The European Union (EU) is bracing for its third annual recession over the last four years, albeit moderate (-1.7%, formerly set at -1.9%), most probably as a result of quarterly drops that are foreseen over the second, third and fourth quarters of 2022, according to the third quarter report of EUROFER’s economic and steel market outlook 2022-2023.
Earlier, the positive trend seen in apparent steel consumption throughout 2021 continued over the first quarter of 2022. However, it slowed down owing to the ongoing, severe global supply chain disruptions, rising energy prices and production costs. Interestingly, these issues are expected to weigh even more in the second half of 2022, together with the effects of Russia’s war in Ukraine which has already made things worse for the EU market.
Thus, the impact of this situation on steel-using industries and the overall economic outlook are set to take their toll on apparent steel consumption this year. Eventually, steel consumption is expected to witness its third annual recession over the last four years. “We may take consolation from the fact that the recession is going to be a ‘moderate’ one this time, not a ‘severe’ one. It’s going to be around -1.7% which was initially set at -1.9%. This comes as the ‘result’ of successive quarterly drops in second, third and fourth quarters of 2022, respectively”, opined a reliable market source.
In contrast, the first quarter of 2022 witnessed growth in apparent consumption (+6.5%, after +10.1% in the fourth quarter of 2021), totalling a volume of 37.1 million tonnes. Nevertheless, it’s still below the pre-pandemic peak reached in the fourth quarter of 2018. It may be noted here that 2020 was considerably impacted by the Covid-19 pandemic and saw apparent steel consumption in the EU plummet (-10.7%) for the second consecutive year after the slump (-5.2%) seen in 2019. On the other hand, in 2021 apparent steel consumption rebounded.
Imports
Imports – including semi-finished products – into the EU continued their strong increase (+28.8%) also over the first quarter of 2022, albeit at a lower rate, after +43.4% and +47.7% in the fourth and third quarters of 2021.
Outlook
In this context, apparent steel consumption is set to recover in 2023 by +5.6%, but the overall evolution of steel demand remains subject to “high uncertainty”, which is likely to continue to undermine demand from steel-using sectors.
Furthermore, keeping in mind, Russia’s ongoing war in Ukraine, continuing supply chain issues and rising energy and commodity prices, coupled with very high inflationary pressures, EUROFER’s GDP forecasts for the EU in 2022 have been further lowered compared to the previous outlook. However, economic recession is for the time being ruled out both in 2022 and 2023. As the above-mentioned downside factors are not expected to ease substantially before the first quarter of 2023, GDP growth estimates are set at +2.6% for 2022 and at +1.6% for 2023.
Overall, these market uncertainties will adversely affect demand for steel consumption. And, it will take some time to recover from the current gloom. Most probably, things will gradually start improving as we come close to 2023, SteelMint noted.
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