The European Confederation of Iron and Steel Industries (EUROFER) has issued its Economic and Steel Market Outlook for 2008-2009, in which its states that steel consumption is likely to shrink next year from the 2008 level, with the biggest demand decline being expected during the first half of the year.
According to EUROFER, fading growth in the first three quarters of this year confirmed that industrial fundamentals have started to weaken from the second quarter onwards. Activity is expected to deteriorate further by a significant degree over the coming quarters. Particularly in the first half of next year, weakening domestic and international demand will result in new orders drying up rapidly and in declining outputs in most sectors. The worst affected sectors are construction and, particularly, automotive.
EUROFER forecasts that output in sectors using steel will drop 0.8 percent in 2009 after a 0.6 percent increase forecast for this year, as the whole economy slows to a growth rate of 0.2 percent from 1.3 percent seen this year.
Meanwhile, the Confederation estimates that output in steel-consuming sectors will fall 1.1 percent year on year in the last quarter of this year, and that it will fall 1.6 percent in the first quarter of 2009 and shrink 2.2 percent in the second quarter.
EUROFER added, "The coming quarters will see the EU steel market entering a period of temporary instability and oversupply. Real steel consumption is already on a weakening trend since mid-2008. The latest projections are particularly more pessimistic for 2009 and indicate that the downward trend is expected to accelerate during the first half of next year as falling end-user activity will lead to a reduction in final consumption. The supply-demand balance is also threatened by supply side risks. Recent import data and license applications for imports into the EU show continued high or rising levels, with those from China on a distinctly rising trend since the second quarter. Moreover, slowing end-user activity makes an inventory correction very likely. Until business confidence picks up again, steel buyers will limit purchases and keep stocks as low as possible. Once the expected improvement in the EU economy and business climate will start to filter through in the demand side of the steel market, a modest rebound could take place in the final quarter."