German steel output is set to fall below 40 million tonnes this year for the first time since 1993, when an economic downswing hammered Europe's biggest economy, the German Steel Federation said.
The second half of this year could see the start of a slight recovery in the market overall, the federation's President Hans Juergen Kerkhoff told a steel conference on Wednesday.
He told reporters he did not expect this year's average output to fall below 35 million tonnes, equivalent to 60 percent of its total capacity.
New orders plunged 47 percent in the final quarter of 2008, the biggest drop in the post-war era amidst a brutal downturn in Germany, the world's seventh-largest steel producer.
Both domestic and foreign demand have withered, with overall new orders declining to 5.7 million tonnes in the fourth quarter from 10.6 million tonnes in the same period of 2007.
The steel sector's trouble is due to a slump in the automotive and engineering industries, continuing liquidity bottlenecks and rising inventories at traders and processors.
Steel companies including ThyssenKrupp and market leader ArcelorMittal have already slashed their production due to the collapse in demand.
Arcelor said in mid-February it expected to see the destocking end and a gradual recovery emerging in the second quarter.