Demand for steel in the EU has bottomed out

by David Fleschen

Although the European steel association Eurofer last week slightly raised its forecast for apparent steel demand in the EU for this year, it still expects a year-on-year decline of 14.6%. At -25.5%, the second quarter saw the biggest slump ever recorded in a quarter. This is mainly due to the corona pandemic, which affected all major sectors. According to Eurofer, the automotive industry has suffered particularly badly, while the construction sector has so far come through the crisis relatively unscathed. The latter is supported by public construction and infrastructure projects in numerous EU countries. Next year, demand for steel is expected to recover by 13.1% across the EU. Led by the auto industry, all major steel-consuming sectors are expected to grow again. However, Eurofer also points out that the outlook is subject to uncertainty, depends on the development of the pandemic and could be revised in the next few quarters.

Meanwhile, MEPS, the research house specializing in the analysis of steel markets, reports that steel producers' profit margins have recently recovered noticeably. MEPS attributes this to higher steel prices and higher sales volumes, while input costs remained largely stable. Particularly in the EU and the USA, margins are expected to improve further over the rest of the year and reach levels seen at the beginning of last year. In our view, this should provide an incentive for steel producers on both sides of the Atlantic to expand their production. In China, steel production is running at full speed anyway, resulting in robust demand for iron ore. Tomorrow, the customs authorities will publish the preliminary trade data for October. China is expected to have imported more than 100 million tons of iron ore for the fifth consecutive month.

Source: Commerzbank Research, Photo: Fotolia

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