Europe's steel market is enduring the weakest demand in decades and will remain depressed all of this year as there are no signs of an upturn in the construction and automotive sectors, the key consumers.
Steel output in the European Union (EU) tumbled almost 46 percent year-on-year in January as companies ran down massive stocks and steelmakers had to slash production since late last year to cushion collapsing prices.
The drop in Europe, though not quite as steep as the 51.2 percent fall in North America, was almost double the worldwide decline of 24 percent, World Steel Association data shows.
ArcelorMittal, the world's largest steelmaker, said in mid-February it expected to see the destocking end and gradual recovery emerge in the second quarter, now just weeks away.
Several analysts agree with Mittal, predicting that inventories are close to depletion, while others expect the destocking process to continue for many more months.
In both cases, nobody dares to speak of a quick improvement in underlying steel demand, while many experts anticipate that depressed demand will keep capacity utilisation low.
"It is a disaster," analyst Jim Lennon at Macquarie Bank said. "A combination of very heavy inventory destocking plus the end user markets; auto sector, construction and white goods collapsing."
"At the moment there is no sign of recovery," Lennon said.
Car sales and production across Europe have been tumbling and construction projects are being delayed or shelved. A Reuters poll of 78 economists taken in February 13-18 showed the recession in the euro zone is likely to be deeper than thought just a month ago.
"February and March output will be weak as well and for the whole year we're definitely looking at a 20 percent plus downturn in European steel demand -- and that's one of the worst we have ever seen," Lennon said.
Italian steelmakers body Federacciai expects the country's steel output, the second biggest in Europe after Germany, to plunge 30-35 percent in the first quarter and remain lower for 2009 despite possible improvements in the coming months.