Improving Manufacturing Sector Good News for EU Steel Market

EUROFER’s latest report on the Economic and Steel Market Outlook 2010-2011 confirms that the EU steel market gained traction in recent months. Since the second quarter of this year, activity in most steel-using sectors is bouncing back from the lows reached last year.

“Orders and output have been improving across a wide range of sectors but particularly so in the automotive sector and its supply chain,” says Gordon Moffat, EUROFER’s director general. “Meanwhile the construction industry and shipbuilding remained in the doldrums. Although real consumption is still relatively weak, the improvement in activity triggered a wave of stock replenishment in the distribution chain and at end-users.”

Despite stocks being replenished again, overall inventory levels have risen only very modestly since the start of the year. Stocks are largely assessed as normal in relation to the prevailing market conditions.

The association feels that a solid recovery is expected next year, in line with activity in the steel using sectors - including the construction sector – gaining further strength as investments in the EU could see some growth again. However, exports will continue to be the main driver for growth in the EU.

Despite this modest but gradual improvement in market fundamentals, managing uncertainty will remain the key challenge for EU steel industry. EU governments face the dilemma of freezing budgets and cutting deficits without stifling economic growth. Austerity programs do not bode well for a short-term improvement in internal EU dynamics, which means that the recovery will remain lackluster for the foreseeable future and heavily dependent on the strength of economies abroad.

 “The impact of rising costs of raw materials on steel prices threatens to jeopardize the still hesitant recovery in the steel using sectors. Imports rising faster than EU demand could put the still volatile market balance in the EU at risk,” Moffat adds.

For the full report, click on the link: Economic and Steel Market Outlook 2010-2011

(Photo courtesy of ThyssenKrupp AG)