EUROFER Sees 7% Recovery in EU Mechanical Engineering in 2021
The European Steel Association EUROFER’s newly released Economic & Steel Market Outlook 2021-2022 said that “Output in mechanical engineering had been falling since the second quarter of 2019, in connection with the continued downturn in manufacturing. In line with expectations, production activity in the EU mechanical engineering sector registered record slump of 20.3% YoY in the second quarter of 2020, which was equally affected by the industrial lockdown in response to the Covid-19 outbreak as the lack of new orders took its toll on production activity. Further to the removal of lockdown measures and the restart in industrial production, output in the EU mechanical engineering industry in the third quarter of 2020 rebounded significantly quarter-on-quarter but still fell 9% YoY, as a continuation of the existing negative trend and reflecting low activity levels. In addition, the second wave of the pandemic has resulted in continued uncertainty and hampered the industrial recovery as well as the global manufacturing cycle.”
Mechanical engineering forecast 2021-2022 - The pandemic has taken a heavy toll on the sector, with an unprecedented output loss at least until the end of the second quarter2021. Due to the relatively strong reliance of the mechanical engineering sector in the EU on export markets and the investment climate, prospects for the post-pandemic scenario are far from bright, at least as long as the international economic recovery will remain fragile and exposed to risks. The combined effect of persistently low business confidence, trade friction, weakened demand in key domestic markets in the EU, policy uncertainty and the likely weakness of the manufacturing sector in general may continue to put the brake on investment decisions even after the end of the pandemic. Amid such levels of uncertainty, companies in most downstream sectors will likely refrain from investment in new machinery and equipment and will instead favour maintenance, debottlenecking and the upgrading of existing machinery. Business conditions are expected to improve only from the second quarter of 2021 as the manufacturing sector in the EU begins to recover from the huge disruptions linked to the COVID-19 pandemic with the global supply chain functioning normally. On the other hand, in the post-pandemic scenario, easy credit conditions and financial support from policymakers should remain supportive. Mechanical engineering output is expected to fall by 11.5%, in line with our previous forecast in 2020, that is for the second consecutive year, further to 0.5% in 2019, and to rebound later by 7% in 2021 and 4.5% in 2022.