Source: Eurostat, EUROFER Economic Committee
Market Situation in Europe and Competitiveness Issues
Platts - European Steel Summit
London, 23rd May 2013
Gordon Moffat, Directeur General
EUROFER
EU economy: uncertainty is the name of the game
EU not out of the woods yet
• Eurozone deeper in recession in Q4-2012
• Indicators lost ground in March-April
• Widening gap Germany vs. the rest
• Worrying signals from labour market
• Financial markets keep their calm
• Loose ECB policy – but credit remains tight
• Drag from austerity, uncertainty, financing
• Only support from exports
• Near-stagnation still plausible in 2013
• Turnaround hinges on sentiment & credit
Source: Eurostat, EUROFER Economic Committee Macro-economic Outlook
Source: European Commission, EUROFER
2014: mild recovery
• Global recovery + less risk aversion financial sector
• Exports remain lifeline EU economy
• Moderate rebound investment & private consumption
• Uncertainties will remain
• GDP growth 1.3% in 2014
2
Indicators going south again – a blip or something more serious?
Source: Eurostat, EUROFER Economic Committee
Source: European Commission, IFO, Markit
Macro-economic Outlook
Manufacturing PMI France
3
EU steel-using sectors’ resilience put to the test by difficult market conditions
Source: Haver Analytics
• Weak start Q1-2013
• Uncertainty and financing key issues
• Strong exposure to weak domestic
market
• Depletion order books
• First signs improvement late 2013
owing to 3rd country exports
• Total drop activity 2013: -1.5%
• All sectors register positive growth in
2014
Source: EUROFER, Q2-2013 Outlook
Steel-using Sectors 4
Construction: more weakness ahead
Q1-2013 output fell 5% Long duration of winter conditions
Continued impact of austerity, financing strains and economic uncertainty
All sectors affected
Large country differentials remain in Q1
Sharp contraction in Spain and Poland
Stability in smaller countries in Northern Europe
Slump to continue in 2013
Construction investment to slip further
Availability project funding is key issue
Pipeline of projects running low or dried up
SMEs in trouble; defaults rising
Larger groups are fleeing Europe
2014: mild rebound Improving economic and financial conditions
Construction investment seen rising
Plenty of projects waiting for funding
Construction activity to rise 1% in 2014
Source: EUROFER Q2-2013 Outlook
5 Construction Sector
Automotive: economic woes drive down demand across the EU
Q1’13 passenger car sales -9.8%
Sharp slump extended into Q1, spreading from south to north - only UK positive growth
Hyundai, Kia and JLR strength continued
Q1’13 commercial vehicle sales -11% y/y
Support of export demand fading German car exports Q1-2013 -9% y/y
Reflects weak EU market rather than demand 3rd countries – USA, Asia and Russia robust
Output Q1-2013 fell approx. 7.5% y/y Strong divergence at the country level Sales seen slowing down further in 2013
Consumer retrenchment due to rising taxes and unemployment, tight credit
Fleet renewal preceding years
Fierce competition in mass segment
Also slump in CV demand to continue
Exports provide some relief
Total output -3.5 to -4%
2014: moderate recovery In line with broader economy
Output +2.5%
Source: EUROFER Q2-2013 Outlook
6 End-User Sectors
Steel Market: moving towards late 2013 low-level stabilisation
Source: EUROFER
7
2013-Q1 apparent consumption -7.5%
6% drop real steel consumption
Less stock replenishment than in 2012
Sharp rise in imports: China key factor
EU suppliers lose market share
Steel Market Outlook
2014 steel consumption to remain
still 15% below 2005 level
2013: no repeat of 2012 stock pattern
Q2 demand to remain weak
Stocks kept as low as possible
H2 will not see similar destocking as in 2012
Demand to stabilise in Q4
Imports remain reason for concern
2013 RSC -3% and ASC -2%
2014 should see moderate rebound
Cautious recovery steel-using sectors
Real consumption to rise 1%
Some restocking during H1-2014 as activity picks up
Increase apparent consumption 3%
EU Apparent
Consumption in million tonnes per
annum
2007 201
2008 185
2009 121
2010 148
2011 157
2012 142
2013 (f) 139
2014 (f) 144
•EU: continuation of tough economic conditions
• Domestic demand to remain weak
• Only exports supportive to growth – Euro?
• Zero-growth GDP 2013, cautious recovery 2014
• Outlook US & emerging countries improving
• Global economy on track for mid-year recovery
• Risks appear more balanced
• Steel users resilience tested during 2013
• Business climate to improve in 2014
• EU steel market: depressed outlook 2013
Evidence of technical restocking in early 2013
EU market lacks positive demand-side impulses
Destocking in H2, but less pronounced than in 2012
Tentative signs of improvement late 2013
Imports to remain low, but no further drop
Mild recovery EU steel market in 2014
Risks: prolonged real demand weakness, supply-side disruptions via imports, stronger Euro, continued margin pressure
Key Messages
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Communication on Industrial Policy 2010 Communication on Competitiveness 2012
Ambition of the Commissioner for Industry:
- halt the decline in industry’s share in GDP and restore it to 20%
Manufacturing industry in Europe represents:
• 75% of European exports
• 80% of all private R&D
• 25% of all private sector jobs
The Communications enshrine the following conditions for
existing and new EU regulations:
• Competitiveness proofing
• Fitness tests (costs and effectiveness)
• Impact assessments
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High Level Round table on the Future of the Steel Indudustry
Recommendations
Demand-side measures and employment policy • Support for construction + automotive sectors • Measures to soften social impact of restructuring
Trade + Raw Materials • must aim to support EU manufacturing base. • Industrial trade interests must be pursued robustly
Climate Policy • Call for reflection on policy design • Correctly points out that industry cannot reduce emissions further
without new technologies
Energy: calls for • Completion of the single market in energy • Improvement in cost-efficiency of support for renewables • Support for complementary energy sources (shale) • Exemptions for industry from renewables and green levies • Long term contracts
10
Source: OECD, December 2012
11
Only developed steel markets signed up to WTO zeroing of steel import
tariffs…import tariff protection remaining for
emerging steel industries
* Major developed steel regions including EU, USA, Canada, Japan, South Korea, Taiwan
% world production with
zero tariffs
% world production with zero tariffs has
halved
60%
46%37%
29%
0%
20%
40%
60%
80%
100%
1994 2004 2008 2009
Steel market protectionism proliferating
12
ETS: Results of Implementation contrary to the political
understanding made with the member states
Benchmarks
The adopted benchmark values differ substantially from those proposed by
EUROFER due to the refusal of the Commission to assign all the carbon in
recovered waste gases to the steel producer benchmark (the proportion used for
power generation has been excluded).
Result: → Even the best performers will be short 8,5%
→ The sector as a whole will be short over 23%
Total cost to industry €11bln
Cross-Sectoral adjustment Factor
Could reduce the benchmarks by a further 2-3%.
Cost = €1bln
Electricity Compensation:
Electricity prices estimated to increase by 30% 2013-2020.
Compensation will be limited, covering only marginal increases.
13
The Commission Low Carbon Roadmap 2050
In October 2009, the Council endorsed a long-term target of reducing
collective greenhouse gas emissions by 80-95% by 2050 compared to
1990 levels
Main EUROFER objections to the roadmap are:
• Very questionable economic modelling
• The targets are not technology-led. Only CCS is explicitly mentioned,
the Commission assumes other technologies will “appear” as necessary.
• The targets are unilateral.
• Confiscation of free allowances (600-800 Mio).
• No account of the situation of individual industries and no provision
for economic growth.
• ETS sectors would have to reduce by 29% in 2020, by 45% in 2030,
by 65% in 2040 and 87% in 2050.
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