Eurofer forecasts steeper decline in European apparent steel demand in 2023 but stronger recovery in 2024

European regional steel industry association Eurofer has lowered its outlook for apparent steel demand in the region for 2023, it announced on Wednesday July 26.

If this lower figure proved to be correct, it would be the fourth annual contraction in the steel market in the past five years, but a stronger recovery was expected in 2024, the association said.

Eurofer expected apparent steel consumption in the EU to drop by about 3% year-on-year in 2023, to 135 million tonnes, it said in its third-quarter 2023 outlook report. This would be down from the previous outlook for a 1% year-on-year consumption drop to 138 million tonnes, published in May this year.

In 2024, apparent steel demand in the bloc was expected to recover by 6.2%, rising to 144 million tonnes. This was a revision from Eurofer’s previous forecast for a 5.4% recovery.

But the association noted that the overall evolution of steel demand in the EU remained subject to much uncertainty. “Quarterly positive developments in apparent steel consumption are only expected to begin from the third quarter of 2023,” it said.

Steel-using sector outlook
Eurofer said that automotive sector output recovered by 3.5% in 2022, but that this was mostly a rebound from the low comparison base of 2021 due to a components shortage that year.

The sector was expected to record further growth in 2023, by 6.4%. This was revised from a previous recovery rate of 1.2%, according to the association.

The automotive industry in Europe was one of the few 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 June 2023.

Notably, in June 2023, the EU car market grew by 17.8% to 1 million registered units. This growth, however, can be attributed to the region’s rebound from a low comparison base last year, primarily driven by vehicle component shortages, the European Automotive Manufacturers Association (ACEA) said earlier this month.

Overall output levels in the sector will remain rather low in historical terms, and the automotive industry will continue to be mostly exposed to external factors. Therefore, Eurofer forecasts another drop in output for the automotive industry in 2024, by 4% year-on-year. This was also down from a previously expected decline of 1.8% year-on-year.

Market sources noted that demand for steel coil from the automotive industry has been rather stable at low levels during the course of 2023.The pick-up in steel demand from the automotive industry in March-April 2023 was rather a short-term rebound, mainly driven by the acute shortage of material due to production disruptions at key suppliers.

Meanwhile, Eurofer expected the construction industry to decline moderately by 0.5% in 2023, after recording 4.8% growth in 2022. The sector was expected to recover modestly (+0.7%) in 2024 (previously expected at +1.3%).

This sluggish trend in construction industry performance was 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 for housing demand of continued monetary policy tightening.

“Looking at the construction sub-sectors, the expected rise in interest rates – as a consequence of policy rate rises by the [European Central Bank] and other central banks – is set to affect residential construction demand,” Eurofer said. “Civil engineering is expected to continue to provide the strongest contribution to the construction sector’s performance, but to a lesser extent.”

Weak construction demand has weighed heavily on the European long steel market in recent months, with most producers taking summer maintenance breaks that are longer than usual due to a lack of inquiries, market participants told Fastmarkets.

“The construction industry is facing pressure from rising interest rates. There is a lack of new projects,” a trading source in Europe said.

In the Northern European market, the price for steel reinforcing bar (rebar), domestic, delivered Northern Europe, fell to a low of €575 per tonne ex-works in late July 2023, from highs around €1,030 per tonne ex-works in September 2022.

Published by: Julia Bolotova