According to the Economic and Steel Market Outlook 2014-2015/Q2 2014 Report from the Economic Committee of the European Steel Association (EUROFER), strengthening indicators and evidence of improving dynamics suggest that the EU economy is well on track for recovery this year and into 2015.
Meanwhile, the report also signals that, while the EU recovery is gradually building up some staying power, risks remain. While delays in the implementation of reforms and the current strength of the euro in combination with longer-term low inflation could slow economic growth in the EU, external risks have come to the fore lately.
Financial market turmoil in several emerging economies, in particular Brazil, India, Indonesia, Turkey and South Africa, have led to capital outflows and overnight currency crunches. Monetary action to stabilize the situation will slow their economies. EUROFER added that further escalation of the conflict between Ukraine and Russia would not only hurt Russia but also the EU economy because of its trade ties with Russia.
According to EUROFER, the base case scenario for the EU steel market is for a gradual but slow and fragile recovery of demand in 2014 and 2015, driven by improving activity in the key steel-using sectors and some restocking. Despite the expected rise in apparent consumption - almost 3.5 percent in 2014 and three percent in 2015 - the gap with pre-crisis demand levels will remain significant.
"As far as supply is concerned, we are concerned about imports from third countries into the EU. Steel trade data show imports remaining at a high level in the first quarter of 2014, attracted by the strong euro and the uptrend in demand. This threatens to distort market conditions in the EU which are already extremely difficult for EU steel producers," EUROFER director general Gordon Moffat said.
