The COVID-19 outbreak has caused steel consumption forecasts to be slashed and the overall economic outlook downgraded. Shutdown measures implemented by governments starting from March 2020 have severely impacted manufacturing activity and steel-using industrial sectors. However, steel demand had been struggling even in 2019, as new data has shown in the European Steel Association’s (EUROFER) latest Economic and Market Outlook, published today.
“The European steel sector had already been experiencing subdued developments in the second half of 2019 due to a downturn in the EU manufacturing sector, escalating trade wars between the US and several of its main trading partners, ineffective EU steel safeguards, and persistent uncertainty regarding Brexit”, said Axel Eggert, Director General of the European Steel Association (EUROFER). “These factors combined led to a continued deterioration in business sentiment and curbed investment growth throughout 2019, even before the onset of the pandemic”.
Apparent steel consumption in the EU fell by -10.8% year-on-year in the fourth quarter of 2019 after a drop of 1.6% in the third quarter. This resulted in an annual decline of -5.3% for full year 2019.
“This was the worst performance in EU steel demand since 2012,” added Mr Eggert. “The negative development seen in the fourth quarter of 2019 is the result of the continued slump in EU’s manufacturing sector due to weakened exports and investment. This trend became more pronounced during the second half of last year, coupled with escalating trade tensions between the US and its major trading partners”.
Data for the fourth quarter of 2019 continued to show growing import distortions as well as higher volatility as a result of the increase in the size of the EU steel safeguard quota.
“The outbreak of the COVID-19 pandemic has compounded an already challenging steel market situation, with unprecedented consequences for the European steel industry,” emphasised Mr Eggert. “Capacity idling, reductions in the workforce and cuts in production are already taking place at an unprecedented scale. This difficulty will likely continue when manufacturing restarts as lockdown measures ease across Europe”.
It is unknown, at the time of writing, as to when – or whether – normal economic activity will be fully restored. EUROFER assumes that, given the pace of deconfinement and the measures to ease the lockdown that have been set out by most EU governments, production should be able to restart again in almost all industrial sectors from the beginning of the third quarter. The coming months will nevertheless be determined by global restrictions on economic activity.