Eurofer predicts lower steel demand in Europe in 2023

Steel demand in Europe was expected to decline in 2022 and remain that trend in 2023 due to weak performance in key steel-using sectors, but recover in 2024, regional steel association Eurofer said in a Q4 2022 report. H

Eurofer expects apparent steel demand in the EU to decline by 4.6% in 2022 and fall by 1.9% in 2023, marking two consecutive recessions in the steel market over the past five years.

Apparent demand for steel in the block is expected to recover slightly in 2024, by 1.6%.

But the evolution of the European steel market will continue to be subject to a high degree of uncertainty, which is likely to continue to undermine demand from sectors using steel.

Overview of the steel market in the EU
2023 started on a positive note for the European flat steel market, with prices rebounding in January from the low levels seen in December 2022.

European mills were able to achieve higher selling prices thanks to a more balanced market, which itself was the result of production cuts and restocking.

Notably, Fastmarkets tallyed its daily index of domestic hot-rolled products exported from Northern Europe at 752.50 euros ($820.53) per ton on Thursday, up 0.62 euros per ton from 751. 88 euros per ton February 1.

The latest calculation of the index was up 5.00 euros per tonne per week and 83.75 euros per tonne per month compared to the previous month.

But according to market sources, the recovery was still fragile as end-user demand for steel remained weak.

Eurofer said it expects automotive sector production to rebound by 2.7% in 2022, but it will mostly be a recovery from a low base of comparison in 2021 due to component shortages this year.

The sector is expected to return to growth in 2023, albeit a very modest one (+1.1%), according to Eurofer.

Demand for coiled steel in the automotive industry picked up slightly in early 2023, mainly due to unfulfilled orders from the automotive industry, multiple sources said.

“I would say that the outlook for the first half of 2023 is not bad, but there could be a gap in consumption in the second half of 2023,” a source at the mill said.

“It is extremely difficult to overcome higher steel prices downstream. There is no trust of buyers,” the steel service center said.

Meanwhile, the construction industry, which has generally been more resilient to economic shocks, is expected to recover 4.4% in 2022 but decline 1.6% in 2023.

The general economic downturn due to the war in Ukraine is also expected to put pressure on the construction sector, with the fall occurring between the fourth quarter of 2022 and the second quarter of 2023.

Weak demand from the key consumer sector, the construction sector, as well as uncertainty among buyers, led to minimal activity in the European steel rebar market in January 2023.

Fastmarkets' weekly estimate for domestically produced steel rebar (reinforcement) delivered to Northern Europe as of February 1 was 700-740 euros per tonne, which is 40-55 euros per tonne lower than last week's 755-780 euros per tonne.

Import
In the first 11 months of 2022, EU carbon steel imports amounted to 25.9 million tons, compared to 27.8 million tons in the corresponding period of 2021.

There has been a change in traditional trade flows and the countries of Southeast Asia have increased their presence in the EU market.

For example, in the absence of traditional volumes of hot-rolled steel from Ukraine and Russia on the market, European buyers began to import more coil from Japan, South Korea, Taiwan and India, Eurofer statistics showed.

It is noteworthy that imports of hot-rolled coils from Japan to the EU in January-November 2022 amounted to 944,230 tons, compared with 591,355 tons for the whole of 2021.

Deliveries of hot-rolled coil from South Korea to the EU also increased, amounting to 713,186 tons in January-November against 463,777 tons for the whole of 2021.

Market sources did not expect total steel imports to increase in 2023, given weak fundamentals in the European steel market and long lead times offered by overseas suppliers.

“When the market is so volatile,” a buyer in Germany told HRC, “taking a risk and booking a roll for May delivery now [January] is like gambling because of all the associated risks [such as] defensive measures, risk of price collapse, fragile demand, etc.”