Consumption of steel products in the EU will decrease by 1.6% in 2023 – EUROFER

The Association of European Steel Producers (EUROFER) worsened its forecast for steel consumption in the EU for 2022 and slightly improved its expectations for 2023. The organization’s website reported about it.

All the negative factors of the first half of 2022 have persisted and continue to affect the European steel market. According to the results of 2022, it is expected that the visible consumption of steel will fall by 4.6% (in the previous forecast there was a drop by 3.5%), in 2023 – by 1.6%. In 2023, demand in steel-using sectors is forecast to remain subdued through at least the second quarter.

In 2024, subject to a more favorable development of events in the industry and improved demand, it is expected that the consumption of steel products will increase by 1.6%. These factors depend on the future evolution of energy prices, the war in Ukraine and its impact on global supply chains.

“We are witnessing what we have been warning against in the past months: energy crisis, inflation, supply chain issues, unparalleled decarbonisation costs combined with massive cheap imports from third countries, are a toxic cocktail for industry. The health of the steel sector is the litmus test for the whole EU industry, given the numerous value chains with steel at their core,” commented Axel Eggert, CEO of EUROFER.

According to him, this should signal the need for the development of the European economy of clean technologies. However, it must be based on demand and receive support. The USA has already paid attention to this, which was demonstrated by the adoption of the Law on Reducing Inflation.

In a new review, EUROFER estimated a fall in steel consumption in the EU in the third quarter of 2022 at 11.4% y/y – to 32.2 million tons.

“Compared to the successful second quarter, when consumption reached 38.6 million tons, this indicator decreased by 16.5% q/q. This is a reflection of the market collapse that we saw in the early fall of last year. However, it is still worth paying attention to the consumption forecasts for 2023-2024 in terms of quarters. Thus, the association predicts a drop in consumption in the first quarter of 2023 by 5.4% y/y, which according to our calculations will increase by 3% until the 4th quarter of 2022. That is, we have a small growth at the beginning of the year quarter to quarter,” noted GMK Center chief analyst Andriy Tarasenko.

According to him, at the same time, a very slight drop is expected for the second quarter – only 2.5% y/y. Given the high base of comparison, this suggests significant consumption growth already in the second quarter of 2023 (+7% q/q), as the same period last year was quite strong. That is, we should expect growth momentum in the steel market.

“However, EUROFER quite unexpectedly predicts growth of only 0.3% y/y for the third quarter of 2023. Given the collapse of the market in the third quarter of 2022, this means expecting an almost similar collapse this year. The predicted dynamics of the 3rd quarter of the current year does not correspond to the consensus forecasts for the GDP of the eurozone. Our view of the market is somewhat different. We expect some cooling of the market in the second half of 2023, but without significant volume volatility,” Andriy Tarasenko noted.

As GMK Center reported earlier, according to the WorldSteel association, steel production in the EU countries in 2022 decreased by 10.5% year-on-year – to 136.7 million tons. In general, steel production in the world fell by 4.3% y/y – to 1.83 billion tons. Earlier, EUROFER expected that due to the closure of production facilities, steel production in Europe in 2022 could decrease by 4%.