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EUROFER expects EU apparent Steel use to decline in 2019, rise in 2020

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BRUSSELS (Scrap Register): EU28 apparent steel consumption fell by 2.5% year-on-year in the first quarter of 2019 and amounted to 42.6 million tonnes, the European Steel Association (EUROFER) said in its latest report.

Stock building in the distribution chain was lower than in the same quarter of 2018, which exacerbated the negative trend in final steel use. This should be seen in context of the development of the inventory cycle in the second half of last year which was characterised by lower than usual seasonal inventory reductions and therefore relatively high stock levels in the EU steel distribution chain at the start of 2019, the association said.

The negative trend in steel demand at the start of this year has primarily hurt domestic steel producers in the EU, EUROFER said. In the first quarter of 2019 domestic deliveries from EU mills to the EU market fell by 4% compared with the same period of 2018. Meanwhile, third country imports decreased only by 1% year-on-year and amounted to 10 million tonnes, accounting for 23.6% of EU steel demand.

The overall trend in total imports hides distortive developments in imports at the individual product level which are allowed under the current quota modalities and management. This situation has created, for several products, a rush for quota consumption including stock building and import concentration, disrupting the stagnating EU steel market, notably by Turkey and China, EUROFER said.

The most affected products are metallic coated sheets for automotive applications, rebar and wire rod, the association said.

The EU steel market is facing severe challenges which are expected to have a negative impact on apparent steel consumption. Following a decline in the first quarter of 2019, real steel consumption is, on balance, expected to stabilise around the year earlier level in the remainder of the year, leading to a total reduction in final steel use by 0.4% over the whole year, the association said in a report.

Meanwhile, flaws in the design and functioning of the current safeguard measures do not reflect the reality of an EU steel market. The market is being squeezed between negative final steel use developments and is facing the ongoing and serious threat of import deflection triggered by the US Section 232 import tariff in a context of persistent global overcapacity. The system still allows for extreme behaviours by exporters which have the potential to lead to serious market distortions. The expected reduction of apparent steel consumption in 2019 of 0.6% year-on-year is therefore expected to come mainly at the expense of EU steel producers, the report said.

Even though market conditions in 2020 are expected to improve moderately, risks related to import distortions continue to threaten the stability of the EU steel market. The 5% increase in the safeguard quota from July 2020 - following a 5% rise in February and in July 2019 - is once more not aligned with expected growth in real steel consumption of just 1.1% in 2020. The EU market therefore remains at risk of being destabilised by third country imports at the expense of EU domestic producers. Nevertheless, the mild increase in final steel use is expected to lead to apparent consumption growing by 1.4% in 2020, EUROFER said.

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