The positive trend seen in apparent steel consumption throughout 2021 came to an end in the second quarter of 2022, due to the impact of ongoing disruptions linked to the war in Ukraine, poor demand outlook and severe rises in energy prices and production costs. All these downside factors are expected to weigh even more in the second half of 2022 up to the second quarter of 2023 included, as a result of the prolonged effects of the war in Ukraine. In the second quarter of 2022, apparent steel consumption fell (-4.8%, after an increase of +6.1%, in the first quarter), totalling a volume of 38.6 million tonnes.

In 2022, apparent steel consumption is expected to see its third annual recession over the last four years (revised downwards to -3.5% from -1.7%), as a result of quarterly drops forecasted also for the third and fourth quarters of 2022. Apparent steel consumption is set to decrease also in 2023, albeit at a lower rate (-1.9%), as demand from steel-using sectors is expected to remain severely subdued, at least until the second quarter of 2023. These developments are conditional on the evolution of energy prices and the Russia-Ukraine war – which are
unforeseeable at the time of writing – and its impact on global supply chains.

EU steel market overview

In the second quarter of 2022, apparent steel consumption dropped (-4.8%, after +6.1% in the first quarter of 2022), totalling a volume of 38.6 million tonnes.

After the pandemic-led recession of 2020, which saw apparent steel consumption plummet (-10.7%) for the second consecutive year after the slump (-5.2%) seen in 2019, in 2021 apparent steel consumption rebounded (+16.3%, slightly revised upwards from +15.7%). The heavy disruptions due to the ongoing supply chain issues and the consequences of the Russian invasion of Ukraine on steel-using industries, and the overall economic outlook, are set to be reflected in apparent steel consumption levels in 2022. Therefore, apparent steel consumption is expected to see its third annual recession over the last four years (-3.5%, steeper than -1.7% previously estimated), most probably as a result of quarterly drops that are foreseen to continue until the second quarter of 2023 included. Apparent steel consumption is set to decrease also in 2023 (-1.9%), as a result of persisting downside factors (primarily the war in Ukraine and high energy prices) that are expected to continue at least until the second half of next year. The overall evolution of the industrial outlook and of steel demand remains subject to high uncertainty, which is likely to continue to undermine demand from steel-using sectors.

Domestic deliveries mirrored weak demand over the second quarter of 2022 and markedly dropped (-7.1%) after a marginal decrease in the preceding quarter (-0.1%). Over the whole of 2021 deliveries sharply rebounded (+11.9%), following 2020’s sharp drop (-9.6%) that marked the second consecutive decline in yearly terms after 2019 (-4.2%).

Imports – including semi-finished products – into the EU continued to increase also over the second quarter of 2022, despite weak demand, albeit at a much lower rate compared to the preceding quarter (+1.6% vs +28.5%). Imports of finished products over the second quarter of 2022 also followed the same pattern (+2%, following +34% in the first quarter). This results in a persistent high import penetration in historical terms over the last four quarters, even in a context of significantly weakened demand.

EU steel-using sectors

Despite the heavy disruptions and the weakened demand outlook caused by Russia’s invasion of Ukraine, steel-using sectors output recorded the sixth consecutive year-on-year growth over the second quarter of 2022 (+5.7%), gaining further speed compared to the first quarter (+4.9%). This is a continuation of the carry-over effect of the positive trend seen since the third quarter of 2020 when industry began to rebound very strongly after pandemic-led slumps. By contrast, in the second half of 2022 total production activity in steel-using sectors is expected to be considerably impacted by the conflict in Ukraine as well as rising energy prices, that took their toll in terms of production costs and lower output. Total output in steel-using sectors in 2021 rebounded (+8.4%) after the sharp drop recorded in 2020 due to the impact of COVID-19 (-10.2%), and is also projected to achieve growth (+1.9%) in 2022 mainly thanks to very positive developments over the first two quarters. This evolution is a combination of favourable trends in the construction, mechanical engineering and transport sectors, plus automotive which returned to positive territory over the second quarter of 2022 after three consecutive quarterly drops, caused by supply chain disruptions.

The ongoing energy crisis and the overall rapid deterioration of the economic and industrial outlook are set to take their toll on growth over the next quarters, as recession in Steel Weighted Industrial Production (SWIP) is expected between the fourth quarter of 2022 and the second quarter of 2023. The winter months are predicted to be particularly tough for both industry and the economy in general, with a recession in sight.

The rapid deterioration of the global situation due to worsened, persisting downside factors over the summer (war in Ukraine, rising energy prices) have led to a complete revision of output forecast for 2023, when SWIP is expected to fall (-0.9%, albeit with different trends among individual EU economies). An improvement of industrial outlook is foreseen from the second quarter of 2023 onwards, although subject to a wide degree of uncertainty and unpredictability.