The European Steel Association EUROFER’s newly released Economic & Steel Market Outlook 2021-2022 said that “Despite the rebound over the third quarter, prospects for the EU construction sector during 2020 were hugely impacted by the economic lockdown. This resulted in closures of construction sites, particularly in civil engineering, despite a slow restart in construction works (particularly in public construction) from June & July onwards. However, some EU countries have explicitly planned to restart public construction activity as quickly as possible, so as to use it as a countercyclical tool during the downturn. The EU construction confidence indicator had remained well above its long-term average over the first half of 2019 but has continued to decline since then. This trend continued in early 2020 according to available figures, before plummeting to dramatic record lows in April, followed by a short-term rebound in June and July. This continued, albeit at moderate pace, until December 2020. However, confidence remains rather low in historical terms. Construction activity at the end of 2019 was already experiencing a slowdown. This was not just because of demand-related factors, such as the weakening economic fundamentals and a general cooling of market dynamics after several years of strong growth, so the experience of 2020 merely extends this decline. Although it has been affected by the huge disruption caused by the COVID-19 lockdown, the construction industry is expected to experience a lower recession than other steel-using sectors with regards to the expected trend in production activity. The residential construction market and, particularly, private non-residential subsectors were most impacted by the halt in construction production in the course of 2020.”
EUROFER added “Despite mortgage and business loans set to remain at record lows, the fall in incomes due to the increase in unemployment as a result of the economic lockdown will continue to be strongly unsupportive of housing demand. Until a substantial improvement in the labour market occur– and growth in wages is seen the residential market will not provide positive contribution to new output in construction. Non-residential construction (offices, commercial and industrial buildings), which was already the weakest subsector in 2019 due to subdued investment climate and economic uncertainty, is expected to pay the highest toll to the pandemic-related lockdown. Even after the removal of lockdown measures the increasing vacancy rates in offices due to widespread remote working across Member States and the uncertain and fragile recovery in the manufacturing industry in the EU will most likely result in delayed investment decisions, with very little benefit for new non-residential investment. In contrast, the role of civil engineering as a growth engine for the construction sector is expected to strengthen at least from the first half of 2021, and to avoid a deeper collapse of the sector as a result of the COVID-19 outbreak. During the economic slowdown in 2019, civil engineering consistently recorded higher growth rates than both residential and non-residential construction.”
EUROFER concluded “Under the current, dire economic circumstances, many EU governments have announced that they will provide impetus to the completion of public construction and infrastructure projects, facilitated by to the suspension of the Stability and Growth Pact and the Fiscal Compact. Lower government debt service costs, given the continuity of the ECB action, should provide a very supportive role. Construction output will drop by 5.7% in 2020, a more pessimistic outlook than our previous forecast of minus 3.6%, and will rebound by 4.3% in 2021 and by 4% in 2022.