London — Eurofer cut its 2020 EU apparent steel consumption outlook to an increase of 1.2% at 159 million mt from a 1.4% forecast in its fourth-quarter 2019 report, the trade association said Thursday.
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"The main reason is the lower base in 2019, which is still based on an estimated Q4," Jeroen Vermeij, Eurofer director of market analysis and economic studies, told S&P Global Platts.
"In the Q4-2019 report, we had forecast that apparent steel consumption would fall by 3.1% to 158 million mt in 2019. Hard data for the first three quarters of the year have led us to revise this down to [a decrease of 3.3%] and 157 million mt in our Q1-2020 report. So the minor downward revision is not due to a very different view on market conditions in 2020, but rather due to a slightly weaker-than-expected performance of the EU steel market in 2019," Vermeij said in an e-mail after a webinar on the first quarter of 2020 report.
Leading indicators suggest that the downturn continued in the remainder of 2019, albeit with some signs of stabilization. No significant rebound is forecast before the second half of 2020. In 2021, apparent EU steel consumption is forecast to increase 2.3%.
Eurofer's position on 2020 and 2021 consumption was unchanged, it said, with any growth supported mostly by restocking as well as some improvement in real demand.
In general, the current downturn in the EU manufacturing sector is unlikely to bottom out in the very short-term, Eurofer said.
The major risk factors are escalating trade wars between the US and several of its main trading partners, mostly China, even after signing of the phase one trade agreement on January 15 eased frictions, and persistent uncertainty regarding the final Brexit deal to be agreed by the end of 2020, it said. These factors are set to weigh on trade conditions in 2020, and may even lead to a further deterioration in business sentiment, it added.
According to the latest Eurofer report, the combination of muted steel market fundamentals and high and increasingly volatile monthly EU steel imports will most likely continue to undermine business conditions for EU producers.
The trade association added that any recovery in EU steel demand in early 2020 will mainly benefit importers rather than domestic suppliers due to the transfer mechanism of unused quarterly quotas, which Eurofer said required revisions.