Growth seen in EU in 2017, but uncertainty looms: Eurofer

“Economic recovery is seen to be strengthening in Europe, but uncertainty looms in the steel sector, in light of Britain’s vote to leave the European Union and the new US president elect, Donald Trump,” Jeroen Vermeji, Eurofer’s head of economic studies, said at the EUROMETAL Steel Net Forum in Porto Friday.

Eurofer said a stronger industry improvement is expected in 2017, based on the third-quarter. Steel using sectors have been growing 2.5% in 2016, with the automotive sector currently at its peak since the pre-crisis level — the only steel using sector to have achieved this.

Eurofer also expects exports to be in a position to increase next year, as the world economy gains momentum, adding that 2017 also looks to be a good year for private consumption. “I think we can be sure about the strength of private consumption,” he said.

Despite signs of confidence, it is currently “impossible to assess the impact” of the latest turn of events. “If Trump imposes a ‘large economic box’ around the US, it could depress investments,” Vermeij noted. Post-Brexit jitters could also hurt steel demand, as the uncertainty could weigh on investment.

“The EU is divided more than ever,” and the relationship with Turkey is “fragile and definitely at risk,” he said, referring to Brexit and the refugee crisis in the region — President Erdogan’s post-coup crackdown has also led to fears in Europe over his increasing grip on power.

Vermeji said European apparent consumption is up 2.6% (2.1 million metric tons) year-on-year, in the first half of 2016. However, imports are growing faster than domestic demand and therefore are capturing most of the rise; imports grew by 11% in the same period (1.8 million mt). “We are not benefiting from the increase in demand,” he said.

Apparent steel consumption is expected to stay stable in 2017, with distributors and service centres currently holding high stock levels. However, real steel consumption is expected to grow by 2.4% on the back of the growth seen in steel using sectors, Vermeij concluded.

Erica Sesay, PLATTS