Rising EU steel demand will be met by imports and European producers will not benefit, claims EUROFER.

Steel demand within the EU is forecast to rise 1.5% off the back of sustained economic momentum, but imported metal will be up 5%.

During Q1 2015, GDP growth sustained the momentum seen in H2 2014 and there are strong signs of modest demand growth driven by private consumption. Low oil prices, weak inflation, low interest rates and improving wage growth in several EU countries are paving the way for moderate increases in consumer spending, says EUROFER.

However, uncertainties surrounding the Greek debt crisis, structural constraints in the Euro area, slowing global growth and geopolitical risks are having a negative effect on confidence.

In European steel consuming sectors only the automotive sector is experiencing ‘confident growth’ according to EUROFER. “Our downstream clients are generally seeing muted business conditions,” said EUROFER director-general Axel Eggert. “They see little impact from apparently brighter macroeconomic conditions,” he added, claiming that headwinds and uncertainties persist.

The corporate sector remains cautious about larger scale fixed asset investment, Eggert said.

Total activity in EU steel consuming sectors is expected to rise 2% this year and 2.7% in 2016.EU apparent steel consumption was marginally up on 2014, although third country suppliers – and not domestic producers – have gained from additional volumes and this trend has continued into Q2.

In 2016, apparent EU steel consumption growth will be slightly higher at 1.9%

Eggert said that EU steel imports are rising, fuelling price competition and eroding margins. China is at the root of such destabilisation. Chinese exports have risen 49% year-on-year over the first five months of 2015. “As long as Chinese mills continue to offload their products rather than cut production, we foresee the continuation of difficult market conditions,” he said.