The prolonged period of high interest rates, the ongoing Russia-Ukraine war, resulting energy crises, inflation, labor shortages, and the disruption in the Red Sea region due to the Israel-Palestine conflict are expected to slow the growth rate of steel consumption in Europe more than initially projected.
The European Steel Association (EUROFER) recently released its "2024-2025 Economic and Steel Market Outlook" report, predicting that nominal steel consumption in the EU will increase by 1.4% year-over-year in 2024 to reach 127 million tons. The previous report had forecast a 3.2% increase to 130 million tons.
The report also revised the 2025 EU nominal steel consumption forecast down from a 5.6% increase to 137 million tons to a 4.1% increase to 133 million tons.
In the first quarter of 2024, EU nominal steel consumption decreased by 3.1% year-over-year to 31.9 million tons. This decline in first-quarter steel consumption is expected to impact the anticipated rebound this year. Notably, steel consumption remains highly uncertain due to supply chain disruptions related to the Russia-Ukraine and Israel-Palestine conflicts, unprecedented increases in energy prices, and production costs. Although a gradual improvement in EU steel consumption is expected by the end of this year, actual consumption is still projected to remain below pre-pandemic levels.
The association also lowered growth projections for steel demand industries. The Steel Weighted Industrial Production (SWIP) index fell by 1.9% in the first quarter of 2024, a sharp contrast to the previous quarter's 0.5% increase. Production in the EU's steel-using sectors has continued to decline due to the Russia-Ukraine war, overall manufacturing weakness, global geopolitical tensions, and the long-term impact of the energy crisis.
The decline in the SWIP index reflects a prolonged slump in the construction, machinery, appliance, and metal product sectors, partially offset by ongoing growth in the automotive sector. The construction sector, which accounts for 35% of EU steel consumption, entered a recession in the third quarter of 2022 and declined for seven consecutive quarters (-2.3%) through the first quarter of this year. The prolonged period of high interest rates, labor shortages, and rising material prices are expected to maintain the construction downturn throughout the year.
The report stated, "The positive trend in steel demand industries, which began after the pandemic, started to slow down from the second half of 2022 due to rising energy costs and labor shortages following the Russia-Ukraine war, continuing through the fourth quarter of last year. The deteriorating economic and industrial outlook for the EU this year is driven by high inflation and the resulting interest rate hikes by the European Central Bank (ECB), with particularly negative impacts from the prolonged construction sector recession, ongoing geopolitical tensions, and worsening manufacturing conditions due to high interest rates."
It continued, "Amid ongoing adverse factors, the growth rate for steel demand industries is expected to fall to -1.6% in 2024, down from the previous forecast of -1%, and rebound to 2.3% in 2025."
Despite the lowered forecasts for steel consumption and demand industries, imports have increased. According to the report, EU steel imports, including semi-finished products, rose by 12% year-over-year in the first quarter, similar to the previous quarter's 11.3% increase.
Axel Eggert, EUROFER's Secretary General, stated, "While the EU's steel demand industries are in a prolonged downturn due to various adverse factors, import market share has risen significantly. This places both European steel production and related clean technology value chains at risk, necessitating urgent action at the EU level. The European Commission must promptly conclude a European Clean Industry Agreement centered on the steel sector."
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