In the second quarter of 2023, the EU's steel consumption fell by 7.6%, marking the fifth consecutive quarterly drop. Despite this, some steel-using sectors showed resilience, with slight growth attributed to the automotive, mechanical engineering, and transport sectors.
The EU steel market is facing a notable decline in consumption. The second quarter of 2023 has seen a 7.6% drop, which is part of an ongoing trend over the last five quarters. This recent figure is a slight improvement from the previous quarter's 11.3% decrease but still underwhelming when compared to the more robust numbers of 2021 and the first half of 2022.
The current downturn began in mid-2022, with a concoction of adversities including geopolitical tensions, surging energy costs, and rising inflation, all amidst a climate of increasing economic uncertainty. These factors have taken their toll on demand, which worsened considerably in the latter half of 2022, and this downtrend is expected to persist at least until the third quarter of 2023.
EU domestic deliveries, reflecting this weakened demand, have been in decline for five consecutive quarters, falling 6.5% in the second quarter of 2023. This follows a stark contrast to 2021, which saw a significant rebound of 11.9% after the steep drops of 2020 and 2019. With the current unfavourable conditions, 2022 saw a marked reduction in domestic deliveries of 7.9%.
Import activity has also decreased, with a 10.2% contraction in the second quarter of 2023. This follows a more drastic reduction in the previous quarter and is largely due to the reduced demand for steel. Nonetheless, imports still account for a high proportion of the apparent consumption, at 28%.
On a brighter note, the EU steel-using sectors have demonstrated unexpected resilience, particularly in the automotive, mechanical engineering, and transport sectors, which saw positive output trends. However, not all sectors fared well; domestic appliances, tubes, metalware, and especially construction have seen decreases in output. The latter has entered a recession, with its third consecutive quarterly decline.
The broader economic and industrial outlook for the EU remains hampered by high inflation and interest rate increases set by the European Central Bank, though the impact on the steel-using sectors' output has been limited so far. Only the construction sector has significantly felt the effects.
The industry's future seems to be shaped by continuing economic uncertainties, with challenges like fluctuating energy prices, weak demand, and inflation all playing a part. While 2022 saw a 3% increase in output, projections for 2023 suggest a slowdown to 0.6%, and 2024 could see further deceleration, particularly due to potential setbacks in the automotive sector.
The EU steel market has been navigating through turbulent times, with significant challenges leading to a steady decline in consumption. Although certain sectors within the industry have shown tenacity, the overall outlook remains cautious with anticipation of continued economic uncertainty and its associated impacts.