Short term outlook for Europe is not very much optimistic

Short term outlook for Europe is not very much optimistic

The analysts predicting an economic recovery in Europe, in case of quick resolution of the Iraqi conflict, have turned out to be wrong. There is still no economical recovery in Europe, not even the signs. The steel industry is suffering as demand remains weak, and forecasted to remain like that. Furthermore the decline in steel sheet products consumption is expected to continue this year. There are no optimistic predictions for construction industry either. The industry is expected to decline for the third year in a row. Automotive industry does not show any growth in terms of production, but still doing pretty good. Stockists in the market are also suffering due to high inventory levels, because of positions taken during the final quarter of last year. On the other side, the European mills have successfully kept their total output under control for the last two years period to avoid further problems and push price increases during that time. However they had taken huge support from a very weak Euro, which had almost stopped imports, when they had pushed those price increases particularly during 2002. Moreover they were also able to increase their exports capitalizing on the exchange rate advantage, and bullish international markets. Obviously situation is a lot different now. Euro got very strong against the US Dollar and consequently imports have started to increase significantly in to EU. Of course the downfall of Chinese and other Asian markets has been another major reason for the increasing imports into EU. Strong Euro almost stopped exports of the domestic mills, and furthermore German mills started to increase their output during the first quarter of 2003. Under these circumstances, the European markets are not expected to recover in the short run, particularly in Euro terms, despite the strong expectations for the international markets to turn around and pick up by the last quarter of the year.