The European Steel Association (Eurofer) had good news about the EU steel sector last week, albeit with a caveat.
According to a report from Eurofer last week, EU investment in steel and its exports have trended positively.
“Strengthening investment and robust exports are boosting the performance of steel-using sectors in the EU,” the report states. “Steel demand is expected to continue its gradual recovery in 2018.”
The report continues with a caveat.
“However, increasing import pressure in in the second quarter of 2017 signals that foreign supply remains a critical issue for the EU steel sector.”
Steel consumption in the EU dipped slightly in the second quarter compared to the first quarter, according to the report. As a result, EU domestic suppliers suffered. Deliveries by EU domestic suppliers in the second quarter fell 3.5% year-over-year. In addition, third country imports rose by 10% year-over-year.
“The relative balance between growth in domestic and foreign supply seen in the first quarter of 2017 was reversed at the expense of EU steel mills,” said Axel Eggert, director general of Eurofer, in a prepared statement. “Despite a reduction in imports from China and several other countries owing to corrective anti-dumping duties put in place third country import volumes have risen again in the second quarter.”
Overall, however, EU steel consumption for 2017 is forecast to rise 2.3%. The report also notes that steel demand is expected to continue its “gradual recovery” into next year (a recovery dating back to 2014). The report cites the “expected rise in real steel consumption in the EU market and very modest support from the stock cycle” as factors underpinning the ongoing bounceback.
As for steel-using sectors, the report states production activity grew by 3.1% year-on-year. Moreover, first-quarter growth was revised up to 6.3% (compared to the same period in 2016).
“We welcome the healthy performance of relatively steel-intensive sectors,” Eggert said in the release. “These include the automotive and engineering industries, as well as tube manufacturers, over the first half of 2017. Growth in the construction industry was the strongest it has been for many years and clearly reflects improving fundamentals in this important steel-using segment.”
Eurofer expects total output to continue to trend positively throughout the remainder of the year, building on the momentum of the first half. Total output is forecast to rise by 4.2% for the year, according to Eurofer.
Despite import pressures, the total economic picture for the EU bloc leaves room for optimism. Eurofer’s October outlook forecasts GDP growth of 2.1% this year and 1.9% for 2018.
“The business climate looks set to remain supportive to continued healthy investment growth, whereas private consumption growth is foreseen to slow down somewhat,” the report states. “In combination with stable growth of government consumption, domestic demand will be the major driver of economic growth in the EU.”