EU Steel Production Lagging Behind GDP Growth

Europe: Steel production around the world fell by 4.3 percent to 1.83 billion metric tons in 2022, with Steel production in the EU taking a particularly hard hit – dropping 10.5 percent year-over-year to 136.7 million tons. Last year's steep decline was mainly attributed to the Russian Federation's military aggression against Ukraine and its subsequent effect on energy prices, which experienced a high degree of volatility and instability.

The energy price crisis has lost much of its potency, yet the war in Ukraine continues to affect multiple facets of life on a global and European scale. For instance, it has had a large impact on the food industry, which in turn greatly influences inflation rates within the EU. Predictions show that this inflation rate will be down by 5.5 percent in 2023, though it is expected to somewhat recover and reach a two percent figure in 2024.

Despite a decrease in production last year, there is hope for renewed growth in the coming years. This year's production of Steel may drop by 0.6 percent, followed by an increase of 1.8 percent in 2024. At the same time, the EU GDP is expected to grow by 0.1 percent and 1.9 percent in 2023 and 2024 respectively – making this a period of controlled growth for Steel mills despite the slower-than-average rate of economic growth across the continent. Apparent consumption of Steel is also forecast to fall this year at 1.6 percent, before rebounding again with an increase of 1.6 percent next year – offering further optimism for the industry.

Steel consumption has been growing at a slower rate than Steel production, likely due to a decrease in Steel input per produced unit in certain industries like electric vehicles. Additionally, the EU is seeing changes in production patterns within sectors - for example, thermal isolation of existing homes requires less Steel than constructing new buildings.

It looks like the construction sector is poised for a slight decline in demand for Steel over the upcoming year. This decrease in demand will be offset by an increase of 1.6% in 2024. Meanwhile, the automotive sector is expected to have a more positive outlook, with an estimated increase of 1.1% this year, followed by a small drop of 0.6% in 2024.