Gordon Moffat, Eurofer director general, pointed out in a press release,"Improving business confidence has triggered some restocking, but so far, inventories have remained well balanced with supply/demand fundamentals."
According to the report from Eurofer's Economic Committee, in 2009, market dynamics "slowed markedly" in Germany, while Italy's GDP only fell slightly. France registered "relatively robust" growth, the recession in the UK came to an end in the fourth quarter and Spain also seems to have reached the bottom of its economic cycle.
Overall economic conditions in the EU appear to be improving. The Euro-area manufacturing PMI rose in March to its strongest levels since January 2007. In addition, the report stated that rising exports prevented the EU market from slipping into another contraction. Steel-using sectors benefited from the pickup in international trade and inventory pressures began to ease. "Most steel-using sectors are expected to show positive year-on-year growth again from the second quarter 2010 onward. The key exception will be the construction industry, for which the outlook has deteriorated in recent months."
Although production in the first quarter of 2010 was heavily influenced by severe weather conditions, which had an impact on the construction sector and its suppliers, it was offset by an improving business situation in other sectors such as automotive and metal goods. And output stabilized slightly above a weak year-earlier level--the first year-on-year rise in output since mid-2008.
"This trend is expected to be sustained over the next quarters," the report points out. "Industrial confidence continued to improve in the first quarter of the year. Most steel-using sectors are expected to show positive year-on-year growth again from the second quarter of 2010 onward. The key exception will be the construction industry, for which the outlook has deteriorated in recent months."
Even though current forecasts for 2010 show overall activity in the steel-using industries accelerating to 4.1 percent growth in 2011, the report noted that uncertainty remains high, with the latest trade data showing that imports are rising again. "Any event leading to global demand lagging the rising trend in steel output could result in temporary oversupply and rising import pressures in the EU. Moffat points out in a press release, "The exorbitant price increases recently announced for raw materials will have a deep impact on steel prices and the downstream value chain and ultimately on the European consumer. They jeopardize the rather fragile recovery of the manufacturing industry and the economy of the European Union as a whole."
However, looking forward to 2011, the report points out that the recovery in steel-using industries will most likely bolster real steel consumption, which will set the stage for further improvement in market fundamentals.
"With a forward view to 2011, the April outlook from Eurofer's Economic Committee confirms the basis for GDP growth should broaden to some extent. A moderate increase in business investment as well as a slightly higher increase in private consumption is pencilled in the latest forecast. It should compensate for the negative impact of lower growth in government expenditure as EU governments will have to go through the painful exercise of reducing structural deficits. Exports will continue to be the key driver for economic growth, which in combination with the mild recovery in EU investment should enable output in the manufacturing sector gain further momentum." MM