Excessive supply of rolled metal in the EU will be balanced in 2018

While growth and imports of domestic production are increasingly outstripping exports, the latest forecast by the World Steel Association, published in April, suggests that EU demand will grow 2% in 2018 to 165.6 million tonnes, and there will be a decline in supply. if current levels of production and trade are maintained.

According to World Steel, steel production in Europe in the first quarter was worse than in the rest of the world. While global production rose 4%, EU output grew only 0.9% year on year to 43.1 million tons.

If the EU maintains this pace, the total volume in 2018 will be 170.2 million tonnes. This assumption would lead to an imbalance between supply and demand of 4.6 million tonnes, or 2.8%; up from 3.9% in 2017. However, this improvement ignores the trade deficit, which widened in early 2018.

According to statistics published by EUROFER, the EU exports of flat and long steel products in 2017 amounted to 22.9 million tonnes, which is 2.7% less than in 2016. Imports declined, but by only 0.6%, despite many anti-dumping duties on sheet steel products.

Higher exports in early 2018 were insufficient to counter the increase in imports, with a trade deficit of 1.48 million tonnes in the first two months of the year, up 10.2% from the previous year.

Adding a trade deficit to the imbalance between supply and demand leaves an oversupply of just over 8 million tonnes of steel, or a 4.9% oversupply.

The picture could improve if the trade deficit is tightened - as expected following a spike in imports in January, when both shareholders and service centers kept stocks low in an uncertain price direction.

However, there are also potential headwinds and US tariffs are expected to redirect steel to Europe, as well as a general slowdown in the EU economy after a weaker-than-expected first quarter.