The
European steelmakers association – EUROFER has recently lowered their outlook
for real and apparent steel consumption for rest of the year.
According
to the new estimates, the association now expects real consumption to move down
by -0.4% y-o-y in 2019, while apparent demand will decrease by 0.6% y-o-y to
163 MnT. This represents a downward revision from EUROFER’s previous forecast a
few months ago of a 0.3% growth in real consumption and -0.4% decline for
apparent demand.
While
the region’s apparent steel consumption saw a downtrend of -2.5% y-o-y basis,
EUROFER believes that Q3 and Q4 might see a slight recovery. However, a number
of uncertainties could adversely impact the sector down the line.
EUROFER
has argued that a series of factor including rising imports, slowing economic
growth and increasing safeguards poses as a threat to the EU’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.
The EU steel market is facing severe challenges. Following a decline in the
first quarter of 2019, real steel consumption is, on balance, expected to
stabilize 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.
The
market is being squeezed between negative final steel use developments and is
facing the ongoing and serious threat of import deflection triggered by the US
Section 232 import tariff in a context of persistent global overcapacity. The
system still allows for extreme behaviors by exporters which have the potential
to lead to serious market distortions. The expected reduction of apparent steel
consumption in 2019 of 0.6% year-on-year is therefore expected to come mainly
at the expense of EU steel producers.
Even
though market conditions in 2020 are expected to improve moderately, risks
related to import distortions continue to threaten the stability of the EU
steel market. The 5% increase in the safeguard quota from July 2020 – following
a 5% rise in February and in July 2019 – is once more not aligned with expected
growth in real steel consumption of just 1.1% in 2020. The EU market,
therefore, remains at risk of being destabilised by third-country imports at
the expense of EU domestic producers. Nevertheless, the mild increase in final
steel use is expected to lead to apparent consumption growing by 1.4% in 2020.
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 has 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.
Source:
SteelMint