent rise in apparent consumption expected in 2010.

The rebound in real steel consumption expected for 2011 will broaden the basis for growth in apparent consumption.

The import situation remains an issue of concern. So far, rising global steel production has not yet resulted in a significant increase in imports into Europe. However, Mr. Moffat added, "If global demand fails to follow the rising trend in steel output, temporary oversupply elsewhere could lead to import pressure building up in the EU more strongly than currently projected."