Oct 30, 2023
Steel market spirals into deeper recession in 2023, faces growing unpredictability for 2024

European regional steel industry association Eurofer has once again lowered its outlook for apparent steel demand in the region for 2023, it announced on Monday October 30.

If this forecast proves to be correct, it will be the fourth annual contraction in the steel market in the past five years, but a stronger recovery is expected in 2024, the association said.

Eurofer expected apparent steel consumption in the EU to drop by about 5.2% year on year in 2023, to 132 million tonnes, it said in its fourth-quarter 2023 outlook report. This is be down from the previous outlook’s expected 3% year-on-year consumption drop to 158 million tonnes, published in July this year.

In 2024, apparent steel demand in the bloc is expected to recover by 7.6%, rising to 142 million tonnes. This is a revision from Eurofer’s previous forecast for a 6.9% recovery in 2024.

“The perspectives for the European steel sector get gloomier every quarter, amidst disruptive wars, global tensions, an unresolved energy crisis, high inflation, tightening economic conditions and historically high import shares that are strangling manufacturing. This situation negatively impacts steel demand. It is essential that EU policymakers steer a course which maintains a sustainable industry in Europe and responds to the call of the clean tech value chain — of which steel is a fundamental part — for an EU Clean Industrial Deal and urgent actions to keep Europe in the world’s clean technology race,” Axel Eggert, director general of Eurofer, said.

Steel-using sector outlooks

Automotive

The automotive sector’s output in the EU recovered by 3.5% in 2022, but this was mostly a rebound from the low comparison base of 2021, due to a components shortage that year.

The sector is expected to record further growth in 2023, by 7%. This was revised from a previous recovery rate of 6.4%, according to the association.

But output levels will still remain far below the pre-crisis levels seen in 2018-2019, and the sector is expected to shrink by 4.6% in 2024.

The automotive industry in Europe was one of the few relatively well-performing steel-consuming sectors in 2023, with data from the European Automotive Manufacturers Association showing that new car registrations in the EU continued to grow strongly in September 2023.

Notably, the EU car market grew by 9.2% to 861,062 registered units in September, marking the 14th consecutive month of growth. But this growth can be attributed to the region’s rebound from a low comparison base last year, primarily driven by vehicle component shortages.

Market sources noted that demand for steel coil from the automotive industry has been broadly stable at low levels during the course of 2023.

“Long-term contracts [for flat steel] for the second half of 2023 with automotive industry, were done at same levels as for the first six months. In general, automotive demand is not booming, but it is not terrible,” a trading source in Germany said.

Fastmarkets’ daily steel hot-rolled coil index domestic, exw Northern Europe averaged at €639.06 ($674.07) per tonne in September 2023, down by €126.14 per tonne from the monthly average of €765.20 per tonne in September 2022.

Construction

Meanwhile, Eurofer expects the construction industry to decline moderately, by 1.7% in 2023 (revised down from a 0.5% drop forecasted in July), after recording a 4.8% growth in 2022. The sector is expected to recover modestly, by 0.2% in 2024 (previously expected at +0.7%).

This sluggish trend in construction industry performance is expected to worsen in the next three quarters due to the effects of rising prices for construction materials, a shortage of construction workers and, in particular, the consequences of continued monetary policy tightening on housing demand, the association said.

“Looking at construction sub-sectors, rise in interest rates — as a consequence of policy rate hikes by the ECB [European Central Bank] and other central banks — has already impacted residential construction demand. Civil engineering is expected to continue providing the strongest contribution to the construction sector’s performance, but to a lower extent,” Eurofer said. “This segment will continue to be supported by EU-wide public policies (NextGenerationEU, etc.), but their effects have become increasingly uncertain and difficult to quantify due to the recent deterioration of the economic outlook.”

Weak construction demand has weighed heavily on the European long steel market in recent months, with producers’ recent bullish attempts falling through due to lack of demand, market participants told Fastmarkets.

The price for steel reinforcing bar (rebar), domestic, delivered Northern Europe fell to a low midpoint average of €589.38 per tonne ex-works in September 2023, from highs around €1,014.38 per tonne ex-works in September 2022.

Published by: Julia Bolotova

Source: Eurometal