EU steel market: demand almost halved in first half 2009

Economic and Steel Market Outlook 2009-2010 - The April ’09 Report from EUROFER’s Economic Committee

While data of the first quarter of 2009 confirm that the economic downturn in the EU is gathering pace, it is clear that particularly EU industry is hit hard by falling exports and tight credit supply. Domestic and international export demand for manufactured goods has continued to fall sharply. Companies are struggling to survive under extremely difficult business conditions, cutting investment and reducing operational stocks to the bare minimum as long as the slump in confidence and tight credit availability continues. Consequently, the outlook for the steel using industries in 2009-2010 is very grim: all sectors will be seeing strongly reduced output levels, particularly in the 1st half of this year.

The impact on the EU steel market is dramatic. Strongly reduced activity levels in the steel using industries translate into much lower volumes of steel needed for direct production processes. While the drop in RC is of utmost concern, its impact is multiplied on the steel producers in the EU by the inventory cycle and translates into a drop in activity of 40% or more. Lower end-user activity implies the need for lower inventories throughout the steel value chain. Moreover, current stocks at end-users, steel service centres and stockholders are assessed as being still much too high compared to the weak activity levels. This means that a further significant inventory reduction is needed before the supply-demand situation can come closer to a balance. Consequently, orders intakes at EU steel mills are expected to be at unprecedented low levels for the time being. Meanwhile, import pressure in the EU has remained relatively high. On balance, the latest forecasts show apparent steel consumption falling by 40-45% year-on-year in the 1st half of this year, and by almost 30% in the whole of 2009.


The outlook for 2010 remains depressed: real steel consumption will remain at a low level, while apparent consumption could see some growth, owing to the fading influence of the stock cycle.