The European steel industry is enjoying higher demand growth led by the auto sector, but industry group Eurofer warned imports were creating headwinds that may strengthen, with China gaining WTO status and hampering a rebound in regional steel output toward the 2007 peak.
There is a "fragile recovery in Europe" and since 2014 demand conditions are improving, albeit at a "very unspectacular" level, said Jeroen Vermeij, director of market analysis at Brussels-based Eurofer said Tuesday at the Eurocoke Summit in Barcelona.
"Market conditions are extremely challenging," Vermeij added.
As China seeks market economy status through the World Trade Organization, Eurofer expects this will "probably happen" and with it, steel exports will inevitably rise.
"Probably granting market economy status, dumping will accelerate," he said of China.
Auto-related steel demand is leading growth and will likely rise over the next two years, while an investment gap, particularly in construction is seen, according to Eurofer analysis. Europeans are said to be leaders in segments such as auto-sheet, which is helping mitigate imports.
A rebound may continue but 2020 projected demand of 160 million mt will be still 4% lower than in 2007, Eurofer expects.
According to Eurofer, steel import volume growth at 5.9 million mt in 2015 captured all the increase in EU demand last year given demand grew by 5.2 million mt.
"Since 2013, the rise in imports is stronger than rise in domestic consumption." "Over the last three years EU mills are losing market share to importers.
He stated Eurofer's position was not against steel imports. Rather it was against imports that are not reflecting genuine cost advantages, and benefit from state aid and other support while pointing out higher Co2 emissions are being exported into Europe at the same time.
As emerging economies slow down, such as China, Brazil, Russia, and the impact of sustained low oil prices remains, the EU steel recovery driven by exports as well as private consumption may have risks skewed to the downside, he said.
Eurofer is not expecting European GDP to change from a 1.9% growth rate over the next two years.
"There are very divergent trends in steel use, best performing is automotive, it's going to continue being quite optimistic," Vermeij said.
"Construction stopped acting as a drag in overall steel production, growing again, while the tube sector not doing well due to oil and gas trends." Eurofer sees regional 2015 steel demand of 150 million mt and gradual growth to 160 million mt in 2020.
"Services are growing faster than manufacturing. We're cautiously optimistic of continuation in steel demand in Europe."
