EU apparent steel consumption grew 2.7% y-o-y in Q3-2015. This mild increase in apparent demand basically reflects the impact of increasing inventories. The 29 % y-o-y rise in imports in Q3 was too much to be fully absorbed by end-users. With real steel consumption stabilising around the level of a year earlier, the oversupply on the market ended up in stocks.
EUROFER Director General Axel Eggert said: “As feared, EU steel mills continued to struggle under these market conditions. The sharp rise in imports and a 13% drop in exports pushed total deliveries by almost 4% down compared with the same period of 2014. Ample global supply and the related fiercening fight for tonnage between suppliers depressed steel prices and fuelled uncertainty in the market”.
Meanwhile, customs statistics for Q4 signal that exports fell further, whereas imports continued to rise, thereby exceeding the already high average monthly import levels registered in Q2 and Q3. This compounded the impact of seasonal destocking in the final quarter of 2015 with steel buyers reducing stocks as much as possible. Q4 apparent steel consumption stagnated around the year earlier, weighed down by heavy destocking. Total apparent consumption is estimated to have grown by 2.3% in 2015.
The outlook for 2016 and 2017 is for a gradual further improvement in EU steel demand. Mr. Eggert commented: “The expected steady strengthening of end-user activity should translate into a mild growth of steel demand of on average almost 1.5% per annum. However, the key uncertainty with respect to actual market conditions for EU steel mills is third country exports. China should stop exploiting the export channel for its overproduction due to domestic steel demand having peaked. If this continues, EU mills will lose further market share, not only in the EU but also in their key export markets”.
Activity growth of steel using sectors in Q3-2015 came in slightly below expectations. Growth was negatively affected by a stronger than anticipated drop in steel tube production. In contrast, sectors oriented towards consumer markets such as cars and white goods manufacturing have been doing better than expected owing to the robust boost from increased consumer spending during 2015. Total activity of the EU steel using sectors is estimated to have grown by 2 % in 2015.
Prospects for 2016 and 2017 are mildly positive. Overall activity in steel using sectors is expected to remain on a steady but unspectacular growth track. Investment-driven sectors such as construction and mechanical engineering are forecast to gain momentum.
The EU economy entered 2016 on a solid footing, with the latest indicator readings boding well for economic fundamentals and business conditions in the quarters ahead.
Moreover, conditions look now right for capital investment to gradually take over the baton from private consumption as growth driver for the EU economy over the 2016-2017 period. With continued support from consumer and government spending as well as exports, the recovery in the EU looks set to becoming more broad-based and self-sustained. However, downside risks to the global economic outlook are seen remaining substantial, with particularly a potential negative impact from weaker than expected growth among major emerging markets.