Steel demand flags in European Union

A MEPS (International) product story
Edited by the Engineeringtalk editorial team May 20, 2005

The outlook for steel demand in Western Europe is deteriorating, according to MEPS European Steel Review.

The outlook for steel demand in Western Europe is deteriorating, according to MEPS European Steel Review.

At the start of the year there had been hopes that economic growth might reach 2% in the Euro-zone nations.

Recently published figures show that it was only 1.6% in the first quarter.

In some countries - including the largest steel consumers Germany and Italy - it is weaker still and the outlook is negative.

In a global market, which is doing little to favour European manufacturing industry, the continuing strength of the Euro is eroding competitiveness.

Higher costs for raw materials and energy are adding to the difficulties of steel-using manufacturers.

The domestic EU-15 economy is not much better.

There is no sign of an increase in private capital investment nor of industrial output.

Top steelmaker, Arcelor, has forecast growth in industrial production of no more than 1.4% this year.

With stocks of steel still overhanging the market, this means apparent consumption is unlikely to show any increase for the foreseeable future.

In addition, the strong Euro made the EU a net importer of steel in the first few months of 2005, putting further pressure on the market.

But look further east, and what a contrast can be seen.

One year on from the enlargement of the EU, the new member states of Central and Eastern Europe are doing famously.

Recent predictions are for a 4.5% increase in their combined GDP this year.

Turkey is faring even better.

Partly thanks to the relocation of manufacturing activity from Western Europe, steel demand is continuing to grow strongly in the rest of the continent.

Recent industry estimates are that real consumption in Central and Eastern Europe rose by 3% in the first quarter of this year, while in the EU-15 it fell by around 4%.

The International Iron and Steel Institute forecasts that Europe, excluding the EU-15, will require 4.7% more steel this year than last.

This makes the region one of the fastest-growing steel consumers in the world outside Asia.

However, these countries together use only about 26-27 million tonnes per year of finished steel versus 146 million tonnes per year in the EU-15, so even a rapid rate of expansion doesn't mean many more tonnes.

Consequently, European mills will have to keep their production rates still more firmly in check if they are to forestall a collapse in prices.

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