Slight rebound for the EU steel sector? Tube industry forecasts for 2021
The European Steel Association (EUROFER) has recently released its latest Economic and Market Outlook report, providing insight into the real impact of Covid-19 on the steel output and use, and an outlook for the rest of the year in this post-pandemic world.
Let’s focus on the market forecasts for the tube sector in 2021, starting by taking a look at where the tube industry was standing before the pandemic.
EU steel tube sector overview
Over the whole 2019, the EU steel tube industry was already experiencing a moderate decline (-0.3%), the second in a row (-1.8% in 2018), foreboding a ticking time bomb scenario. This drop was associated with production activity becoming more closely aligned with other downstream sectors (automotive, metal goods, mechanical engineering) that were also in contraction. The impact of the declining demand in other sectors, however, was somewhat counterbalanced by a positive trend in the construction industry that helped boost the tube demand for construction applications, at least up to the first quarter of 2020.
The negative trend was then exacerbated by the Covid-19 outbreak in March 2020, resulting in a steep fall in steel tube output in the first and second quarter of 2020 (-27.3%). In Q3 2020, much despite a robust quarter-on-quarter rebound due to the lifting of lockdown measures in April and May, the EU steel tube production activity dropped by -11.6%. This marked the fifth quarterly drop in a row, with output remaining at historically low levels and a year-on-year fall comparable to those experienced by other steel-using sectors in the EU.
“The third quarter of 2020 was a period between two waves of the pandemic,” said Axel Eggert, General Director of the EUROFER. “Some measures had been relaxed and a partial economic recovery occurred in Q3, but the fourth quarter was marred by the reimposition of measures. 2020 is likely to be one of the worst years on record.”
Steel tube industry forecast 2021
With the market overview out of the way, let’s now move on and see what we can expect for this year. Projections for 2021 see a moderate rebound (+8.4%) by the end of the year, provided the pandemic fades around the third quarter, EUROFER expects the demand for large welded tubes from the oil and gas sector to remain very weak.
Little progress was made in the past few months to solve the political and commercial issues hampering the completion of some specific pipeline projects, and the collapse of global oil demand and oil prices is not helping in this regard either.
Forecasts indicate a dubious picture also for other downstream steel tube market segments. Should they return to normal business conditions and in case there are no other external shocks, there will be some positive effects on output starting from Q2, but overall the demand is set to remain fairly sluggish. Projections seem to indicate that demand for the construction sector will recover, while the automotive and engineering industries will remain rather weak, even in a best case scenario (where production activity returns to high historical levels and there are no more supply chain disruptions).
“The EU should use this crisis as an opportunity to use the recovery fund to support industry in meeting its decarbonisation ambitions, starting with sectors, such as steel, that have already shown how they can help support the aim,” said Mr Eggert. “Europe wants to come back from this crisis in a greener, more sustainable way. The European steel industry is ready – under the right conditions, with the appropriate regulatory framework, and a means to ensure a global level playing field – to roll out new technologies and approaches to revolutionise steelmaking.”
Read the full report and article here >>
Photo by worldsteel / Hristo Shindov
