The European steel industry is grappling with an unprecedented downturn as revealed in EUROFER's comprehensive Economic and Steel Market Outlook report. The market faces a complex web of challenges, with apparent steel consumption projected to decline by 1.8% in 2024, contradicting earlier forecasts that had predicted a 1.4% growth. This downturn follows a substantial 6% decrease in 2023, painting a concerning picture for the industry's immediate future and raising alarms among industry stakeholders, policymakers, and economic analysts.
The second quarter of 2024 has been particularly challenging, with apparent steel consumption falling by 1.3% to 34.8 million metric tons. This decline is occurring alongside a significant contraction in domestic deliveries, which decreased by 1.7% in the same quarter. Perhaps most alarming is the rise in import share to a record-high 28%, despite a slight 1.5% decrease in import volumes, indicating a structural shift in market dynamics. This unprecedented import penetration has created additional pressure on domestic producers, who are already struggling with high production costs and environmental compliance requirements.
Steel-using sectors are experiencing parallel challenges, with output declining by 2.1% in the second quarter of 2024. This represents a broader industrial slowdown affecting multiple sectors, including construction, mechanical engineering, and domestic appliances. Even the automotive sector, which had previously shown resilience with seven consecutive quarters of growth, has now stalled, contributing to the overall market deterioration. The construction sector, traditionally a major steel consumer, has been particularly affected by high interest rates and reduced investment in both public and private projects.
The European Central Bank's recent interest rate cuts have failed to stimulate significant market improvement, with the Steel Weighted Industrial Production index projected to face a 2.7% decline in 2024, a more severe downturn than the previously anticipated 1.6% decrease. Recovery prospects for 2025 have been revised downward, with projections now indicating a modest 1.6% growth, reduced from earlier estimates of 2.3%. This persistent weakness in industrial production has far-reaching implications for the entire steel value chain, affecting everything from raw material suppliers to end-users.
EUROFER's Director General, Axel Eggert, has emphasized the urgent need for EU-level intervention to preserve sustainable steel production and quality jobs while supporting decarbonization investments. The organization is calling for a comprehensive European Steel Action Plan to address multiple challenges, including global overcapacity, unfair trade practices, high energy prices, and access to ferrous scrap. The proposed plan would need to balance environmental goals with economic sustainability, ensuring that European steel producers can compete effectively in the global market while meeting ambitious climate targets.
The market outlook is further complicated by persistent high energy costs in the EU compared to other major economic regions, rising geopolitical tensions, and weak overall economic forecasts. Energy costs, in particular, remain a critical concern, with European producers paying significantly more than their global competitors. This cost disadvantage is exacerbated by the need to invest in green technologies and decarbonization efforts, creating additional financial pressure on an already stressed industry. Even with a projected recovery of 3.8% in 2025, consumption volumes are expected to remain significantly below pre-pandemic levels, indicating a structural shift in the European steel market.
The industry's challenges extend beyond immediate market conditions to include long-term strategic concerns. The transition to green steel production, while necessary for environmental sustainability, requires massive investments at a time when profit margins are already squeezed. The sector must also contend with changing global trade patterns, evolving customer demands, and increasing competition from regions with lower production costs. The situation has prompted calls for more robust trade defense instruments and support mechanisms to ensure the industry's long-term viability.
Despite recent policy interventions and industry adaptations, the European steel sector continues to face significant headwinds. The combination of high import penetration, weakening domestic demand, and broader economic uncertainties presents a complex challenge for industry stakeholders and policymakers alike. The current crisis has highlighted the strategic importance of maintaining a strong domestic steel industry, not only for economic reasons but also for ensuring Europe's industrial autonomy and achieving its climate objectives. Industry leaders are increasingly calling for a coordinated approach that addresses both immediate market pressures and longer-term structural challenges, emphasizing the need for policies that support innovation, sustainability, and competitiveness in the European steel sector.
