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EU steel consumption set to experience third recession in four years: Eurofer

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EU steel consumption set to experience third recession in four years: Eurofer

Highlights

FY2022 EU steel demand forecasted to decrease by 1.7%

Sector may recover by 5.6% in 2023, subject to uncertainty

Steel-using sectors' output to expand by 1.1% this year

The EU's steel consumption is likely to see its third recession in the space of only four years in 2022 as a result of quarterly drops that are foreseen over the second, third and fourth quarters, according to an outlook from the European Steel Association, or Eurofer.

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Eurofer foresees a 1.7% decline in the EU's apparent steel consumption in full year 2022. However, this forecast represents an upward adjustment from the 1.9% decline seen previously.

"A gloomier outlook for the steel market for the rest of 2022 is consolidating and will most likely have spillover effects also on 2023," Eurofer Director General Axel Eggert said in a statement.

"We have been facing skyrocketing energy prices and bottlenecks in supply chains for almost a year now, and the dire consequences of Russia's invasion of Ukraine for half a year. Yet, there is no sign that uncertainty will ease any time soon, while steel imports in the EU are still significant," he said.

The union's steel consumption is set to recover by 5.6% in 2023, but the steel demand remains subject to high uncertainty, which is set to last at least until the first quarter of 2023, conditional upon developments in the Russia-Ukraine war and its impacts on global supply chains, although these are unforeseeable for the time being, Eurofer said.

Despite the persisting supply chain issues, the output of the EU steel-using sectors marked the fifth consecutive year-on-year growth over the January-March quarter of 2022 (up 4.9%), gaining speed compared with Q4 2021.

The dynamic is owed to a combination of positive developments in the construction, mechanical engineering and transport sectors on the one hand, and severe drops in output for automotive and domestic appliances on the other.

Figures for the first quarter of 2022 have not yet reflected the Russia-Ukraine war (which started Feb. 24), but the latter has certainly impacted the outlook for the rest of 2022.

Steel-using sectors' output is expected to continue to expand in 2022, but as a result of the rapid deterioration of the global industrial and economic outlook following Russia's war in Ukraine, Eurofer has downgraded its year-on-year growth rate to 1.1%, down from its previous outlook of 2%.

These factors, combined with ongoing and worsening supply chain issues, are expected to yield either very modest growth or even drops in the EU steel-using sectors' output over the three remaining quarters of 2022, Eurofer said.

In 2023, their production will accelerate only moderately, by 2.2%, due to overall high uncertainty which may ease only from the second quarter of 2023 onwards.

In the first quarter of 2022, growth in apparent steel consumption in the EU grew by 6.5% on the year to 37.1 million mt. Domestic deliveries recorded a tiny increase of 0.2%, mirroring the slowdown in demand apparent since H2 2021, but Q1 steel imports into the EU showed a pronounced increase of 28.8% on the year.