EUROFER Analysis of EU Steel Sector Performance in 2020
Eurofer’s Director Market Analysis & Economic Studies Mr Alessandro Sciamarelli has highlighted the market condition, supply & demand and consumption of steel in Europe in 2020 for 2020 in EUROFER’s Annual Report. He wrote “Crude steel production in the EU28 was 139.3 million tonnes in 2020, a drop (-11.5%) compared to production in 2019. This decrease reflected a continued deterioration in demand from steel-using sectors that had materialised throughout 2019 and worsened dramatically over the second half of 2020 due to the onset of the COVID pandemic. This was coupled with fierce competition in the domestic EU market, as well as on the EU’s main export markets. In 2020, apparent steel consumption in the EU amounted to 136 million tonnes, a drop of -11.1% (the second in a row, further to -5.3% in 2019) compared to 2019. Imports decreased (-17%) down to 29 million tonnes and held a 21% share of the market. The pronounced drop seen over the entire 2020 was mostly due to the lows seen in the second quarter. This was the quarter that saw the most severe COVID lockdowns. These led to an almost complete stop in industrial activity across the EU and plummeting demand.”
The substantial deterioration in business conditions due to the pandemic merely added to existing downside factors that had already seriously depressed steel demand over the preceding quarters. Uncertainty about near-term business conditions, weak demand from the manufacturing sector and continued stock reduction to record lows resulted in quarterly falls in apparent consumption from the first quarter of 2019 to the first quarter of 2020. From the third quarter, the recovery in the industry and the rebound in orders has translated into a pick-up in steel demand, albeit at historically low levels, well below the levels observed in 2018. However, it paves the way for more stable recovery over the course of 2021. After the removal of lockdown measures over the third quarter of 2020, EU apparent steel consumption had continued to fall (-10.4%) year-on-year in the third quarter of 2020, despite a quarter-on-quarter rebound from the record low seen in the second quarter. This trend, coupled with revived demand from steel-using sectors (stronger than expected for automotive and domestic appliances in particular), led to a year-on-year growth (+3.3%) over the fourth quarter of 2020, reaching 35.2 million tonnes. This marked the first quarterly growth in apparent consumption since the fourth quarter of 2018. Over 2021 apparent steel consumption is expected to continue to improve, thanks to a stable recovery in demand from manufacturing industry. Some uncertainty factors, however, are likely to remain in place over the course of 2021. These include fragility in the EU economic recovery, slow implementation of vaccination plans, persistent volatility on commodity and raw material markets and transportation costs.
Meanwhile, domestic deliveries by EU steel suppliers fell (-9.7%) compared to 2019, marking the second consecutive decline in yearly terms after 2019 (-4.2%).
In 2020, total imports of steel products into the EU including semi-finished products decreased (-17%), further to a decrease in 2019 (-11%). Imports of finished products fell (-15% in 2020; -13% in 2019), due to a drop imports of flat products (15% in 2020; -10% in 2019) and a fall in imports of long products (-16% in 2020; -21% in 2019). The main countries of origin for flat product imports to the EU in 2020 were Turkey, South Korea, India, the Russian Federation and Ukraine, together accounting for 64% of total flat product imports into the EU. At the individual product group level, in particular, imports of organic coated sheet, hot-rolled wide strip, hot-dipped galvanised sheet and quarto plate all dropped over the year 2020 compared to 2019. The main countries of origin for long product imports into the EU in 2020 were the Russian Federation, Turkey, Belarus, Ukraine, Switzerland and China. These countries accounted for a share of 59% of total long products imports into the EU. All long product imports were significantly lower in the whole 2020 than in 2019. The sharpest falls were recorded for wire rod, merchant bars and heavy sections.
Despite the extreme weakness of steel demand due to the COVID-19 pandemic and the effects of safeguard measures, the risk of import distortions threatening the fragile balance between supply and demand on the EU steel market is likely to remain even post-COVID. The growth scenario forecast for EU apparent steel consumption is still subject to uncertainty. The global steel market continues to suffer from overcapacity and the proliferation of trade distortions. These will represent a threat to EU steel market stability even after the end of the pandemic. Given this reality, the EU steel safeguard remains an essential tool to prevent damaging import-led disruption to the internal market.
Total EU steel product exports to third countries fell in 2020 (-18%) compared to 2019. Exports of finished steel dropped (-17%). Underlying data for flat and long product exports show decreases (-17% and -16%). The main export destinations for EU steel exports over the fourth quarter of 2020 were Turkey, United States, Switzerland, China and Algeria, followed by Egypt and the Russian Federation. These main five destinations together accounted for 41% of total EU finished product exports over this period. Over the entire year 2020, exports of finished products to China rose (+18%) and so did exports to Egypt (+9%). By contrast, exports to Turkey dropped (-13%) and so did exports to the Russian Federation (-38%) and Algeria (-44%), as well as exports to the US (-33%). Exports to Switzerland decreased much less significantly (-8%).
The total EU trade deficit narrowed from 10.5 million tonnes in 2019 to 8.8 million tonnes in 2020 (2.5 million tonnes for finished products, unchanged compared to 2019). There was a deficit for flat products and a surplus for long products. The net trade deficit in flat products decreased from 4.1 million tonnes to 3.8 million tonnes in 2020. The trade surplus in long products also decreased from 1.6 tonnes in 2018 to 1.3 million tonnes in 2020.
As far as the trade deficit with individual trade partners is concerned, the largest trade deficit in finished products in 2020 was with Russia with a deficit of 2.7 million tonnes, followed by South Korea with 2.5 million tonnes and Ukraine with 1.3 million tonnes. The trade position with Turkey improved as the trade deficit has decreased from 1.8 million tonnes in 2019 to 684 kilotonnes in 2020. The major destination countries for EU finished steel exports with a trade surplus in 2020 remained the US, Switzerland and Algeria.
Source - Strategic Research Institute