A bad spell for European steel

Energodigest | 3 August 2023
The Eurozone Manufacturing PMI marked a sixth consecutive decrease in July, having plunged to a 38-month low of 42.7 (see Fig. 1),[1] plagued by an accelerated decline in production volumes and new orders. These negative trends have a bearing on the steel sector as well.
According to the World Steel Association, the EU’s crude steel output dropped 11.1% YoY to 10.6 million tonnes this June (see Fig. 2) and 10.9% YoY to 66.3 million tonnes in the first six months of 2023. Production is falling as the influx of new orders rapidly dwindles. Apparent steel consumption in the EU-27 decreased 11.7% YoY in Q1 2023 and is likely to contract 3% by the end of the year, marking a fourth annual recession in the past five years, estimates by Eurofer suggest. Amid lackluster demand most steel producers take longer-than-usual summer maintenance breaks, which has a negative impact on supply.
As for industry players, they are very cautious in their outlook for the European steel market. ArcelorMittal, for example, has trimmed its year-end forecast, with growth in apparent steel demand in Europe now projected within a range of -0.5% to +1.5%, compared with the +0.5% to +2.5% projected earlier, while Sweden’s SSAB expects an even steeper downturn in the third quarter than a quarter earlier.

Demand is driven down by malaise in the construction sector, which consumes around 35% of the EU’s steel output (see Fig. 3), with recession there expected at 0.5% in 2023. According to the European Construction Industry Federation, investment in construction this year is set to drop 2.5%.[2]

Other constraints that continue to weigh heavily on steel makers are high energy bills, carbon emission quotas and growing logistics costs. To break the bad streak in the European steel industry, it’s essential to minimize the impact of these factors and stimulate the rapid recovery of major steel-consuming sectors.
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