Eurofer’s Q1 2011 steel market outlook signals that despite slowing growth in the 2nd half of last year, the EU economy is on track for further recovery in 2011-2012.

The 2% GDP growth estimated for 2010 masks significant internal divergences in economic performance.

While the recovery in Germany and its Northern European trading partners is on solid footing, growth in the peripheral countries is hampered by structural weaknesses in the export sector and the negative impact of austerity measures on domestic demand.

Eurofer director-general Gordon Moffat: “The good news is coming from the manufacturing sector. Output has been rising faster than foreseen, particularly in Germany but also elsewhere we see a turn for the better.

"Indicators signal a continuation of this trend. Improving capacity utilisation will trigger investment in machinery and equipment. Also construction investment looks set to stop acting as a drag on domestic demand growth this year. This will broaden the basis for economic growth in the EU”.

The manufacturing rebound increasingly has replaced stock replenishment as the key driver of steel consumption growth since mid-2010.

The EU steel market started 2011 on a positive note. Stocks at end-users and distributors are still assessed as low to normal for the current level of downstream activity. The outlook for real and apparent consumption is for further sustainable growth.

Imports are still at reduced levels compared to 2006-2008, albeit on a rising trend for most flat products. All in all, the market is expected to remain relatively well balanced for the time being. Real and apparent consumption are seen rising by around 4% per annum in 2011 and 2012.

Mr Moffat added: “The key uncertainty currently stems from increased volatility in demand due to the continued tightness and rising prices for raw materials.

"Recently, the market has seen some forward buying in anticipation of steel producers looking to recoup the rising cost of hot metal. This might have an impact on bookings later this quarter”.

For the full report, click on the link: Economic and Steel Market Outlook 2011-2012, via the Eurofer website