Tag: steelworks

2025 is unlikely to see a long-awaited rebound in European industrial production and metals consumption, primarily steel. While the impact of earlier investments could improve the second half of the year, more substantial changes that have been set in motion to revitalize EU manufacturing have been postponed to 2026, multinational ING bank said.

At the start of the year, industrial production in the EU and the eurozone was 5% lower than two years ago, while it has remained stable in the US, and China recorded a 13% growth in that same period, ING noted in a report published on May 1.

February saw production in both the EU-27 and the eurozone rise to the highest level since August 2024, and in April, the manufacturing output PMI rose to 51.2 — the highest level in almost three years. According to ING, while the longstanding decline in European industrial production, which began in the first quarter of 2023, has shown signs of bottoming out with improved purchasing power, new uncertainties stemming from US President Donald Trump’s import tariffs are now eroding confidence and dampening investment in the manufacturing sector.

EU’s 20% reciprocal tariffs have been postponed for 90 days, but 25% tariffs on steel, aluminum, cars and auto parts remain in place, while most other EU-manufactured goods are now subject to a 10% tariff.

Eurozone exports to the US increased materially before tariff announcements were made, but “as long as tariffs remain in place and uncertainty about further and higher levies lingers, the US [the largest export destination providing 20% of extra-EU trade] will probably no longer be a growth market for European goods,” says ING.

While it is impossible to fully quantify their impact, ING reckons 20% tariffs will shave off 0.3 percentage points of eurozone GDP growth over the next two years. Aside from pharma, the machinery and equipment sectors that in 2024 made up 26% of EU’s Eur530 billion exports to the US – will be among those hit hardest, the bank estimates.

“The picture may change somewhat in the second half of the year, if the trade storm subsides and European producers and consumers can look ahead with more confidence,” says ING adding that “in the meantime, uncertainty over trade barriers remains a major disruptive factor for confidence and investment,” and that “we probably have to wait until 2026 for a substantial increase in industrial production due to government investments in infrastructure and defence.”

The escalation of trade tensions between the US and China will also have a negative effect on EU manufacturing as China seeks markets outside the US for its exports, although European exporters may well show resilience too and successfully shift part of their trade from the US to other countries. Meanwhile, the EU is already pursuing new trade agreements and forging partnerships with countries such as Mexico, Chile, Switzerland, Malaysia, and South American states.

However, conditions will remain difficult for longer for energy-intensive industries given that gas prices in Europe remain four to six times higher than in the US, and electricity is two to three times more expensive, ING estimates. The proposed measures on affordable energy from the European Commission could yield results, but immediate energy supply boosts are unlikely.

A number of steelworks – falling victim to lower domestic end-user demand, especially dwindling procurements by manufacturers of machinery, electrical equipment, and motor vehicles, whose productions declined the most in 2024, — have been shut across Europe recently as global overcapacity in steel has increased to a level that exceeds the total steel production of OECD countries.

The EU is now bracing for its basic industries’ competitiveness to be eroded further as US tariffs are expected to prompt more steel directed to the European Single Market, which in a persisting environment of high energy prices and weak demand will result in an increasing number of basic industrial companies shifting investments away from European soil.

Although the EU housing market is picking up and US import tariffs are having little impact on many European building material suppliers, manufacturers of metal and plastic semi-finished products do not see their prospects improving much for the time being, while a substantial increase in production isn’t expected until 2026.

Discussing other differences between sectors and countries, ING noted that high-tech industries, including electronics and air and spacecraft, are somewhat better off with an uptick in their production levels in February, while basic and mid-tech industries, including machinery and transport equipment, are affected by rapid technological advances and large-scale government investments in China that have made the country a fierce contender in traditional European strongholds.

Within the EU, Spain and Poland have managed to maintain stable production over the past two years, while Germany, Italy, and the Netherlands have experienced a steady decline.