Speaking at the 15th SteelOrbis "New Horizons in Steel Markets" annual conference being held virtually on December 1-3 due to the Covid-19 pandemic, Alessandro Sciamarelli, EUROFER's director of economic research and market analysis, said that the EU and Western economies should have bottomed out after the second quarter this year, though confidence indicators signal that the recovery is very slow and uncertain. The second wave of the pandemic is already having an impact and casting a shadow on the recovery in the fourth quarter this year, he underlined. Based on data up to October this year, confidence indicators in the EU plummeted in April, rebounded strongly in June and then stagnated in September and October due to the resurgence of Covid-19 cases. Meanwhile, while manufacturing output growth remained sustained, service sector activity kept deteriorating. Steelmakers were able to continue producing after the third quarter rebound, while activities of other sectors have remained depressed and weak. According to the latest forecasts, the EU's GDP will decrease by more than seven percent this year. However, Mr. Sciamarelli underlined that GDP growth had already lost momentum throughout 2019, before the predicted slump in the first quarter this year and the record fall in the second quarter, all year-on-year.
In fact, steel-using sectors had already been hit in 2019 by worsening conditions in global trade and by the weakening manufacturing cycle, Sciamarelli stated. Output in steel-using sectors slowed down considerably in 2019, and this trend culminated in record falls in the second quarter of the current year due to the effects of the pandemic. While automotive output recorded a record fall of 44 percent in the second quarter, the construction sector was the most resilient. Order books followed the same path. According to the latest EUROFER forecasts, automotive output will decrease by 20.6 percent this year and will increase by 18.1 percent in 2021, while construction output will decline by 3.6 percent this year and will increase by five percent next year. Although car dealerships reopened after lockdown measures were lifted around June, consumer demand in the EU has not recovered yet, and the market is set to remain depressed up to the end of this year due to the second wave of Covid-19 and the resulting new lockdown measures. At the same time, Sciamarelli recalled that many EU governments have announced they will provide an impetus for the completion of public construction and infrastructure projects, which will sustain the construction sector in the medium term.
The EUROFER official then observed that crude steel production in the EU has never recovered to the levels before the 2008-2009 crisis, and has actually been declining in the long term, with a six percent year-on-year decrease in 2019. At the same time, other regions have continued to increase their steel capacity and production. Sciamarelli stated that the EU industry has been hit very hard by the outbreak of the pandemic. Steel companies were forced to cut production by over 22 percent year on year on average between March and September, while orders fell by up to 26 percent year on year. Apparent consumption has been falling since early 2019, reflecting the negative trend in steel demand and destocking. Apparent consumption declined by 5.3 percent in 2019 and is expected to plummet by 14.6 percent this year, while it should rebound by 13.1 percent in 2021. Consumer demand declined as well and is not likely to recover at least until the job market has recovered, which may happen in the second quarter of 2021. Mr. Sciamarelli stated that the EU’s imports also decreased, especially in the fourth quarter last year and in the first quarter this year, due to the EU safeguard on steel imports, although in the second quarter this year imports fell less than consumption. The EUROFER official pointed out that import volumes decreased, reflecting depressed demand, though the share of imports in overall steel demand has remained high in historical terms.