The European Steel Association EUROFER’s newly released Economic & Steel Market Outlook 2021-2022 said that “The EU automotive sector was already suffering its worst slump since the eurozone crisis of 2009-2012, before the onset of the COVID-19 outbreak that led, in March and April 2020, to an almost complete stop in production across EU car plants. Activity restarted after the removal of economic lockdown measures between May and early June in almost all EU countries, leading to a considerable rebound in output albeit far below the activity levels observed before the pandemic. Sluggish domestic and export demand, trade-related uncertainties, emissions woes, shifting patterns in ownership and model ranges (namely uncertainty about regulation and facilities for Electric Vehicles) already took their heavy toll on production activity during 2019. Output in the automotive sector has fallen since the third quarter of 2018, resulting in annual drop (-5%) over the entire year 2019 (the first since 2013), and – due to the huge impact of the pandemic-related lockdown - to an unprecedented year-on-year fall (-47.1% revised, formerly -44%) in the second quarter of 2020. Over the third quarter, the restart in industrial activity that was made possible by lockdown measures removal in the EU resulted in a strong quarter-on-quarter rebound, which however still translated into a year-on-year drop (-10.7%).”
Automotive industry forecast 2021-2022
Due to the onset of the pandemic, the automotive industry almost completely shut down in the second quarter of 2020 and production was suspended all over Europe, with very few exceptions. Some production sites re- opened already in late April, and gradually the sector returned to almost normal activity around mid-June all over the EU. This led to new orders and restart in output, albeit around low levels. Huge disruption in the supply chain due to lockdowns and blockages in transport across EU countries made it very difficult to ensure the supply of materials and components to the industry. However, assuming that from the second quarter 2021 onwards full confidence is restored and normal business conditions return it will take time before activity levels before the downturn seen in 2019 will resume. In addition, demand for new cars from consumers is expected to remain very weak at least until the macroeconomic picture and consumer disposable income improve. This is another source of uncertainty. In 2021, provided that the industry has been able to restore its production to normal levels, and with WLTP distortions having faded out by then, the launch of new models - many of them electric vehicles – could be a supportive factor, combined with some improvement in real wages and labour market dynamics on the demand side. However, subdued car demand from major markets such as the US, China and Turkey will remain a challenge for EU car exporters.
In addition, trade-related risks, potential disputes with the US on tariffs on EU automobiles and automotive parts and components, cannot be completely ruled out, possibly also under the new US Administration that will still hamper the recovery of the industry. This would continue to impact Germany and Central European industry, which have extensive trade linkages with the US market and are closely integrated into European auto supply chains.
Output in the automotive sector is expected to be hit the most compared to all other steel-using sectors in the course of 2020, with an annual slump (-19.5%, slightly less severe than -20.6% in our previous outlook), followed by a rebound (+15.9%) in 2021 and a more moderate growth (+4.8%) in 2022.