Evidence of recovery in the Eurozone

For the past few years several national economies in Europe have been considered the world’s underperformers, but circumstances may finally be changing for recyclers and manufacturers located there.

The Economic Committee of EUROFER, the Brussels-based European Steel Association, released a report in May 2014 stating, “Strengthening indicators and evidence of improving dynamics suggest the EU economy is well on track for recovery this year and into 2015.”

“The mood of negativism is clearly fading as economic conditions stabilise and short-term viability of the domestic markets improves,” said EUROFER Director General Gordon Moffat in remarks accompanying the report. “The private sector looks more willing to invest again, particularly if credit conditions would ease further. Also, international investors are returning to the EU. That’s good news for downstream steel users.”

Relative economic health in northern Europe has been countered by struggling economies in southern Europe the past few years, but EUROFER says that imbalance is lessening. The second quarter 2014 outlook from EUROFER’s Economic Committee predicts “economic growth is expected to become more balanced across growth factors, also in the more vulnerable countries in the Eurozone periphery, owing to reforms strengthening the export sector in particular.”

With conditions in Europe seemingly improving, steelmakers and ferrous scrap recyclers in Europe may next have to contend with uncertainty in key overseas markets.
 

“Financial market turmoil in several emerging economies, in particular Brazil, India, Indonesia, Turkey and South Africa, have led to capital outflows and overnight currency crunches,” says EUROFER in the statement accompanying its report. “Monetary action to stabilise the situation will slow their economies.”

Instability in Eastern Europe also remains a factor. “Further escalation of the conflict between the Ukraine and Russia would not only hurt Russia but also the EU economy because of its trade ties with Russia,” says EUROFER. “As such, the global economic context looks currently more uncertain. This jeopardises the expected synchronised recovery of the industrialised economies.”

Such turmoil could result in increased amounts of steel from other parts of the world being dumped in the EU, says Moffat. “As far as supply is concerned, we are concerned about imports from third countries into the EU. Steel trade data show imports remaining at a high level in the first quarter of 2014. This threatens to distort market conditions in the EU, which are already extremely difficult for EU steel producers.”

From his vantage point in southern Europe, Ruggero Alocci of Italy’s Alocci Rappresentanze Industriali witnessed increased interest in Italian ferrous scrap from export buyers in April. “The April Italian scrap market has been driven by the Turkish mills’ purchases, with the result of higher prices during the first half of the month,” says Alocci. Italian mill buyers ended up paying about €10 more per tonne for ferrous scrap in April in part because of the increased Turkish interest in scrap.

EUROFER’s scrap index for April 2014 reflected similar price increases, with its index number for purchased demolition scrap rising from 254 in March 2014 to 266 in April.

The association’s index figure for new arisings scrap rose by just 9 points (from 255 to 264) while shredded ferrous scrap enjoyed a bigger boost from a 250 index number in March to 262 in April.

April 2014 as a steelmaking month in the EU showed some signs of strength, based on figures collected and distributed by the Brussels-based World Steel Association (Worldsteel).

The nations of the EU 28 produced more than 14.6 million tonnes of steel in April 2014, up by 4% over the 14.0 million metric tonnes of output in April 2013. Year-to-date the EU 28 has produced 6.2 percent more steel than it did in the first four months of 2013.

An encouraging sign in the Worldsteel figures is a 6.7% percent year-to-date increase in Spanish steelmaking, to 4.86 million tonnes in the first four months of 2014.

Another encouraging figure comes from Italy, which has produced 8.65 million tonnes in early 2014, a 5.8% increase over the 8.18 million tonnes made in the first four months of 2014.

Joining the ranks of steel output gainers is the United Kingdom. Steel mills in the U.K. have churned out 17.6% more steel in the first four months of 2014 compared to the same period last year, rising to a level of 4.31 million tonnes.

The Worldsteel figures largely coincide with the scenario envisioned by EUROFER. “The base case scenario for the EU steel market is for a gradual but slow and fragile recovery of demand in 2014 and 2015, driven by improving activity in the key steel using sectors and some restocking,” says the group.

The group says the anticipated increase leaves EU steel output and demand below its 2008 level. “Despite the expected rise in apparent [steel] consumption—almost 3.5% in 2014 and 3% in 2015—the gap with pre-crisis demand levels will remain significant,” says EUROFER.