“The impact of imports having surged over 2018
has squarely hit home. In an EU market that grew by 3.3% last year, imports
grew by 12.6% and domestic deliveries by only 1.7%”, said Axel Eggert, Director
General of the European Steel Association (EUROFER). “This represents yet
further loss of market share for domestic producers”.
The ‘relaxation’ of the final steel safeguard
measures – with an enlargement of 5% in February this year with another upwards
revision of 5% scheduled for July 2019 and another in July 2020 – operates out
of step with the anticipated decline of the EU steel market in 2019. As such,
the 15% increase in import quota allowed in the final safeguard measures risks
squeezing the EU steel sector, as it will be exposed to rising import pressure
in a shrinking market.
“As apparent steel consumption is expected to
fall by 0.4% in 2019, the situation for domestic producers will worsen”,
emphasised Mr Eggert.
EU STEEL MARKET OVERVIEW
In the final quarter of 2018 domestic deliveries
from EU mills to the EU market decreased by 2.1% compared with the same period
of 2017. This was the result of third country imports growing by 16.3%
year-on-year within a context of flattening steel demand growth over that
timeframe. Imports amounted to 9.6 million tonnes and accounted for 24.7% of EU
Over the whole year 2018 apparent steel
consumption rose by 3.3%. Third country imports grew by 12.6% which contrasts
sharply with a 1.7% rise in domestic deliveries. The preliminary safeguard
measures imposed by the EU Commission in July 2018 were supportive to limiting
import volumes in the second half of the year compared with the extraordinary
high import volumes that landed in the EU in the first half. However, the sharp
year-on-year rise in the second half of the year also illustrates that the
threat of deflection of tonnage due to the Section 232 tariffs on steel imports
imposed by the US and market distortions due to the global overcapacity and
other countries’ protectionist measures is still very much alive.
The outlook for EU steel demand is subdued. The
base case scenario for the development of final steel use shows only marginal
growth in 2019 and 2020. Given the uncertainty that currently surrounds the EU
steel market in terms of demand and supply fundamentals, steel inventories will
be managed with care. With reportedly relatively high inventories in the steel
distribution chain at the start of 2019, apparent steel consumption is forecast
to fall by 0.4% over the whole year 2019. Apparent steel consumption may grow
by 1.3% in 2020.
With only a few months of customs data available
it is impossible to already see a clear pattern in trade flows. Nevertheless,
with imports remaining at elevated levels and exports on a downward trend in
early 2019, the justified conclusion seems to be that there is no evidence of
an easing in competitive pressures in international steel markets. With global
steel overcapacity still estimated to be 550 million tonnes by the OECD, it is
of the utmost importance that individual countries and regions dismantle
market-distorting subsidies and other government support measures.
Additionally, they must share data and information on the process of capacity
reduction in order to facilitate the process of cutting excess capacity where
it is needed most and avoid a further proliferation of trade distortions.
EU STEEL-USING SECTORS
Total production growth in EU steel-using
sectors cooled further in the fourth quarter of 2018. The strongest slowdown
was registered in the automotive sector, followed by the mechanical engineering
sector, the steel tube industry and the metal goods industry. Meanwhile,
production activity in the construction sector did not witness much of a growth
deceleration, but continued to expand at a healthy pace.
Prospects for production activity in EU
steel-using sectors in 2019 and 2020 are rather weak, with external and
internal headwinds undermining the outlook. While private consumption and
government expenditure will continue to grow, both exports and investment are
at risk of falling behind expectations in case of a hard Brexit and an escalation
in global protectionist measures. The significant degree of uncertainty the
corporate sector is facing has clearly the potential to lead to a negative
confidence shock and investment decisions being postponed until more clarity
emerges on trade conditions and Brexit. On the other hand, a well-managed
Brexit and settlement of US-EU trade disputes would pose an upside risk.
Output in the EU’s steel-using sectors is
forecast to grow by 0.9% in 2019 and by 1.1% in 2020.
EU ECONOMIC CONTEXT
Slowing global economic momentum and the related
deteriorating contribution from net trade has been the primary reason for the
weakening of the EU economy in 2018. The slowdown was led by the industrial
sector, bearing the brunt of global headwinds. Export orders gradually
weakened, dragging on confidence.
Available forward-looking indicators and hard
data seem to justify the conclusion that the weakness in industry will at least
persist over the first half of 2019. The base-case scenario for economic growth
in the EU suggests that – nevertheless fairly solid – domestic economic
fundamentals could offset the weakness in trade. However, investment is
particularly at risk of falling behind expectations if rising protectionism and
a worsening global economic environment lead to a further deterioration in
EUROFER’s second quarter 2019 forecast for EU
GDP growth is 1.5% in both 2019 and 2020.
About the European Steel Association (EUROFER)
EUROFER AISBL is located
in Brussels and was founded in 1976. It represents the entirety of steel
production in the European Union. EUROFER members are steel companies and
national steel federations throughout the EU. The major steel companies and
national steel federations in Switzerland and Turkey are associate members.
About the European steel industry
The European steel
industry is a world leader in innovation and environmental sustainability. It
has a turnover of around €170 billion and directly employs 320,000
highly-skilled people, producing on average 160 million tonnes of steel per
year. More than 500 steel production sites across 22 EU Member States provide
direct and indirect employment to millions more European citizens.
Steel is the most versatile industrial material in the
world. The thousands of different grades and types of steel developed by the
industry make the modern world possible. Steel is 100% recyclable and therefore
is a fundamental part of the circular economy. As a basic engineering material,
steel is also an essential factor in the development and deployment of
innovative, CO2-mitigating technologies, improving resource efficiency and
fostering sustainable development in Europe.