Eurofer forecasts decline in steel-use sectors for 2022 but revival next year

Apparent steel consumption in the European Union is expected to decline in 2022, because of weak performance by key steel-using sectors, but to recover in 2023, European steel association Eurofer said in its third-quarter outlook report on Wednesday August 24.
The disruptions to global supply chains created by Russia’s unprovoked war against Ukraine, and the looming energy crisis in Europe, were expected to take a toll on the steel sector in the region.

Notably, steel consumption was expected to drop by 1.7% in 2022, Eurofer said in the report published on its website. But this would be followed by a 5.6% recovery in 2023.

But this outlook remained uncertain due to the economic and political difficulties resulting from the war. These included the uncontrollable increase in energy prices, which were likely to have serious effects on demand from steel-using sectors until at least the end of 2022, Eurofer said.

For example, in July this year, average electricity prices in Italy were around €400 ($398) per MWh, up from about €271 per MWh in June and sharply up from €103 per MWh in July 2021, according to local energy service company Gestore dei Mercati Energetici (GME).

And during the week ended August 21, average electricity prices in Italy surpassed €500 per MWh.

Steel-using sector outlook
Overall steel-using sector output in Europe was expected to rise by only 1.1.% in 2022. This year’s figure has been revised downward from an expected 2% in Eurofer’s previous outlook.

Growth in steel-using sector output, however, was forecast to accelerate moderately in 2023, showing a 2.2% increase.

After a slump by 20.4% in 2020 due to the effects of the Covid-19 pandemic, in 2021 automotive output rebounded, but only by 3.4%.

Output from the automotive industry was expected show a 0.5% decline in 2022. This would mean that the automotive industry’s output would remain below pre-pandemic levels.

The global components shortage, rising costs for energy and shipping, and subdued consumer demand, were likely to continue to affect the automotive sector until at least the end of 2022.

Steel prices in the EU have been falling continuously since April 2022 amid chronic overstocking and slow end-user demand.

Fastmarkets calculated its daily steel hot-rolled coil index, domestic, ex-works Northern Europe, at €720.00 ($716.52) per tonne on August 24, down by €2.40 per tonne day on day.

The latest calculation of the index was down by €37.50 per tonne week on week and by €135.00 per tonne month on month.

Output by the automotive sector was expected to rebound by 4.9% in 2023, but only if supply chain issues and global uncertainty were to ease substantially.

The outlook for construction output appeared more optimistic. In general, the sector is more resilient to economic shocks, Fastmarkets understands.

EU construction output was set to rebound by 5.3% in 2022, revised upward from 2.3% in the previous outlook, and to keep growing moderately in 2023 by 0.6%.

Disruptions along the supply chain and the overall deterioration of the economic and industrial outlook started to affect the sector from February 2022, when Russia launched its war on Ukraine, with consumer confidence declining from then onward, Eurofer said.

Overall construction activity should continue to grow at a low rate, mainly thanks to government-funded schemes, with the civil engineering sub-sector expected to provide the strongest contribution to the construction sector’s performance.

Published by: Julia Bolotova