Economic and Steel Market Outlook 2008-2009 - The October ’08 Report from EUROFER’s Economic Committee
As expected, the EU economy slowed down considerably in the 2nd quarter of 2008, reflecting strengthening global headwinds and fading internal EU dynamics. The upswing in Germany – Europe’s growth engine until early 2008 – has grounded to a halt.
Economic prospects for the EU sharply deteriorated in recent weeks due to the deepening global financial crisis. Confidence has fallen to unprecedented lows despite coherent actions from governments to keep the banking system afloat. The EU economy is on the brink of or already in recession. It may take until late 2009 before economic fundamentals could start to improve again. However, against the background of the unprecedented uncertainty regarding the effects of the financial crisis, the risk of a steeper downturn is certainly not to be underestimated.
In line with the darkened economic outlook, the latest forecasts for production growth in the EU steel using sectors signal a significant deterioration in activity over the coming quarters.
Fading growth in the first three quarters of this year confirmed that industrial fundamentals have started to weaken from the 2nd quarter onwards. Activity is expected to deteriorate significantly further over the coming quarters. Particularly in the 1st half of next year weakening domestic and international demand will result in new orders to dry up rapidly and output to decline in most sectors. The most badly affected sectors are construction and particularly automotive.
The coming quarters will see the EU steel market entering a period of temporary instability and oversupply. Real steel consumption is already on a weakening trend since mid 2008. The latest projections are particularly more pessimistic for 2009 and indicate that the downward trend is expected to accelerate during the first half of next year as falling end-user activity will lead to a reduction in final consumption. The supply-demand balance is also threatened by supply side risks. Recent import data and licence applications for imports into the EU show continued high or rising levels, with those from China on a distinctly rising trend since the 2nd quarter. Moreover, slowing end-user activity makes an inventory correction very likely. Until business confidence picks up again, steel buyers will limit purchases and keep stocks as low as possible. Once the expected improvement in the EU economy and business climate will start to filter through in the demand side of the steel market, a modest rebound could take place in the final quarter.
For the full report, click on the link :
Represented by EUROFER, the European steel industry is the world leader in its sector with a turnover of EUR 140 billion and direct employment of 370 thousand people, producing 200 million tons of steel per year.
Contact
Gordon Moffat, Director General +32 2 738 79 26 (g.moffat@eurofer.be)
Axel Eggert, Director Public Affairs +32 2 738 79 34 (a.eggert@eurofer.be)