A leading industry expert has warned that the historical correlation between European steel users’ production and apparent consumption has disappeared, with annual growth in the former significantly outstripping the latter over the past six quarters.
Speaking at the EUROMETAL Steel Net Forum Iberia conference in Porto on March 17, Professor Roland Döhrn of the University of Duisburg-Essen said that the clear correlation between apparent steel consumption and production of users has been negative since the second quarter of 2021
“Production of finished products in the EU declined despite an increase in user production and shrinking imports,” he said.
Utilizing data from Eurostat, Eurofer and the World Steel Association, Döhrn calculates that between Q2 2021 and Q4 2022, European user production generally hovered within a range of 0-5% annual growth while apparent consumption has ranged from zero to minus 20%.
While the reasons for the structural break remain unclear, Döhrn suggested changes in user production patterns as a potential reason for the split.
He pointed to a reduction in steel intensity in the automotive industry as OEMs pivot towards electric vehicles which use more lightweight materials in order to maximize battery performance, and also noted a significant shift the construction sector’s production patterns meaning it requires less steel.
While the disparity between user production and apparent consumption would usually point to an increase in industry destocking, he suggested that the current pattern in user production and apparent consumption is beyond any fluctuations in stock levels.
“This difference goes beyond the stock cycle” he said.
Döhrn said that he expects European steel consumption to record negative growth this year before rebounding in 2024 supported by the recovery of the automotive industry and high construction output.
Platts assessed Northwest Europe hot-rolled coil at Eur903/mt ($961/mt) ex-works Ruhr March 16, up from Eur610/mt Dec. 1, 2022, according to S&P Global Commodity Insights data.
— Euan Sadden
