eu steel market outlook · 2018-01-23 · eu steel market outlook imports of flats from china and...

© 2018 SteelConsult International

EU Steel Market

Outlook

January 2018


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EU Steel Market Outlook

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EU Steel Market Outlook – Company Profile

About SteelConsult International

Services Product Areas Why SteelConsult?

• Strategic Consulting • Steelmaking Raw Materials • Specialised in Iron & Steel

• Market Research • Semis • Expertise & experience

• Economics Analysis • Flat Products • Background in industry

• Training • Long Products • Wide contact network

• We know the steel industry

• We know the market

• Extensive databases

• Strong network of senior consultants,

with a background in the industry


2.4%

1.5%1.8%

0.9%

-3.5%

-0.2%

7.1%6.7%

3.0%

2.3% 2.4%

1.7%

1.0%

1.7%

6.7% 6.8%

3.1%

2.5%2.1%

1.3%

2.0%1.7%

7.3%

6.4%

3.0%

2.2%

1.7%

0.8%

2.3%

1.8%

7.5%

6.3%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Global USA Eurozone Japan Brazil Russia India China

2016 2017e 2018f 2019f

Source: World Bank, SteelConsult

BRIC countriesGlobal

Real GDP growth (%)


Growth prospects are bright around the world. The Eurozone, Brazil and Russia are finally also showing recovery

G3



EU steel prices have rebounded firmly since Q1 2016

0

100

200

300

400

500

600

700

800

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Source: ArcelorMittal, SteelConsult analysis

2012 2013 2014 2015 2016 2017

Average steel sales price EU (€/t)



Profitability has also improved, with EU mills booking their strongest financial performance since 2008

100

115

134

157

169

22

73

44 42

56 57

68

86

65

0

20

40

60

80

100

120

140

160

180

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e

Source: SteelConsult analysis

Average EBITDA margin EU steel industry (€/t crude steel)



Capacity utilization in Europe is, however, still lagging behind

0%

20%

40%

60%

80%

100%

120%

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

Source: WSA, SteelConsult analysis

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Crude steel capacity utilization EU steel industry



Whilst steel imports into the EU have fallen in recent months, they remain at relatively high levels

Source: ISSB, SteelConsult

555 638 626426 561 694 583

403

8271,056

788 790 664805 679 556 681

480 528 472 512 392 448 486 398 473 584371 442

189 267 290 273

447

698 690877 730

816

658

566

507

683

494 450490

643563 729

699

587646 760 697

789 656 588 805 620657

657722

716 556666

431

368

351 481 447 412

502

536

426

469

492

514410 454

591

570703 578

588 443 455 486 423 463 466395

369

620

334

437

452333

334

458

135

127

144170 246

210

191

196

227

245

204165 205

228

227238 210

151 247 280

301330

328 245373

339

401

471

633

444

323324

307

517

551

595 814 844

930

926

732

842

833

778

592

817

820928 791 834

852815 837

905 9831,084

694

1,021

952

909

833

958

966

944 7941,038

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S

2015 2016 2017

Imp

ort

s ('

00

0 t

on

nes

)

3rd country imports of total steel products into the EU-28 by origin

Other 3rd countries

South Korea

Turkey

India

Ukraine

Russia

China

Source: ISSBNote: Products incl. HR, CR, Electrical steel, HDG, EG , Plate, OCS , tinplate, long products, semi-finished steel and welded and seamless tubes



Imports of flats from China and Russia have come down sharply, but have been taken over by other countries incl. India and Turkey

Source: ISSB, SteelConsult

373460 483

284417

517421

270

591722

608 587519

589477

394505

339 367 350 334254

327 365263

355433

287 352

94 123 152 119

153

309 288

366

341

350

315

206

191

226

154 158143

245

248264

222

108

242 304259

292227 169

71

58

74

100

149

162233 154

94

158

151 178

194147

228

190

146

153

125

107 125149

192

172232

185

229

142197

179192 200 217

158148

240

129

180

174139

149

142

113

65138

8856

101

61

60

116

47

43 5861

76

109 55113

77

130

112 273 286 207 235

229

311

371

393

405

406 256252

231

25

19

26

51120

89

63

79

10990

67 79107

96

86111

101

38

7265

129 191154 134

238

127

204

274

349

254

167179

157

77

140

118

118

169

101

135

141

155177

142 108 181

156202 210

205

123

196128

183228

222 160

278 211

203

290

248

196

228186

167

184

203180

340188

275

291

265

336

359

294229

315

288 376292

258

255

379 357

385287

416

224 377350

444

339

310

340

305 448

470

0

500

1,000

1,500

2,000

2,500

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S

2015 2016 2017

Imp

ort

s ('

00

0 t

on

nes

)

3rd country imports of flat products* into the EU-28 by origin

Other 3rd countries South Korea

Turkey India

Ukraine Russia

China

Source: ISSBNote: * Flat products incl. HR, CR, Electrical steel, HDG, EG and Plate, excl. STS, OCS and tinplate


Source: Eurostat


The price upturn has been mainly caused by a pick up in demand, with both the manufacturing and the construction sectors showing a more pronounced recovery since 2016

Leading economic indicators EU (Index 2010=100)

80

85

90

95

100

105

110

115

120

125

JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASON

Industrial production manufacturing EU-28

Construction production EU-28

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017



Steel demand growth by the EU automotive sector is loosing speed, but remains at high levels

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

J F M AM J J AS O ND J F M AM J J AS O ND J F M AM J J AS O N D J F MAM J J A SO N D J F MAM J J A SO N D J F MAM J J A SO N


Passenger car output of main EU producing countries (% YoY growth)

2012 2013 2014 2015 2016 2017


Source: Eurostat

Note: Data is seasonally adjusted


Meanwhile, the South of Europe has also started to show some clear improvement

Leading economic indicators - forward looking

0

20

40

60

80

100

120

140

160

J FM AM J J AS ON D J FM AM J J AS ON D J FM AM J J AS ON D J FM AM J J AS ON D J FM AM J J AS ON D J FM AM J J AS ON D J FM AM J J AS ON D J FM AM J J AS O

Building permits Germany (Jan. 2010=100)

Building permits Spain (Jan. 2010=100)

2010 2011 2012 2013 2014 2015 2016 2017


Source: Markit


The PMI indicator for Eurozone Manufacturing is at a record level of 60.6, also boding well for expectations in the coming months

Leading economic indicators - forward looking

0

10

20

30

40

50

60

70

JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASOND

Eurozone Manufacturing PMI

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

PMI>50 = expansion

PMI<50 = contraction

PMI balance point = 50



Growth in steel consumption is expected to slow down somewhat in 2018 and 2019, but remain well in positive territory

-3.4%

14.2%

5.9%

-8.3%

-34.8%

21.0%

7.1%

1.7%

4.7%2.8% 3.4%

2.2% 1.8% 1.7%

-10.5%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018f 2019f

Source: Eurofer, WSA, SteelConsult

Note: *Excl. Turkey

Growth in steel consumption Europe* (YoY % change)



There are also some threats: Raw materials costs are rising again…

Source: SteelConsult analysis, SBB, Steel First

Price

40 43 48 4657

125115

97

305

129

191

289

210

102

114

210

240

17 18 18 19 22

3544

49

7566

107

167

120

43 4754 54

126

159

75

112

0

50

100

150

200

250

300

350

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18Q1*

Coking coal (FOB Eastern Australia Port, US$/t)

Iron ore (SSF FOB Tubarao, US$/t, 62% Fe)


Operational production cost/t slab, EU mill, US$/t

80 90117

174196 203

364

266

357

529

387342

267

184 193

285310

15

36

3167

73

31

33

31

29

27

27

16 15

21

25

5060

66

6371

84

90

92

83

85

77

79

83

71 71

73

79

31

25

0

100

200

300

400

500

600

700

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Q1

Other operational production costs*

Freight raw materials

Raw materials


…EU mills are seeing their production costs increase significantly. In addition to raw materials, costs for energy, freight and labour are also rising, whilst the euro is strengthening


Note: *Incl. net energy credit



Rising CO2 emissions costs: CO2 emissions prices have been low for many years and the impact on the EU steel industry has so far remained modest…

Source: EEX

0

5

10

15

20

25

30

Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Spot carbon emission price ETS (€/t CO2)

€8/t

© 2018 SteelConsult International Page

61

39

18

-10

0

10

20

30

40

50

60

70

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

*

2019

*

2020

*

2021

*

2022

*

2023

*

2024

*

2025

*

2026

*

2027

*

2028

*

2029

*

2030

*

-10

0

10

20

30

40

50

60

70

Actual cost

Case 3: High case scenario (EUR100/t CO2 by 2030)

Case 2: Middle case scenario (EUR65/t CO2 by 2030)

Case 1: Low case scenario (EUR30/t CO2 in 2030)

18

CO2 emissions costs, average of integrated EU steel mills (€/t crude steel)

Free

Phase I ETS Phase II ETS Phase III ETS


Note: Indicative only, forecasts are subject to specific assumptions


However, the EC’s CO2 emissions regime is getting stricter and CO2

emissions costs are expected to increase to levels of ~€20-60/t crude steel in Phase IV of the ETS

Phase IV ETS


0

50

100

150

200

250

'67'68'69'70'71'72'73'74'75'76'77'78'79'80'81'82'83'84'85'86'87'88'89'90'91'92'93'94'95'96'97'98'99'00'01'02'03'04'05'06'07'08'09'10'11'12'13'14'15'16'17'18'19'20

Source: WSA, SteelConsult

Note: *Excl. Turkey


Negative growth: the EU steel market is mature and, despite the current upturn, it declines by 0.3% per year on average over the long term

Finished steel consumption Europe* (mln tonnes)



In conclusion: the outlook for the EU steel market and industry is better than seen in a long time, but remains subject to numerous risks

• Considerably improved outlook for EU steel market and industry, though imports remain relatively

high. Demand for steel is firm from all major end-use sectors incl. automotive, construction,

appliances and most other industries.

• Elections are over in several key EU countries, eurozone more stable, more stability in the EU in

coming years.

• However, many and considerable risks remain:

– US Fed interest rate policy

– ECB tapering

– Geopolitical risks (Russia/Ukraine, Middle-East, Korean peninsula)

– Brexit

– Tensions between Western and Eastern Europe (Poland, Hungary)

– Government formation in Germany, upcoming elections in Italy

• Long term challenges:

– Steel demand declining, need to adjust capacity remains

– CO2 emissions costs



Thank you for your attention!

SteelConsult International

L.A. Braakstraat 16

1432 PP Aalsmeer

The Netherlands

Tel: +31 297 761 337

Email: [email protected]

www.steelconsult.com

eu steel market outlook · 2018-01-23 · eu steel market outlook imports of flats from china and...

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