market report 2011 october
TRANSCRIPT
8/2/2019 Market Report 2011 October
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1) Based on information available as of 17
th October, 2011
21st
October 2011
Economic and Steel Market Outlook 2011-2012 Q4-2011 Report from EUROFER ’s Economic Committee 1)
EU macro-economic overview(y-o-y change in %)
EUROFER ForecastOctober 2011
EU 2009 2010 2011
(f)2012
(f)
GDP -4.3 1.9 1.5 1.0
Private consumption -1.7 0.9 0.4 0.7
Government
consumption2.2 0.6 0.2 -0.1
Investment -11.8 0.0 1.9 2.3
Investment in mach.equip.
-17.7 3.8 5.2 3.7
Investment inconstruction
-6.3 -3.4 0.7 0.9
Exports -10.9 10.4 6.1 4.2
Imports -10.3 9.3 4.3 3.2
Unemployment rate 9.1 9.6 8.7 8.7
Inflation 0.7 1.9 2.8 2.0
Industrial
production-13.8 7.1 3.8 2.3
(f) = forecast
I. EU Macro-economic overview
Recovery lost steam in Q2
Indicators weaken on resurfacing
of sovereign debt concerns
Manufacturing to remain bright
spot in darkened outlook
ECB changing its policy stance
Fragile recovery - no recession
Risks skewed to the downside
GDP growth in the second quarter of
2011 slowed to a disappointing 0.2%
q-o-q. The recovery losing steam did
not come as a surprise. The boost from
mild weather conditions which had
temporarily bolstered growth in early
2011 faded at the end of the first
quarter. At the same time, the negative
effect of austerity measures through
fiscal tightening and subdued govern-
ment consumption on domestic
demand became more pronounced.
Private consumption was rather dull,
reflecting weak confidence levels and
the effect of high inflation and fiscal
tightening on disposable incomes.Meanwhile, slowing global economic
growth dampened dynamics in interna-
tional trade, thereby reducing export
opportunities for EU exporters. The
Euro‟s relative strength versus the US
dollar has also hurt foreign trade in the
second quarter.
The strongest deceleration in
economic growth was seen in the core
countries Germany and France as wellas in some smaller EU countries that
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had registered a robust performance in
the first quarter. Consequently, growth
differentials at the country level
narrowed to some extent.
Leading indicators head south
Due to sovereign debt concerns
resurfacing, leading indicators headed
south during summer. Readings had
already been under pressure during
the second quarter on concerns about
the sovereign debt crisis and the
vulnerability of EU‟s financial systems
and on evidence that global economic
growth had started to slow.
Agreement on a second bailout
programme of 109 billion Euro for
Greece could calm down market
turmoil only for a short while. Since
August, doubts about the progress
made by the Greek government on its
debt reduction programme fuelled
speculation on Greece not being able
to meet several critical fiscal targets
that are conditional to getting the next
instalment of the bailout money from
the EU, IMF and ECB.
Under the current circumstances,
rumours suffice to send big ripples into
the markets. Stock markets registered
hefty losses, bond spreads increased
and the Euro came under pressure.
Economic confidence in the EU
decreased quite significantly in August
and September.
Also other forward looking indicators
turned sour in recent months. The
Markit Eurozone Composite Output
index fell to below 50 in September,
reflecting that the assessment of
business activity in the corporate
sector has hit a two-year low. Also the
OECD leading economic indicators for
Europe lost strength in recent months.
Poor Q2 growth figures, not only in the
EU but also elsewhere in the advanced
economies, slipping indicators and
increased risk and uncertainty levels
related to the intensification of the
Eurozone sovereign debt crisis have
led to EUROFER‟s Economic
Committee revising its economic
growth forecasts for 2011 and 2012.
Manufacturing sentiment is weakening
Indicators on manufacturing activity
have been mixed lately.
Sentiment in industry has been losing
strength since April, and slipped further
in September to just above the long-
term average. In addition to a less
positive assessment of order intakes
and production expectations, the latest
surveys suggest that since July stocks
of finished products in the supply chain
are on the rise.
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Meanwhile, since June actual order
data have started to mirror weakening
business conditions as well. Month-on-
month growth in industrial new
bookings turned negative in June andJuly, more so in the Eurozone than in
the EU27.
Meanwhile, industrial production in July
and August continued to grow at a rate
of close to 5% year-on-year. Germany
registered in July even two-digit output
growth.
Underlying data show that particularly
output of capital goods continued to
increase at a healthy rate, with
demand increasingly supported by
domestic sales. Corporate investment
in machinery and equipment in Europe
has picked up following very weak
investment activity during the 2009
recession. This has broadened the
basis of the manufacturing recovery in
the EU which had been strongly reliant
on exports until this year.
Activity not seen falling off a cliff
The current mix of indicators and hard
data on industrial bookings and activity
appears to suggest that, while high
uncertainty and risk levels have a
negative impact on business
confidence, industrial momentum has
not yet grinded to a halt. Well-filled
order books in most manufacturing
sectors will for the time being cushion
the impact of slowing order intakes,
keeping industrial activity at a rather
satisfactory level.
Nevertheless, it is evident that output
will slow down or could even turn
temporarily negative in the months
ahead should the weakening trend in
new order intakes persist. The recent
depreciation of the Euro against the
US dollar could help improving the
competitiveness of Eurozone compa-
nies abroad and soften the effects of
such a downturn.
The outlook for 2012 is currently
clouded by more uncertainties than
some months ago. The central forecast
assumes investment growth in the EU
to continue at a rate of around 2% in
2012. Should the sovereign debt crisis
deteriorate to beyond a manageable
level, it will most certainly backfire on
industrial confidence and result in a
more pronounced slowdown or
reduction in corporate investment.
This will be exacerbated by tighteningcredit conditions in EU‟s financial
markets. Interbank lending is
reportedly showing signs of tension
since summer which appears to
suggest that access to credit could
become more difficult and cost of
lending for the private sector will rise.
Export demand is to remain another
important pillar supporting activity in
EU‟s manufacturing industry. However,the rebound in international trade
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appears to have entered a soft patch.
EU‟s export opportunities are largely
shaped by the economic performance
of Asia and other emerging economies.
Capacity limits and monetary
tightening in response to high inflation
have in 2011 tempered GDP growth in
this part of the world. Growth prospects
for 2012 look nevertheless still rather
solid; inflation is easing and
governments could decide to stimulate
the economy by loosening up their
fiscal and monetary policies if
necessary.
Despite activity losing momentum,
manufacturing looks set to remain a
relatively bright spot on the overall
darkened EU economic landscape in
the remainder of 2011 and in 2012.
Consumption showing signs of sagging
The outlook for the other components
of domestic demand is bleak. Pressure
on EU governments to cut budgets
more rapidly has intensified in recent
months, not only in the debt-ridden
peripheral Eurozone countries but also
in the core countries with a structurally
solid budget and debt performance. As
a result, government spending across
the EU will be reduced more briskly
than projected before. Inevitably, this
will be felt in all sectors of the
economy.
Consumer confidence deteriorated
quite sharply in recent months due to
the sovereign debt crisis in the
Eurozone countries flaring up and on
concerns that the policy response is
too late and too little. As a result,
private consumption was quite sluggish
in Q2-2011.
The bottom line is that consumers fear
for their jobs, their income and
pensions; particularly in the peripheral
Eurozone countries fiscal retrenchment
and governments shedding jobs has
fuelled social instability.
The modest economic rebound in the
EU has so far not resulted in a
significant decline in unemployment.
In August, the EU27 unemployment
rate stood at 9.5% compared with
9.6% in the same month of 2010.
These figures hide huge differentials at
the country level: unemployment rates
range from around 4-5% in Austria and
the Netherlands to over 21% in Spain.
Generally speaking, employment
growth has been quite benign in the
Northern European countries in which
the manufacturing sector benefitted
strongly from the recovery in
international trade.
Harsh fiscal measures resulting in
downward pressure on household
income, weak job creation and high
unemployment will most likely result in
a certain degree of consumerretrenchment in 2012; our central
forecast sees private consumption
growth remaining below 1% next year.
The risks are clearly on the downside,
owing to unusual high uncertainties
clouding the consumers‟ assessment
of current and expected economic and
financial conditions.
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ECB seen changing its policy stance
Excessive public debt loads in the
peripheral Eurozone countries have
continued to spook financial markets.
Surging yields on government bonds
resulted in surging financing costs for
these countries. Due to rising concerns
about their ability to withstand further
pressure – with the focus shifting from
Greece and Portugal to Spain and Italy
– the ECB decided to purchase
Spanish and Italian debt securities.
This support operation was followed in
September by a move in the ECB
policy from a tightening to an easing
stance. The escalation in financial
market pressures, evidence of lower
inflation, combined with slowing GDP
growth in Q2 and continued weak
prospects for the remainder of the year
and into 2012 have been the catalysts
in the change in policy reaction.
Inflation has eased somewhat in recent
months owing to oil and food comingdown from their peaks registered in
early 2011. In August 2011, EU annual
inflation stood at 2.9% coming from
rates above 3% in the second quarter.
However, inflation is still substantially
higher than in the same period of 2010
when the annual inflation rate was
around 2%.
An interest rate cut appears to be on
the cards later this year, possiblyfollowed by another one in the first
months of 2012 should downside risks
to economic growth and inflation
persist.
The shift in ECB stance triggered
downward pressure on the Euro. The
currency had kept its strength during
the second quarter and in the July-
August period, remaining within a
rather narrow bandwidth of 1.40-
1.45US$, despite weakening indicators
and financial market woes.
Since early September however,
pressure started to mount and the Euro
exchange rate versus the US dollar
slipped recently below 1.35 US$.
The Euro depreciation is good news for
Eurozone exporters. It should be
supportive to softening the effects of
slowing dynamic in international trade
on EU exports. Against the background
of weakened economic growth
prospects for the Eurozone countries
and the likelihood of on-going financial
market turbulence chances are that theEuro will remain under downward
pressure for the time being
Fragile recovery – recession avoided
The latest forecasts for the macro-
economic framework in the remainder
of 2011 and in 2012 from EUROFER‟s
Economic Committee show downward
revisions for annual GDP growth in
2011 and 2012 in comparison with ourprevious outlook. EU economic growth
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will amount to 1.5% in 2011, and
decelerate further to 1% in 2012.
In the July outlook a moderation in
growth had already been pencilled in,
due to the EU economy facing
significant headwinds and with already
high uncertainty levels potentially
weighing down on EU‟s overall growth
perspectives.
Over summer, risks and uncertainties
have intensified to unusually high
levels due to the Eurozone debt crisis
entering a critical stage.
A key issue is that financial markets
apparently have lost confidence in the
ability of EU political leaders to provide
structural solutions to the debt
problems in the peripheral Eurozone
countries. It is feared that the EU will
be sailing deeper into uncharted
territory while the ship‟s officers
continue to discuss about the best
course to safer waters.
Meanwhile, it is also clear that there is
no easy way out. Many options exist,
all of them will have a negative impact
on EU‟s economic performance which
will be extremely difficult to quantify
with respect to the direct and indirect
effects incorporated in the various
bailout-default scenarios.
The most likely scenario still appears
to be that European policymakers will
be able to contain the debt crisis in the
peripheral Eurozone countries. This“muddling through” scenario assumes
the implementation of the euro-area
financial stability measures announced
on July 21st 2011, together with the first
outline of necessary steps towards
improved governance of the euro area
and a further strengthening of the
capitalisation of EU banks. Future
steps could include a greater
harmonisation and co-operation infinancial crisis management and a
stronger role for the European
Commission including a larger budget.
However, reaching agreement on
these topics will be an even more
challenging „tour de force‟ and
encounter opposition from several EU
member states.
The central scenario also assumes the
continuation and probably inten-
sification of fiscal tightening which
inevitably will stifle economic growth,
which will make the road to recovery
longer and more difficult particularly for
the Southern European economies.
Nevertheless, the EU economy is seen
escaping a double-dip recession.
However, stringent austerity measures
imply that most governments are left
with very little room provide their ailing
economies with new stimulus
measures.
Internal risks have come to the fore
Early 2011 risks to the outlook for the
EU economy were rather diverse,
ranging from the internal risk of
Eurozone indebtedness to external
risks such as rising commodity, energy
and food prices fuelling inflation, the
instability in the Arab world and later
also the impact of the devastating
earthquake in Japan.
These external risks appear to have
become more balanced in recent
months, whereas the internal risks inthe EU have come to the fore and are
presently skewed heavily to the
downside.
These risks are not limited to the
financial and economic stability of
certain endangered Eurozone member
states, but pose a serious threat to the
stability of the banking sector in
Europe and abroad and as such also
to other EU members and the globaleconomy.
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USA GDP growth slows further in Q2 Data revisions reveal weaker
growth than earlier estimated No near term rebound expected
Growth to remain subdued GDP growth was only 1.3%(seasonally adjusted annualised rate)in Q2-2011. Moreover, the recentrevisions to US national accounts showthat the downturn during the recessionhas been deeper and the reboundslower than previously estimated.Private consumption came almost to ahalt in Q2 and manufacturing activity
lost much of the strength it had before.The exceptionally weak constructionand real estate markets continue to actas a drag on economic growth.Looking forward, confidence indicatorshave remained weak during Q3-2011.The ISM manufacturing index fell to just above 50 in August.The debate and last-minute agreementon raising the federal debt ceilingrevealed the lack of a credible fiscal
policy. This was confirmed by S&P‟sdowngrade of US long-term debtrating. Together with concerns aboutthe Eurozone debt crisis this hasintroduced new risks and uncertaintiesthat will dampen growth.Against the background of continuedhigh inflation, the high indebtedness ofthe federal, state and localgovernments as well as private
consumers, disappointing job creationand the persisting housing sectordownturn is it hard to see what couldbe driving a near term rebound of theeconomy.The Fed has indicated it will keep thefederal funds rate to close to zero until,but a third round of quantitative easinghas not yet been confirmed.GDP growth is forecast around 1.5% in2011 by most economic institutes. For
2012 economic growth is projected tobe nearing 2%.
Key emerging regions Growth in China holding up well,
no indication of sharp slowdown Fiscal and monetary policy in
BRICs could become loser if
necessary The Chinese economy continued togrow at a robust pace in Q2-2011;annual growth was 9.5%. So far thisyear, investment remained the driver ofgrowth despite fading support from thefiscal policy. No signals point to amarked near term deceleration of theeconomy. While weak growth in theadvanced economies does not bode
well for China‟s manufacturing sector,production and export held up ratherwell so far this year owing to continuedsolid demand from the Asian region.GDP growth is seen around 9% in2011 and at slightly below 9% in 2012.In India high inflation and interest ratesare putting investment under pressure.Combined with a moderation in exportgrowth, economic momentum slowedin recent months. Should this continue,
the central bank may revise itstightening policy. GDP is seen growingaround 7% in 2011 and 8% in 2012.Brazil‟s economy has been growingmoderately so far this year. Interestrates had been raised to controlinflation; this has attracted large capitalinflows. The central bank cut interestrates again in August on concernsabout the overvalued Real and weaker
than expected Q2 growth. GDP growthmay amount to 4% in 2011 and 2012.In Russia GDP growth slowed to 0.6%q-o-q in the 2nd quarter of this year.Manufacturing momentum hasremained fairly robust so far this year.Inflationary pressures have eased,supported by the appreciation of theRouble. Investment is seen picking upin 2012 supported by a fiscal boost.GDP is forecast to grow 3.5% in 2011
and 4% in 2012.
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Construction
Q2-2011 output growth slowed
down to below 2% y-o-y Uneven country performance Near term prospects to remain
subdued, some improvement in 2012
EU construction activity growth in theEU eased off to below 2% y-o-y in the2nd quarter of 2011, coming from 7.6%in the 1st quarter. Q1 constructionactivity had been boosted by mildweather conditions which helped
output to strengthen considerablycompared with the weak levelregistered in Q1-2010.Drilling down into country data revealslarge differentials in performance.Poland, Germany, Sweden and Francehave seen a positive trend inconstruction activity over the 1st half ofthe year, much in contrast with Spainand Hungary where a double-digit dropin activity was registered. The other EUcountries have on average seen
activity falling slightly or movingsideways at a rather depressed level.The recovery in Germany, France andSweden has been largely driven bynew projects and rising renovation andmodernisation activity in the privateresidential sector. Meanwhile in Polandthe key driver of construction outputgrowth remained civil engineeringinvestment in projects related to theEuro2012 football championship and
public infrastructure.
The outlook for the construction sector
for the coming months remains onbalance rather dim. Constructionsector confidence fell in September tothe lowest level since December 2010,signalling that construction companiesare not expecting any near termimprovement in market conditions. Onbalance, output in 2011 will increaseby almost 2.5%, primarily reflectingstrong growth in Q1 relative to 2010and despite an uneven performance at
the country level.These fundamentals are not likely tochange significantly going into 2012.The rebound in Poland, Germany,France and Sweden will continue,albeit at a slowing pace in the latterthree western European countries. Theother Central European countriesexcept Hungary expect someimprovement in market conditions in2012. Meanwhile, construction activityin Spain will hit bottom and move on
balance sideways. Activity inresidential and renovation andmodernisation projects will improvefurther, in contrast with publicly fundedinfrastructure and non-residentialactivity. Unfortunately this implies thatthe actual boost on demand forconstructional steel products will befairly small.All in all, construction output isprojected to increase almost 3% in
2012.
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Automotive
EU car sales slightly fell 1.3% y- o-y in 8m-2011
CV sales continued to rise Car exports remained firm Output +10% in 2011 Slowdown in 2012 to 3% In the first 8 months of 2011, EUpassenger car sales declined by 1.3%y-o-y. Sales in August rose almost 8%;the rebound was widespread with alllarge markets registering growth. Theweakest markets however remainedSpain, Greece and Portugal due to theextremely low levels of consumerconfidence in these debt-riddencountries.Commercial vehicles sales continuedto grow over summer; in August salesgrew by almost 16% y-o-y. Year-to-date sales rose more than 12% y-o-y.Particularly demand for medium and
heavy trucks remained buoyant, withsales in the 1st eight months of thisyear growing by just below 40%.Export demand remained robust inrecent months. German passenger carexports grew 17% y-o-y August and9% in September; 77% of total caroutput was for export in the January-September period.Automotive output grew by slightlymore than 10% y-o-y in Q2-2011;
continued strong growth since Q1-
2010 has resulted in output nearing thepre-crisis production level by mid 2011.Looking forward this is one explanationof output growth cooling down over thecoming quarters. The other one is therather weak outlook for privateconsumption, due to consumerconfidence falling rather sharply inrecent months. At the same timeprospects for investment have becomeclouded by uncertainties with respectto the general business climate in thecoming quarters. Also export demandis seen slowing on a par with theexpected moderation in globaleconomic growth.Output growth in 2011 is forecast toamount to just over 10%; while growthis positive in all EU countries with anautomotive manufacturing base,Germany and all Central European
countries will register double-digitgrowth this year.Market fundamentals are expected toweaken further in 2012, while stillremaining slightly positive andsupportive to further but significantlyslower output growth.On balance, automotive output in theEU is seen easing off to around 3%;activity in Central Europe will continueto increase at a faster pace than in
Western Europe.
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Mechanical Engineering
Growth in Q2 remained robust EU investment in machinery &
equipment is rising Output growth in 2012 limited
due to cooling investment and export growth
In the 2nd quarter of 2011, activity inthe mechanical engineering industry inthe EU increased almost 12% y-o-y;this is only a mild deceleration
compared to the close to 16% growthin the 1st quarter of this year.Increasingly, domestic demand - drivenby rising corporate investment inEurope - has been driving growth inoutput. Investment in machinery andequipment has been rising since late2010.Meanwhile, also exports continued tocontribute to the improvement inactivity and in order books.
First indications for the 3rd quartersignal a continuation of rather healthybusiness conditions. The Germanmechanical engineering associationVDMA reported a 14% y-o-y rise inorders in August, with domestic ordersgrowing 22% and export orders 9% y-o-y. The German industry nearingcapacity limits has boosted activity inother countries such as Austria, theNetherlands, Sweden and mostCentral European countries.
Business prospects for the remainderof 2011 and 2012 have remained quitepositive despite high uncertainty levelsimpacting on industrial sentiment.Order books have continued toincrease in recent months; the existingbacklog will guarantee activity stayingat overall satisfactory levels in thecoming quarters.EU investment in machinery and
equipment is projected to increase bymore than 3% in 2012, coming from4% in 2011.The competitive position of Eurozoneproducers on the key markets abroadcould improve if the EU remainsaround its current level of close to1.35US$. This could help to soften themoderation expected for growth inglobal GDP and international trade.On balance, mechanical engineering
output in the EU is seen rising by morethan 9% this year. This implies thataverage growth in the 2nd half of theyear will slow down to around 5% year-on-year.In 2012, output in the EU mechanicalengineering industry is seen keeping arather satisfactory pace. Activity isforecast to rise further by almost 3.5%,with growth in the 1st half probablyoutpacing growth in the remainder of2012, reflecting the industry nearing itscapacity limits again.
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Tubes
Moderation Q2-2011 tube output
growth momentum
Outlook for growth easing off
further in the months ahead
Firm demand from all tube client
sectors in 2012
Output in the steel tube industry in theEU continued to grow strongly in the2nd quarter of this year. Nevertheless,
compared with the extremely robustincrease in production in Q1-2011 ofmore than 22% y-o-y the decelerationto a growth of around 8% y-o-y wasquite significant.This trend could be observed in almostall EU countries.Since the 2nd quarter real consumptionin the steel tube using sectors hasbecome the main driver of demand
growth, whereas in the 1st
quarter alsoinventory replenishment had played asignificant role in the rise in tubedemand. Basically all client sectors ofthe tube industry have registered arobust rise in activity in Q2-2011.First estimations for output in the 3rd quarter show a further moderation inoutput growth to around 2.5%, closelyin line in the growth in activity expected
for the key client sectors.
The outlook for the coming months isfor output growth cooling further to 2%y-o-y in Q4. This looks also set tobecome the average growth rate in thefirst half of next year.Demand for small and medium-sizedsteel tubes should strengthen mildlyfurther over the forecast period, in syncwith the expected trend in activity in
the main tube using sectors such asautomotive, engineering and metalgoods.OCTG demand will be supported byhigher activity in the Middle East and asustained high level of activity in NorthAmerica, assuming that oil pricesremain close to their current levels.Solid pipeline project activity isforeseen to keep global demand for
large welded tubes at a satisfactorylevel in Eastern Europe, the MiddleEast and Asia.On balance, total steel tube productionin the EU is forecast to increase byalmost 9% in 2011. Output growth in2012 is projected to cool down toaround 2.5%.
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Domestic Appliances
Output in H1-2011 slightly lower than in the same period of 2010
Market expected to see some improvement in 2012
The latest figures for production ofelectric domestic appliances in the 1st half of 2011 signal that contrary toearlier estimates activity in this sector
has registered a slight decline in thefirst half of this year.Demand for electric domesticappliances has remained underpressure so far in 2011. Waningconsumer confidence and stilldepressed residential property marketsacross the EU have been acting as adrag on sales of white goods. Themodest improvement in new residentialhousing activity in some EU countries
has not been sufficient to unlock thedemand side potential in the EU.EU manufacturers of electric domesticappliances have been facing difficultmarket conditions since 2008. Incontrast to other manufacturingsectors, the gap with pre-crisisproduction levels has remained quitesignificant. Fierce competition andheavy pressure on profit margins haveresulted in manufacturers relocatingproduction to low-wage countries.Since 2005 Central Europe has seen a
marked increase in its domesticappliances‟ manufacturing capacity. Atthe country level, divergences in theevolution of sector activity persisted inQ1-2011. More recently, newcapacities have been built in EasternEurope (Slovenia, Russia) and Turkey.Meanwhile, competition with suppliers
from China and Korea has alsointensified.Near term prospects for this sector arenot particularly bright. Weak privateconsumption growth and the hesitantrecovery of the residential propertymarkets will keep demand in the EUrather subdued for the time being.First estimates and projections for the2nd half of this year signal outputmoving sideways, which will result in
production in the whole of 2011 fallingslightly compared with 2010.The outlook for 2012 is better as theresidential construction market isexpected to see a further, morewidespread rebound across the EU.The market will continue to becharacterised by fierce competition,however. Production of domesticappliances is forecast to increase byaround 3% in 2012, basically driven bya rise in output in Central Europe.
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Real Consumption
Forecast for real consumption - % change year-on-year
PeriodYear2010
Q111 Q211 Q311 Q411Year2011
Q112 Q212 Q312 Q412Year2012
4.8 13.8 7.6 2.3 1.7 6.1 0.6 1.9 2.4 3.2 2.0
Real consumption growth in Q2-
2011 rose 8% y-o-y
Slowdown in growth momentum
in H2-2011 and in early 2012 Mild acceleration consumption
growth in H2-2012
Real steel consumption in the EU
increased by more than 8% y-o-y in
Q2-2011, driven by still robust growth
momentum in the manufacturing
sectors. The deceleration from the
double-digit growth pace in the 1st
quarter marked the transition to a more
sustainable growth trend as the effectof temporary factors boosting activity
faded away.
Looking forward, a further cooling
down of real steel consumption growth
is on the cards for the coming quarters.
First estimates for Q3 real
consumption signal a further slowdown
in growth to just below 2.5% y-o-y, in
line with the manufacturing recovery
losing steam.
In Q4-2011 consumption growth may
slip below 2% y-o-y, which will result in
total real steel consumption in 2011
rising by around 6%.Prospects for 2012 have remained
mildly positive despite high levels of
uncertainty surrounding the outlook for
the steel using industries in the EU.
Activity in the manufacturing sectors
and in construction will continue to
grow, albeit in the case of the
manufacturing industry at a
significantly slower pace than in 2010
and 2011.Particularly in the first half of 2012 real
steel consumption is forecast to grow
only modestly.
From mid-2012 onwards improving
end-user fundamentals should result in
a modest acceleration in consumption
growth. On balance, real steel
consumption is projected to increase
by 2% in 2012.
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Apparent Consumption
Forecast for apparent consumption - % change year-on-year
PeriodYear2010
Q111 Q211 Q311 Q411Year2011
Q112 Q212 Q312 Q412Year2012
22.0 16.5 11.4 3.5 -1.6 7.5 -3.1 0.5 4.0 7.7 2.0
Q2-2011 apparent consumption rose 11% y-o-y
Imports take larger share of EU steel market
Distribution stocks rising in Q3 Real and apparent consumption
growth 2012 seen slowing down EU apparent steel consumptioncontinued to grow rather vigorously inQ2-2011. Growth was just over 11%,compared with 16.5% in the 1st quarter.Inventory replenishment continued tohave an effect on demand, but the keydriver for growth was clearly the solidincrease in real consumption.
Customs data confirm the continuationof high imports from third countriesentering the EU steel market in Q2.Imports grew 45% y-o-y and werealmost 20% up on the precedingquarter, rising to the highest quarterlylevel since Q3-2008. The huge rise inimports resulted in EU domesticdeliveries in Q2-2011 falling below theQ1 level and imports accounting for a21% share of the EU steel market.Supply pressures in the EU steelmarket have risen during summer.Particularly stocks in the distribution
chain have increased further as themarket entered the seasonally weakerholiday period while deliveries werestill coming in. At the current level of
distribution chain sales - which isunlikely to improve towards the end ofthe year - stocks account for 3 monthsof shipments. Ample stocks and shortdelivery times in combination withslowing demand growth and highlevels of uncertainty surrounding thebusiness climate in the months aheadimply that bookings will continue on ahand-to-mouth basis. Import licensedata suggest that import pressure
could ease to some extent, whichappears to be confirmed by July andAugust import data. In the whole of2011 apparent consumption is forecastto rise by 7.5%.In 2012, real consumption will driveapparent consumption growth, but acooling down is inevitable. The stockcycle effect is expected to be fairlyneutral. Imports are forecast to comedown from the high levels registered in2012. On balance, apparent steelconsumption is forecast to rise by 2%in 2012.
Annual ApparentConsumptionin Mio Tonnes
2004 179
2005 170
2006 195
2007 204
2008 188
2009 123
2010 150
2011 (f) 161
2012 (f) 164
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Imports
Rise in imports accelerated in Q2-2011
Particularly flat product imports rose sharply
Imports may slow down in the remainder of 2012
Imports in 2012 seen decreasing moderately
The latest steel trade figures confirmthat import pressure increased furtherin the 2nd quarter of 2011. Total third
country imports rose 45% y-o-y andwere almost 20% higher than in the 1st quarter of this year. At a monthly levelof just under 3.1 million tonnes, thirdcountry imports reached the highestlevel in three years‟ time. The share ofimports in the EU steel market was21% in Q2 compared with on averageof almost 16% in 2010.In line with the trend seen in 2010,particularly imports of flat products
have risen sharply so far this year. Inthe first 8 months of this year, quartoplate imports rose 89% y-o-y, coldrolled imports 68% and hot-rolled coilimports 43%. Total flat imports were51% up on last year compared with21% for long products. Within thisproduct group, differentials at theproduct level are significant with fallingwire rod and rebar imports being
overshadowed by a strong rise inmerchant bars.
With respect to the main countries oforigin, China has remained thedominant third country supplier forseveral products, most notably hot-dipped galvanised sheets and organiccoated sheets;
Meanwhile, nearby steel producerTurkey has stepped up its flat productdeliveries to the EU steel market. Inthe January-July period Turkey wasthe largest supplier of hot-rolled widestrip to the EU. Other countries suchas the Russian Federation and Ukrainehave kept a strong presence in the EUflat product markets as well.The latest import license informationand first estimates for Q3 point towards
a further y-o-y rise in imports but theyare seen moderating compared withthe Q2 level. Imports in the finalquarter are seen moving sideways,which will result in total imports risingby 30% in 2011.The outlook for 2012 is for a decreaseof around 5% in third country imports.The weakening growth trend indemand and the likelihood of the Euroremaining below 1.40US$ for sometime should be supportive to keepingimports at a reduced level.
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Exports
EU exports fell 10% y-o-y in 2011 EU net importer since 2011 Trade surplus in long products
only Exports seen falling by almost
6% in 2011 Exports may rise again in 2012 In the 2nd quarter of 2011, EU steelexports decreased by 10% compared
with the same quarter of 2010, whilerising 4% in comparison with the 1st quarter of the year. Particularly in the2nd quarter the competitive position ofEurozone exporters was negativelyaffected by the relative strength of theEuro.Over the first 8 months of 2011, flatproduct exports declined by 10% y-o-ywhereas long product exportsincreased by 3% y-o-y.
Since 2011, the EU is again a netimporter of steel products, to the tuneof 590,000 tonnes per month over theJanuary-August period. Whereas thereis a trade deficit in semis and flatproducts, long products continued torun a surplus.Net trade in long products amounted to488,000 tonnes per month in thisperiod with exports dominated byrebars and heavy sections.
The largest trade deficit persisted insemis, averaging 502,000 tonnes permonth over the 1st 8 months of thisyear.As far as the main export destinationsfor long products are concerned,
Algeria has remained the largest outlet.Exports in Q3-2011 are estimated tohave decreased to some extent incomparison with the Q2 level. A slightrise in in the quarterly export tonnageis forecast for the final quarter of theyear.This will result in total exports falling byalmost 6% in the whole of 2011.For 2012, EU steel exports areprojected to rise. The weaker Euroshould be supportive to Eurozoneexporters regaining market shareabroad. With unrest in the NorthAfrican markets cooling down, steelmills‟ export opportunities shouldimprove during the year.
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Changes in %IMPORTS
Third CountriesEXPORTS
Third CountriesDELIVERIES
into EU27TOTAL
DELIVERIES
Year 2010 29.9 6.3 20.9 18.3
Q.1/2011 40.9 -6.2 12.9 9.3Q.2/2011 44.9 -10.0 4.2 2.4
FORECAST
Q.3/2011 14.1 -8.5 2.5 1.2
Q.4/2011 4.8 2.7 -1.7 -0.4
Year 2011 26.2 -5.7 4.5 3.1
Q.1/2012 -6.1 13.8 -1.7 0.3
Q.2/2012 -18.1 13.0 4.4 5.5
Q.3/2012 0.4 11.8 4.9 5.8
Q.4/2012 8.7 8.0 7.5 7.5
Year 2012 -5.2 11.6 3.6 4.7