The outlook for steel demand
in Western Europe is deteriorating. At the start of the year there
had been hopes that economic growth might reach 2 percent in the
Euro-zone nations. Recently published figures show that it was only
1.6 percent in the first quarter. In some countries – including
the largest steel consumers Germany and Italy – it is weaker still
and the outlook is negative.
In a global market, which is doing little
to favour European manufacturing industry, the continuing strength
of the Euro is eroding competitiveness. Higher costs for raw
materials and energy are adding to the difficulties of steel-using
The domestic EU-15 economy is not much
better. There is no sign of an increase in private capital
investment nor of industrial output. Top steelmaker, Arcelor, has
forecast growth in industrial production of no more than 1.4 percent
With stocks of steel still overhanging the
market, this means apparent consumption is unlikely to show any
increase for the foreseeable future. In addition, the strong Euro
made the EU a net importer of steel in the first few months of 2005,
putting further pressure on the market.
But look further east, and what a contrast
can be seen! One year on from the enlargement of the EU, the new
member states of Central and Eastern Europe are doing famously.
Recent predictions are for a 4.5 percent increase in their combined
GDP this year. Turkey is faring even better.
Partly thanks to the relocation of
manufacturing activity from Western Europe, steel demand is
continuing to grow strongly in the rest of the continent. Recent
industry estimates are that real consumption in Central and Eastern
Europe rose by 3 percent in the first quarter of this year, while in
the EU -15 it fell by around 4 percent.
The International Iron & Steel
Institute forecasts that Europe, excluding the EU -15, will require
4.7 percent more steel this year than last. This makes the region
one of the fastest-growing steel consumers in the world outside
However, these countries together use only
about 26-27 million tonnes per year of finished steel versus 146
million tonnes per year in the EU -15, so even a rapid rate of
expansion doesn’t mean many more tonnes. Consequently, European
mills will have to keep their production rates still more firmly in
check if they are to forestall a collapse in prices.