Friday, July 18, 2008

EUROFER releases economic and steel market outlook

EUROFER said that in line with earlier projections, the EU economy held up well in the first quarter of 2008 amidst weakening global fundamentals. However, indications that the EU economy will lose momentum heading into the second half of the year have become stronger.
Confidence indicators cooled significantly in recent months due to deepening fears over the negative impact of the US slowdown, the global financial crisis and particularly on concerns about the impact of rising inflation on the EU economy. The latest forecasts submitted by the members of Eurofer’s Economic Committee still show GDP growth at 1.8% in 2008, but next year looks set to see a more marked slowdown to a below-trend 1.4%.
Q1’08 output growth in the EU steel using sectors was somewhat stronger than previously anticipated. However, it is also evident that activity in the steel using sectors is seen slowing compared to the very robust growth rates registered in the 2006-07 period. The deceleration is projected to intensify in the 1st half of 2009. By then, order books will be getting thinner whereas business conditions in the EU and in the international export markets will be affected by slowing global demand for capital and consumer goods. A mild rebound in activity is foreseen towards the end of 2009.
All in all, output in the steel using sectors is expected to increase by 2.5% in 2008 and 1.7% in 2009.
So far this year, the supply-demand situation in the EUsteel market was relatively well-balanced. Although in the first quarter, imports were slightly up on the Q4 ’07 level, robust end-use fundamentals enabled EU mills to regain market lost in 2006-07 due to the drastic increase in imports into the EU market. EU mills stepping up domestic deliveries resulted in a 5 percentage-points gain in market share compared to Q1’07.
Mid’08 inventory levels were generally assessed to be in line with the overall still firm downstream activity levels in the distribution chain and at end-users.
On balance, apparent consumption in the whole of 2008 is seen rising by 0.6%. First projections for 2009 signal 2% growth in apparent consumption as a result of the expected mild increase in real steel consumption and the absence of significant destocking.
This projection suggests a reduction in imports in 2008 and a slight rise in 2009. Should imports start to rise at an earlier stage or more sharply, then the supply demand situation in the EU steel market looks set to become unbalanced again.

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