Andrey Kuzmin/Adobe Stack
Recently, the European Steel Association (EUROFER) argued that a series of factors, including rising imports and slowing economic growth, are posing an existential threat to the E.U.’s steel industry.
Earlier this year, the E.U. imposed steel safeguards in an attempt to protect the bloc’s steel industry on the heels of the U.S.’s Section 232 tariff. However, amid an incremental rise in the steel quota under the safeguards, Europe’s steel sector argues the measures are not effective.
Late last week, the European Steel Association released its 2019-2020 steel outlook.
“The manufacturing sector in the EU may have not seen the worst yet: a deepening escalation of the trade war between the US and several of its main trading partners and a no-deal Brexit would severely impact global trade conditions, trigger a further deterioration in business sentiment and lower investment growth,” EUROFER said in a release. “In that scenario, the EU steel sector would suffer badly because at the same time the risk of import distortions increases due to the expansion of the size of the safeguard measures’ quota both this year and next.”
Axel Eggert, director general of EUROFER, sounded the alarm regarding scheduled increases in the quota under the steel safeguards.
“Given these economic and market conditions the European Commission needs to act now to adapt the steel safeguard measures to reflect these circumstances,” Eggert said. “The repeated rises in the size of the quota this year and next are completely out of step with the sluggish steel market.”
According to the EUROFER report, E.U. apparent steel consumption fell 2.5% in the first quarter of 2019 on a year-over-year basis. EUROFER argues the decline in demand has primarily impacted E.U. steel producers; deliveries from E.U. mills within the E.U. market fell 4% in the first quarter on a year-over-year basis, according to EUROFER.
“The EU steel market is facing severe challenges which are expected to have a negative impact on apparent steel consumption,” EUROFER states. “Following a decline in the first quarter of 2019, real steel consumption is, on balance, expected to stabilise around the year earlier level in the remainder of the year, leading to a total reduction in final steel use by 0.4% over the whole year. Meanwhile, flaws in the design and functioning of the current safeguard measures do not reflect the reality of an EU steel market.”
EUROFER forecasts apparent steel consumption will increase 1.4% in 2020. In addition, the association forecasts output in steel-using sectors will rise 1.1% this year and 1.4% in 2020.
On a macroscopic level, EUROFER expressed pessimism regarding the bloc’s economic outlook, particularly vis-a-vis exposure to the ongoing U.S.-China trade war.
“The likelihood of increasing economic fragility in the two largest economies of the world – the US and China – do not bode well for global economic growth and trade conditions in the second half of 2019 and in 2020,” EUROFER said. “Given its relative sensitivity to global economic trends, the EU economy is expected to enter a period of below-trend growth. However, growth of domestic demand is forecast to remain sufficiently resilient to prevent the EU economy from sliding into recession.”
The association forecast GDP growth in the third quarter of 1.4% and 1.5% in 2020.