The positive trend seen in apparent steel consumption throughout 2021 continued over the first quarter of 2022,
but was slowed down by ongoing, severe global supply chain disruptions, rising energy prices and production
costs. In particular, these issues are expected to weigh even more in the second half of 2022, together with the
effects of Russia’s war in Ukraine.

The impact of this situation on steel-using industries and the overall economic outlook are set to take their toll on
apparent steel consumption in 2022. Therefore, steel consumption is expected to see its third annual recession
over the last four years, albeit moderate (-1.7%, formerly set at -1.9%), most probably as a result of quarterly
drops that are foreseen over the second, third and fourth quarters of 2022. Apparent steel consumption is set to
recover in 2023 (+5.6%), but the overall evolution of steel demand remains subject to high uncertainty, which is
likely to continue to undermine demand from steel-using sectors. High uncertainty is set to last at least until the
first quarter of 2023, conditional upon developments in 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 first quarter of 2022, growth in apparent consumption increased (+6.5%, after +10.1% in the fourth quarter
of 2021), totalling a volume of 37.1 million tonnes. This is still below the pre-pandemic peak reached in the fourth
quarter of 2018.

The whole year 2020 was considerably impacted by the COVID-19 pandemic and saw apparent steel
consumption in the EU plummet (-10.7%) for the second consecutive year after the slump (-5.2%) seen in 2019.
In 2021 apparent steel consumption rebounded (+15.7%, slightly revised upwards from +15.2 % in the previous
outlook). The heavy disruptions due to the ongoing supply chain issues and the consequences of the war in
Ukraine on steel-using industries, and the overall economic outlook, are set to take their toll on apparent steel
consumption in 2022. Therefore, apparent steel consumption is expected to see its third annual recession over
the last four years, albeit moderate (-1.7%, previously estimated at -1.9%), most probably as a result of quarterly
drops that are foreseen over the second, third and fourth quarters of 2022. Apparent steel consumption is set to
recover in 2023 (+5.6%), but the overall evolution of steel demand remains subject to high uncertainty, which is
likely to continue to undermine demand from steel-using sectors.

Domestic deliveries recorded a tiny growth rate in volumes over the first quarter of 2022 (+0.2%, after +1.2%
in the fourth quarter of 2021), mirroring the evident slowdown in demand within the EU experienced since the
second half of 2021. Over the whole of 2021 deliveries sharply rebounded (+11.3%), 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 their pronounced increase (+28.8%) also
over the first quarter of 2022, albeit at a lower rate compared to the fourth and third quarter of 2021 (+43.4% and
+47.7% respectively), but rose very modestly (+0.4%) over the second quarter. Imports of finished products also
rose very modestly (+0.6%), after a rise of +34% over the first quarter. Bearing in mind that only 2021’s second
quarter figures specifically reflect the comparison with the exceptionally low figures of the year before, which
was heavily impacted by the pandemic, it is clear that import penetration over the last quarters has remained
considerably high.

EU steel-using sectors

Despite the persisting supply chain issues and Russia’s invasion of Ukraine, steel-using sectors marked the fifth
consecutive year-on-year growth over the first quarter of 2022 (+4.9%), gaining speed compared to the fourth
quarter of 2021 (+2.6%). This trend had peaked in the second quarter of 2021 when steel-using sectors achieved
a spectacular, one-off growth rate (+27.9%). This was due to the industrial recovery gaining momentum, but it
was also a result of the comparison to record lows of the second quarter of 2020.

By contrast, over the second half of 2021 total production activity in steel-using sectors had been increasingly
impacted by the ongoing supply chain issues (lack of components and materials, bottlenecks and rising
transportation costs, etc.) and rising energy prices that took their toll in terms of production costs, component
shortages and lower output. However, total output in steel-using sectors in 2021 rebounded (+8.6%, previously
estimated at +7.3%) after the sharp drop recorded in 2020 due to the impact of COVID-19 (-10.4%), mainly
thanks to very positive developments over the first two quarters. The war in Ukraine has certainly impacted the
outlook for the rest of 2022 - with supply chain issues still persisting and even being exacerbated - but figures
for the first quarter of 2022 (Russia invaded Ukraine on 24 February) do not yet reflect the impact on the steel-using
sectors’ output as whole. However, different developments for individual sectors lie behind this figure.

The positive evolution of total steel-using sectors’ output was a combination of very positive developments in
the construction, mechanical engineering and transport sectors on one hand, and severe drops in output for
automotive and domestic appliances on the other, which had already been impacted by ongoing supply chain
issues in the previous quarters.

Steel-using sectors’ output is expected to continue to expand in 2022, but growth will be halved further
compared to EUROFER’s previous outlook (+1.1% vs +2%). This is a result of the rapid deterioration of the global
industrial and economic outlook following Russia’s war in Ukraine, coupled with ongoing and worsening supply
chain issues. This combination of factors is expected to yield either very modest growth or even drops in output
over the three remaining quarters of this year. Growth in output will accelerate only moderately in 2023 (+2.2%),
due to overall high uncertainty which is likely to continue and ease only from the second quarter of 2023 onwards.