According to the European steel outlook report released by the international credit ratings agency Fitch Ratings, steel demand will remain depressed across Europe in the second half of 2012.
Fitch expects steel prices to register a limited increase for the remainder of 2012, while it anticipates iron prices will remain at around current levels, given the consistent demand in China. Non-integrated steel producers will be particularly affected by high raw material costs and lower steel prices for the remainder of 2012. Fitch forecasts high raw material input prices, notably iron ore and coking coal, to exacerbate margin erosion in 2012.
The report pointed out the larger steel producers' plans to shut down higher cost production facilities, suggesting that plant closures will help reduce costs, increase capacity utilization and improve medium-term profitability.
Market players are expected to adopt a wait-and-see approach to the slowly worsening economic outlook in Europe, while the GSP (gross social products) of the euro zone is predicted to register a slight growth of 0.4 percent.
Fitch stated that a stable outlook could be achieved through industry-wide cost saving measures and an improved supply-demand balance.