Steel market fundamentals may remain depressed longer than expected in Q3: EUROFER

LONDON (Scrap Monster): EUROFER's steel market outlook for third quarter signals that market fundamentals may remain depressed longer than expected. Only from the second quarter of 2013 onwards is EU steel demand forecast to improve again.

Gordon Moffat director general of EUROFER said that, "Weak confidence in combination with liquidity and credit issues is showing a negative impact on the EU business climate. With global economic growth currently hitting a soft patch, export growth is also cooling down, despite the weaker Euro. This is bad news for the manufacturing sector and for steel consumption in the EU."

Despite the EU escaping a technical recession in Q1 2012, available data signal that economic momentum continued to slow down in the first half of 2012. Moreover, sentiment has come again under pressure in recent months as concerns about the Eurozone crisis and particularly the indecisive way it is being dealt with by EU's policy makers have resurfaced, they added.

So far, solid order books have softened the manufacturing sector downturn, keeping activity and capacity utilization at satisfactory levels. However, corporate and consumer retrenchment will translate into new orders remaining subdued for the time being.

Meanwhile, construction activity across the EU will remain under pressure as well, due to a lack of new publicly or privately funded projects.

This will backfire on steel demand in the EU. Apparent steel consumption is estimated to have fallen by 9% YoY in the first half of 2012. Demand in the second half of the year is seen stabilizing around the depressed levels of H2 2011. Total apparent steel consumption in 2012 is forecast to fall 5%.

"Our base case scenario is still a moderate improvement of the business cycle in 2013 and a corresponding pick up in real and apparent consumption. However, confidence and access to finance need to improve to get the market moving upward again," Gordon Moffat concluded.