EU Steel Market Supply Analysis

Below we present an examination of the European Union steel market’s supply dimension, domestic and international supplier dynamics, logistics network structure, and end-user inventory effects.

Observable Steel Consumption

Observable consumption is also defined as “steel demand.” Mathematically expressed, it is obtained by taking the total shipments of all steel products by EU producers, adding imports entering EU borders minus “returned” materials, and subtracting sales to third countries.

In other words, observed consumption is calculated by adding Union producers’ shipments with imported goods (excluding raw materials that EU producers subject to further processing in their own facilities), then subtracting returned materials and sales made outside the EU.

This observable consumption concept established by EUROFER encompasses final products of all grades, including stainless steel, as well as semi-processed steel materials.

If observed consumption exceeds actual steel consumption, this surplus quantity is stored throughout the supply chain. When observed consumption falls below real consumption, existing warehouses are depleted.

Apparent steel consumption in the third quarter of 2020

Further to the exceptional drop in the second quarter (i.e. -25%) due to harsh lockdown measures all over the EU leading to a stop in most industrial activities, EU apparent steel consumption fell (-11.6%) year-on[1]year in the third quarter of 2020, reaching 32.8 million tonnes. This marked the seventh consecutive fall. The outbreak of the Covid-19 pandemic led to an almost complete stop in industrial activity from mid-March 2020 took its heaviest toll at that point, but steel demand had already been impacted in the previous quarters. EU domestic and foreign supply

A substantial deterioration in business conditions due to the onset of the pandemic was added to existing downside factors that had already seriously depressed steel demand over the preceding quarters: uncertainty about near-term business conditions, weak demand from the manufacturing sector and continued stock reduction to record lows have resulted in exceptional quarterly falls in the second quarter.

As a result of these downside factors prior to the pandemic, apparent consumption in the EU fell (-5.3%) over the entire year 2019, compared to 2018, when apparent consumption increased year-on-year (+2.6%). EU domestic and foreign supply In line with what had been seen in preceding quarters, imports of steel products from third countries into the EU market – including semi-finished products – decreased markedly over the third quarter of 2020 as a result of extremely weak steel demand in the EU, coupled with current safeguard measures, resulting in a year-on-year drop (-25.4%), even steeper than that recorded in the second quarter (-16.6%).