Steel Expected to Decline Over the Next 18 Months, Says Leonard Ullrich Neumann.
Online, June 14, 2013 (Newswire.com) - Pressure on the industrial sector is rising. Only exports are expected to provide support to activity, on a par with the gradual strengthening in global economic momentum later this year. Total activity in the steel using sectors is expected to decline by around 1.5 percent this year. For 2014 a moderate recovery is penciled in, supported by exports and domestic demand as investment and private consumption start to recover cautiously.
Weak domestic demand
Simon Carter, a Senior Portfolio Manager at Leonard Ullrich Neumann, states: "For the time being, our client sectors will remain heavily exposed to weak domestic demand. Particularly the automotive and construction sectors struggle on in 2013. What is needed to kick-start the internal market, is better sentiment. This will only happen if credit supply improves and a credible growth perspective is offered by EU policymakers."
Steel demand in the EU headed further down (year-on-year) in the first quarter of this year, despite some moderate restocking of inventories. Meanwhile, imports increased sharply, reversing the falling trend registered in 2012. As a consequence, domestic producers lost market share to suppliers from third world countries.
A distortion of global trade flows?
The market situation in the remainder of this year looks set to remain depressed. Bearish end-user and distributor sentiment combined with liquidity and credit restrictions result in continued cautious buying behavior. This implies that the effect of the stock cycle will be less of a drag on demand than in 2012. Apparent steel consumption is foreseen to drop by another two percent in 2013, before rising again moderately in 2014.
Simon Carter underlines: "Imports are again on the rise and no longer soften the downturn as in 2012. As long as steel output in China is not better adjusted to slowing domestic demand, a distortion of global trade flows will be the result and inevitably lead to rising import pressure in the EU steel market".