The European Steel Association EUROFER’s newly released Economic & Steel Market Outlook 2021-2022 said that “Prior to the onset of the Covid-19 pandemic, the manufacturing slump in the EU had deepened in the second half of 2019, with the automotive sector registering quarterly falls in production activity since the third quarter of 2018. In most other sectors, output fell considerably as well. The main exception was the construction industry whose growth, nevertheless, lost ground considerably. Persistent headwinds were already blowing before the outbreak of COVID-19, and are likely to continue weighing on the steel-using sectors once normal business conditions are fully restored. The outlook for output growth was slashed dramatically for 2020 due to the almost complete shutdown in industrial activity from the second half of March 2020. This resulted in unprecedented falls in output over the second quarter and is set to lead to very severe output drops by the European steel using sectors, despite a short-term rebound over the third quarter due to restart of industrial activity and removal of lockdown measures albeit still at historically low levels.
Total production activity in EU steel-using sectors experienced flat growth in 2019, which is a revision from the former 0.1% in our previous outlook, further to an increase of 2.7% in 2018, which was the first annual drop in output since 2013. The negative growth in 2019 was the result of an increase in construction output and a drop in all other steel using sectors, the most pronounced being recorded by the automotive sector. This negative trend continued at a faster pace in the first quarter of 2020. This quarter was only impacted to a limited extent ie from mid-March by the lockdown measures. The most severe consequences of the stop to industrial activity were thus recorded over the second quarter. The removal of lockdown measures over the third quarter allowed industrial activity to restart, with a considerable rebound in output compared to the record lows seen in the preceding quarter, but industrial activity has remained slow, and is exposed to fragility and risks.
Further to the downturn already observed in the preceding quarters due to worsening conditions for the whole manufacturing sector, production activity in steel-using sectors of the EU experienced a pronounced fall in the first two quarters of 2020. Output fell by YoY 7.5% in the first quarter and in the second quarter by 24.4%. In the third quarter, despite a quarter-on-quarter rebound, steel using sectors’ output continued to fall on a YoY basis of minus 6.4%.
Total steel-using sectors forecast 2021-2022 - The Coronavirus pandemic and lockdown has a massive impact on steel using sectors’ output, with plant closures, capacity reduction (permanent and/or temporary) and huge supply chain disruption. Despite the removal of lockdown measures and restarted industrial activity, uncertainty remains quite high as the pandemic is not yet over and continues to weigh down confidence and growth prospects. This was particularly visible during the new wave of the pandemic that hit Europe since the start of the fourth quarter 2020, with new lockdowns put in place albeit without affecting industrial activity. Thus, economic growth and global trade are set to remain subdued and exposed to fragility until the second quarter 2021, with repercussions for export oriented sectors, automotive in particular. This will also affect EU investment via severely weakened business confidence levels. Likely less negative output growth in construction, rather than other sectors, may cushion negative trends in other steel-using sectors. Total steel-using sectors output is set to fall by 11%, almost unchanged from EUROFER’s previous forecast of minus 10.4% in 2020, to recover by 7.4% in 2021 and to grow more moderately in 2022 by 4.1%