WSD’s Regional Outlook & Development: Europe: Part 1
Europe – “Hanging On” is a good outcome, shifting supply even better
European steel demand (based on data for the EU) and production has been on a declining trend for some time, with the downward momentum accelerating in the post-Covid era to an existentially threatening degree:
- ASC has declined from 155 million tonnes at the turn of the century in 2000 to 146 million tonnes in 2010, 144 million tonnes in 2015 and 140 million tonnes in 2019 just preceding Covid.
It plummeted to 128 million tonnes in 2020 and subsequently rebounded to a 13-year high of 161 million tonnes in 2021 – averaging a roughly “normal” 144.5 million tonnes across the two extremes – only to continue eroding in the next three years to a 133.5 million tonne figure in 2025. In fact, the last three years have seen demand converge in close range of that figure plus/minus a few hundred thousand tonnes.
- Crude steel output has followed the downward trend, from 163 million in 2010, 155 million in 2015, 150 million in 2019, 132 million in 2020 and only about 127 million in 2025. In fact, the past three years have averaged about 128 million tonnes within a highly compressed range.
Looking ahead, WSD would posit that an optimistic case for European steel demand in the decade ahead would be one of stagnation relative to most recent levels, especially considering the economic and geopolitical headwinds the region is facing:
- The manufacturing economy is facing an existential crisis, especially the traditionally export-oriented and steel-intensive automotive and machinery sectors in Germany and elsewhere. The onslaught of Chinese exports is hurting the export competitiveness of EU member economies, with the “double whammy” of China reducing its imports of the very same industrial goods that previously represented a huge portion of European exports.
- From an intra-regional perspective, steel demand sectors such as construction, automotive, etc. that are tied to a combination of population and employment dynamics in the long-term are bound for structural stagnation.
- The pursuit of “green” policy initiatives has yet to bear fruit with respect to surging Fixed Asset Investment, and the high cost of energy is likely to limit these ambitions with the steel sector’s recent pullback on previously announced projects a prime example.
- High labor and energy costs in general are a limiting factor in restoring the region’s export competitiveness; furthermore, with limited import trade barriers for manufactured goods the risk of further erosion is substantial.