Information from the Commission - Forward Programme for Steel for the first half of 1998 and for 1998 as a whole
Date: 1998-01-29
Institutions: European Commission
Subjects: economic growth, export policy, import policy, iron and steel industry, price fluctuation, single market

29.1.98

EN

Official  Journal  of  the  European  Communities

C  31/3

FORWARD  PROGRAMME  FOR  STEEL  FOR  THE  FIRST  HALF  OF  1998  AND
FOR  1998  AS  A  WHOLE

(98/C  31/03)

(Text  with  EEA  relevance)

INTRODUCTION

representing  an  upward  revision  of  the  spring  forecasts
of  0,2(cid:216)%  for  1997  and  1998.

A  more  marked  economic  upturn  than  expected  in  the
European  Union  in  1997  underlies  the  much  improved
climate  of  confidence  in  industry  and  among  consumers
indicated  by  the  most  recent  economic  surveys.

Even  if  this  recovery  was  largely  export(cid:220)led  initially,
helped  by  the  strength  of  the  dollar,  its  momentum  is
gradually  being  increased  by  the  improving  performance
of  various  internal  factors.

This  expansion  of  the  Community  economy,  set  to
in  1998  thanks  to  the  knock(cid:220)on  effect  on
intensify 
lead  to  a  further
industrial  activity,  will  presumably 
in  the  steel(cid:220)
increase 
construction
consuming 
industry.

in  production 
industries, 

including 
the 
even 

levels, 
and 

In  this  developing  context,  the  Union’s  steel  industry
should  benefit  in  future  not  only  from  good  export
prospects,  but  also  from  the  improved  conditions  on  the
Community  steel  market  already  evident  in  1997  and  set
to  improve  further  still  during  1998.

steel 

None  the  less,  given  the  longer(cid:220)term  trends  in  inter(cid:220)
national 
risk  of
supply  and  especially 
disturbance  that  any  shift  in  certain  trade  flows  might
cause  in  the  short(cid:220)term,  the  Commission  would  urge
those  concerned  to  exercise  caution  in  their  strategies  so
as  to  ensure  greater  stability  on  the  Community  steel
market,  which 
is  wide  open  and,  of  course,  more
vulnerable  to  alternations  in  the  business  cycle.

the 

its 

is  confirmed  by 

through
The  EU’s  economic  activity,  as  measured 
quarterly  GDP  figures,  grew  as  expected  during  the  first
half  of  1997.  This 
industrial
production,  which  grew  in  annual  terms  by  4,5(cid:216)%  in
July,  and  by  the  findings  of  surveys  (up  to  October)  indi(cid:220)
cating  gradual  but  quickening  recovery.  Industry  and
consumers  alike  have  gradually  gained  confidence  over
recent  months.  Indeed,  industry’s  confidence  has  been
riding  above 
long(cid:220)term  average  since  April,  and
consumer  confidence  since  July,  and  even  the  building
renewed
industry 
confidence.  Order  books  have  filled  up  nicely,  both  for
the  national  markets  and  for  exports.

signs  of 

tentative 

showing 

its 

is 

low  and 

So  the  stage  is  set  for  the  recovery  to  gather  pace  in
1998.  The  supply(cid:220)side  basics  are  favourable:  return  on
investments  is  high  and  getting  higher  and  inflation  is
traditionally 
increasingly  predictable,  which
helps  companies  calculate  their  costs.  External  demand
remains  firm.  The  rest  of  the  world  economy  should
grow  by  4,5(cid:216)%  over  the  forecast  period,  thanks  not  least
to  a  major  expansion  of  international  trade.  Estimates
suggest  world  imports  outside  of  the  Union  will  grow  by
in  1998.  Europe’s  export
10(cid:216)% 
in  1997  and  7,5(cid:216)% 
prospects  are  also  helped  by  the 
improved  competi(cid:220)
tiveness  resulting  from  domestic  cost(cid:220)cutting  and  the
strong  dollar.  Monetary  conditions  are  conducive  to
growth,  following 
impressive  and  credible  efforts  to
achieve  convergence  and  thanks  to  a  sensible  approach
to  pay.  Interest  rates  remain 
lack  of
exchange(cid:220)rate  pressure  between  Member  State  currencies
is  encouraging.

low  and  the 

Despite  this,  1998  offers  excellent  prospects  for  the
industry  given  the  expected  devel(cid:220)
Community  steel 
opment  of  a  series  of  favourable  factors,  and  particularly
in  view  of  the  healthier  economic  situation  in  all  the  EU
Member  States.

At  the  beginning  of  the  recovery,  growth  was  export(cid:220)
driven.  However,  endogenous  development  of  domestic
demand  should  quickly  take  over  and  so  reduce  the
external  sector’s  contribution  to  growth.

1.(cid:217)ECONOMIC  SITUATION  IN  THE  EUROPEAN

UNION

Growth  in  the  Union’s  overall  GDP  should  rise  from
1,8(cid:216)%  in  1996,  to  2,6(cid:216)%  in  1997  and  3,0(cid:216)%  in  1998,

Private  consumption,  sustained  by  modest  increases  in
real  pay,  a  fall  in  precautionary  saving  and,  increasingly,
by  higher  employment,  should  continue  to  grow  by
around  2(cid:216)%  in  1997,  rising  to  a  forecast  2,5(cid:216)%  in  1998.

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29.1.98

a 

in 

significant 

improvement 

Growing  foreign  and  domestic  demand,  ever  higher
returns  on  investment  and  low  interest  rates  will  bring
about 
investment
performance.  This  will  promote  growth,  in  the  short
term  as  a  demand  factor  and  in  the  long  term  through  its
impact  on  production  capacity.  Total  investment  in  the
Union  is  expected  to  pick  up  to  2,6(cid:216)%  this  year  and
4,7(cid:216)%  next  year.  Equipment 
investment  should  rise
sharply,  from  3(cid:216)%  in  1996  to  4,5(cid:216)%  this  year  and  6,3(cid:216)%
in  1998.  After  the  stagnation  of  1996,  the  building
industry  too  is  expected  to  see  a  gradual  recovery  (1,2(cid:216)%
in  1997  and  3,3(cid:216)%  in  1998).

is  helping 

Faster  growth 
the  employment  situation.
Employment  in  the  EU  should  grow  by  0,5(cid:216)%  this  year
and  0,8(cid:216)%  next  year,  representing  a  net  figure  of  around
700(cid:216)000  new  jobs  in  1997  and  some  1,3  million  in  1998.

However,  an  increase  in  the  working  population  means
the  creation  of  jobs  is  unlikely  to  be  matched  by  a  corre(cid:220)
sponding  fall  in  unemployment.  Average  unemployment
in  the  EU  should  thus  fall  from  a  little  under  11(cid:216)%  in
1996  to  10,7(cid:216)%  this  year  and  10,3(cid:216)%  next  year.

The  average  inflation  rate  in  the  EU,  measured  by  the
private  consumption  deflator,  fell  from  2,6(cid:216)%  in  1996  to
2,1(cid:216)%  in  1997,  despite  the  strong  dollar.  The  average
depreciation  of  EU  currencies  on  a  trade(cid:220)weighted  basis
is  around  5,5(cid:216)%  compared  with  1996.  However,  the
resulting  upward  pressure  on  import  prices  should  not
have  any  major  impact  on  the  overall  rate  of  inflation,  as
the  moderate  rise  in  unit  labour  costs  will  serve  to  offset
imported  inflation.

The  public  finance  forecasts  for  1997  are  based  on  actual
budgetary  implementation.  For  1998  they  are  based  on
the  Commission’s  evaluation  of  the  budgets  adopted  by
the  national  governments  (where  this  has  happened).  The
average  public  deficit  in  the  EU  should  fall  from  a  peak
of  6,1(cid:216)%  of  GDP  in  1993  to  4,2(cid:216)%  in  1996  and  2,2(cid:216)%  in
1998,  a  major  part  of  the  effort  being  concentrated  in
1997,  when  the  average  deficit  should  be  reduced  to
2,6(cid:216)%.

1998  all  the  Member  States  will  have  diminishing  debt
ratios  except  France  and  Luxembourg,  whose  ratios  will
nonetheless  remain  below  60(cid:216)%  of  GDP.

2.(cid:217)REVIEW  AND  PROSPECTS  IN  THE  STEEL  MARKET

2.1.(cid:217)CRUDE  STEEL  PRODUCTION  IN  THE  EUROPEAN

UNION

Monthly  steel  production  in  the  EU  has  been  growing
increasingly  rapidly  since  the  beginning  of  1997 
in
response  to  a  considerable  increase  in  domestic  demand
and  thanks  to  excellent  export  levels.

While  Community  steel  production  during 
the  first
quarter  of  1997  was  up  only  2,3(cid:216)%  on  the  same  period
in  1996,  it  rose  by  over  10(cid:216)%  during  the  second  quarter
of  the  year,  so  that  its  average  increase  during  the  first
half  of  1997  was  around  6,4(cid:216)%  ,  i.e.  slightly  higher  than
forecast(cid:216)(˛).

During  the  third  quarter  of  1997  Community  steel
production  was  again  well  up  (+(cid:216)10,1(cid:216)%)  on  1996.  Thus
for  the  first  nine  months  of  1997  the  cumulative  increase
ovr  the  same  period  in  1996  was  7,5(cid:216)%.

Production  was  again  up  8(cid:216)% 
in  both  October  and
November,  and  the  continuing  excellent  export  prospect
and  expected  consolidation  of  demand  from  the  steel(cid:220)
consuming 
in  the  months  ahead  suggest  a
substantial  rise  even  during  the  fourth  quarter,  so  that
for  1997  as  a  whole  Community  steel  production  might
just  exceed  the  157  million  tonnes  last  forecast.

industries 

The  increasing  pace  of  steel  production  throughout  1997
has  meant  better  use  of  capacity,  helping  make  the
operation  of  EU  steel  companies  more  profitable  and,
consequently,  helping 
results
appreciably.

improve  operating 

to 

and 

figures 

The  table  in  Annex  I  "Crude  steel  supply  and  demand’
gives 
in
summarizes 
consumption,  foreign  trade,  production  and  stocks  of
steel  in  the  15  Member  States  of  the  Community  and
estimates  the  changes  expected  in  the  first  half  of  1998
and  for  1998  as  a  whole.

trends 

recent 

This  deficit  reduction  is  reflected  in  lower  debt  ratios  in
most  Member  States.  The  average  public  debt  in  the  EU
is  expected  to  fall  from  73(cid:216)%  of  GDP  in  1996  to  72,4(cid:216)%
in  1997,  with  the  downward  trend  continuing.  As  from

(˛)(cid:217)OJ  C  225,  24.7.1997.

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For  the  sake  of  consistency,  the  table  provides  figures  for
all  15  Member  States  of  the  European  Union,  even  for
the  period  before  1995.

2.2.(cid:217)OUTLOOK  FOR  THE  FIRST  HALF  OF  1998  AND

FOR  1998  AS  A  WHOLE

The  economic  upturn,  more  pronounced  in  the  EU  than
expected,  will  have  contributed  throughout  1997  to  a
considerable  increase  in  manufacturing  activity  in  general
in  response  to  growing  demand,  both  domestically  and
on  the  export  market.

The  Community  steel  industry,  while  benefiting  from
improved  conditions  on  the  steel  market,  has  none  the
less  failed  to  make  the  most  of  the  potential  offered  by
increased
foreign  demand  and  prices,  being  under 
pressure  during 
traditional
its 
the  year 
customers  in  the  Community.

supply 

to 

into
These  developments  have  breathed  optimism 
in  October  1997,
business  circles,  so  much  so  that 
according  to  the  Commission’s  monthly  survey,  the
indicator  of  economic  confidence  in  industry  reached  a
seven(cid:220)year  high.  This  optimism  seems  justified  by  very
good  results  in  terms  of  orders  for  durable  goods  and  by
the  notable  improvement  in  capacity  utilization  rates.

improve
Consumer  confidence  has  also  continued  to 
in
over  recent  months  and  reached  a  10(cid:220)year  high 
October,  reflecting  excellent  growth  and  employment
prospects.

While  sharing  the  general  optimism,  the  Union’s  steel
producers  made  a  point, 
in  recent  consultations,  of
stressing  the  precarious  balance  of  the  steel  market,
which  despite  everything  remains  under  the  cloud  of  a
certain  excess  supply  upsetting  the  world  market.

in 

Since  1997  the  generalized  upturn  in  steel  prices  on  the
large  part
Community  market  has  been  achieved 
thanks  to  a  gradual  restoration  of  the  balance  between
supply  and  demand,  despite  the  upward  trend  in  imports,
especially  of  long  products  as  from  the  second  quarter.
In  fact,  steel  producers  believe  the  upward  trend  in
demand  and  prices  could  be  even  more  pronounced
during  the  first  half  of  1998,  and  slowing  only  a  little  in
the  second  half,  even  if  some  temporary  rebuilding  of
stocks  were  to  occur.

The  Union’s  steel  dealers,  on  the  other  hand,  report  a
in  steel
disappointing  performance 

in  terms  of  trade 

products  on  the  Community  market  during  1997,  though
they  recognize  that  results  in  terms  of  volumes  and
margins  were  better  than  in  1996,  particularly  for  large
export(cid:220)oriented  concerns.  Meanwhile,  their  expectations
for  1998  reveal  a  growing  optimism,  albeit  qualified  by
fears  as 
stockpiling
to  a  potential  resumption  of 
throughout  the  industrial  chain.

that 

fact  remains 

The 
the  EU’s  excellent  general
economic  outlook  will  no  doubt  lead  to  an  eventual
picking(cid:220)up  of  activity  in  the  steel(cid:220)consuming  industries  in
1998  (some  of  which  are  analysed  more  closely  below),
particularly 
fields  of  vehicles,  electric  and
non(cid:220)electric  machinery  and  metal  articles.  The  building
industry  in  general  should  also  benefit  more  fully  from
the  Union’s  economic  performance  in  1998  thanks  to  the
the
expected  upswing 
forecast  upturn  in  public  investment.

in  private  consumption  and 

the 

in 

Tables  2  and  2a  in  the  Annexes  show  indicators  of
activity  in  the  main  steel(cid:220)consuming  industries  for  the
first  half  of  1998  and  for  the  year  as  a  whole.  The  data
have  been  supplied  by  the  national  representatives  of  the
sectors  concerned,  but  since  their  opinions  do  not  always
accord  with  the  trends  identified  these  figures  should  be
treated  with  caution.

2.2.1.(cid:217)Primary  processing

in  1996,  caused  by 

the
After  rather  poor  results 
economic  slowdown  and  compounded  by  the  tendency
to  run  down  stocks,  the  Community  primary  processing
industry  saw  a  new  trend  emerge  at  the  beginning  of
1997.

However,  the  rate  at  which  its  various  sectors  are  now
catching  up  has  been  tied  to  the  economic  progress  of  its
customer  industries.

Generally  speaking,  the  sectors 
linked  to  the  manu(cid:220)
facture  of  vehicles  and  electrical  and  non(cid:220)electrical
in  1997,
machinery  will  have  done  particularly  well 
though  some 
those
in 
improvement  was  also  seen 
depending  on  the  building  industry,  which  is  in  a  phase
of  tentative  recovery.

Despite  a  forecast  increase  in  imports,  most  sectors  of
the  industry  should  be  able  to  continue  growing  in  1998
given  the  good  economic  prospects  within  the  Union  and
the  very  good  chance  of  maintaining  the  excellent  export
performance  of  1997.

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Despite  increased  activity  and  better  use  of  production
tools,  various  sectors  of  this  intermediate  industry  are  far
from  using  their  capacity  to  the  full.

B.(cid:217)The  wire  drawing  industry

A.  Steel  tubes

In  1996  the  Community  steel  tube  industry  achieved
rather  poor  results,  particularly  in  the  first  part  of  the
year  and  particularly  for  small  welded  tubes  and  seamless
tubes.

The  market  situation  during  this  period  was  charac(cid:220)
terized  by  a  significant  drop  in  tube  consumption  in  the
EU,  a  sizeable  rise  in  imports  and  a  significant  build(cid:220)up
of  stocks.

The  fallback  in  production  was  none  the  less  kept  to
3,6(cid:216)%  in  1996  thanks  to  a  very  sizeable  increase  in
exports  (+(cid:216)12(cid:216)%).  One  disturbing  element  in  1996  was
the  increase  in  imports  of  seamless  tubes,  which  captured
more  than  a  quarter  of  the  Community  market.

Steel  tube  manufacture  in  the  Union  during  the  first  part
of  1997  was  highly  satisfactory:  export  performance  was
excellent  (+(cid:216)33(cid:216)%),  even  compared  with  the  very  good
results  of  the  same  period  in  1996,  and  a  new  trend
emerged  in  domestic  consumption,  which  was  up  by
about  2,6(cid:216)%  on  the  first  six  months  of  1996.

For  1997  as  a  whole,  the  results  of  the  steel  tube  industry
should  improve,  despite  pressure  from  certain  imports,
especially 
sensitive
tubes,  on 
seamless 
Community  market.

a  highly 

In  1998,  very  good  export 
levels  should  ensure  the
situation  remains  excellent  for  large  welded  tubes,  this
phenomenon  having  already  been  observed  in  1996  and
1997.

For  small(cid:220)diameter  welded  tubes  and  seamless  tubes,  too,
in  principle  be  one  of
the  market  situation  should 
economic
gradual 
conditions  even  better  than 
less,
exports  could  slip  slightly  depending  on  the  performance
of  the  dollar.

improvement,  with 

in  1997.  None  the 

domestic 

All  in  all,  1998  should  prove  even  better  than  1997  for
the  Community  steel  tube  industry  as  a  whole,  despite
competition  from  imports,  which  will  retain  a  sizeable
share  of  the  seamless  tube  market  and  could  make  appre(cid:220)
ciable  inroads  into  the  small  welded  tubes  market.

Low  levels  of  activity  in  the  building  industry,  the  main
user  of  drawn  products,  made  1996  a  rather  poor  year
for  the  Community  wire(cid:220)drawing  industry  in  terms  of
domestic  consumption.  However, 
increased  exports
offset  the  fall  in  production  to  some  extent.

The  first  six  months  of  1997  saw  a  firm 
increase
in  the  volume  of  sales  on  the  Community
(+(cid:216)8(cid:216)%) 
market,  which  was  also  under  less  pressure  from  imports
of  drawn  products,  while  exports  of  the  same,  again
improved  somewhat  over  the  period.

since  on 

Thus  the  recovery  of  this  sector  continues  to  be  mainly
export(cid:220)led, 
real
consumption  has  increased  much  more  slowly  owing  to  a
certain  tendency  to  rebuild  stocks  and  the  very  slow
upturn  in  demand  from  the  building  industry.

the  domestic  market 

improvement  on 

For  1997  as  a  whole  the  wire(cid:220)drawing  industry  expects,
despite  everything,  a  clear 
its  1996
results,  and  even  a  consolidation  of  the  trends  which
became  apparent  in  the  first  half  of  the  year.  So  much  so
that  the  rise  in  consumption  is  estimated  at  around  7(cid:216)%,
export  growth  at  more  than  13(cid:216)%  and  the  increase  in
production  at  5(cid:216)%  compared  with  1996. 
this
favourable  context,  imports  should  increase  only  slightly.

In 

Provided  no  unforeseeable  factor  emerges  in  the  short
in
term,  1998  could  see  an  eventual 
domestic  demand,  albeit  partly  offset  by  a  shrinkage  in
exports.  Production  of  drawn  products  should  therefore
continue  to  rise  slightly,  especially  as  imports  of  drawn
products  into  the  Community  are  expected  to  level  off.

improvement 

1996  was  even  worse  for  the  general  drawing  industry
than  for  the  wire(cid:220)drawing  industry,  despite  the  excellent
performance  of  the  motor  industry,  its  main  customer.

intended  almost
Basically,  deliveries  of 
exclusively  for  the  EU  market,  fell  by  15(cid:216)%  in  1996
owing  to  the  need  to  reduce  stocks  downstream.

its  products, 

At  the  beginning  of  1997,  however,  a  turnaround  in
domestic  demand  became  apparent  and  in  the  first  half

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of  the  year  it  grew  by  around  4(cid:216)%,  prompting  an  accom(cid:220)
panying  rise  in  the  production  of  drawn  products.

though 

1996, 
marked  recovery.

long(cid:220)formed  products  showed  a 

less

Given  the  positive  developments  in  its  main  customer
industries,  the  recovery  of  the  general  drawing  industry
seems  set  to  continue,  pushing  up  the  volume  of  sales  in
1997  by  some  5(cid:216)%,  particularly  given  the  significant  fall
in  imports.

The  prospects  in  1998  for  wide(cid:220)formed  products,  and
particularly  sandwich  panels,  are  very  good  despite  low
levels  of  activity  in  the  EU  building  industry,  for  which
all  these  products  are  intended.

As  for  1998,  the  foreseeable  slowdown  within  the  motor
industry  is  an  element  of  uncertainty  which  could  have  a
major  impact  on  the  general  drawing  industry.  However,
the  Union’s  fairly  positive  general  economic  outlook
would  suggest  that  production  and  sales  of  drawn
products  should  be  the  same  as  in  1997,  or  even  slightly
higher.

C.(cid:217)Rolling  and  forming

in  1997  the  general  economic  recovery 

As  announced 
in  the  previous  programme,  the  cold
rolled  strip  industry’s  sales  fell  by  around  15(cid:216)%  in  1996.
However, 
is
helping  the  industry  to  an  unexpectedly  good  result,
recouping  almost  entirely  the  lost  volume  of  the  previous
year,  albeit  unevenly  around  the  EU,  with  Germany
enjoying  a  much  more  visible  recovery  and  the  United
Kingdom  a  relatively  weak  one.

The  forecast  recovery  of  the  building  industry  and  the
need  to  rehabilitate  old  building  structures  and  hangar
covers  suggest  demand  for  wide(cid:220)formed  products  will
grow  by  an  estimated  5(cid:216)% 
in  1998,  and  perhaps
appreciably  more 
in  the  years  ahead,  especially  for
sandwich  panels.

For  long(cid:220)formed  products,  however,  the  vast  majority  of
which  are  again 
industry,
increased  demand  in  1997  will  only  have  enabled  part  of
the  10(cid:216)%  drop  in  sales  in  1996  to  be  recouped.

intended  for  the  building 

None  the  less,  the  market  in  these  products  could  see
considerable  progress  in  1998,  especially  in  view  of  the
government  measures  being  envisaged 
in  some  EU
Member  States  to  stimulate  the  recovery  of  the  building
industry.

2.2.2.(cid:217)Situation  in  the  construction  industry  in  1998

In  1998  the  industry  is  hoping  for  a  further  improvement
of  around  5(cid:216)%  in  demand  for  strips  thanks  to  orders
from  the  motor  industry,  the  mechanical  industry  and
the  electrical  and  electronic  machinery  industry.

Having  gone  through  a  somewhat  difficult  period  since
the  beginning  of  the  1990s,  the  building  industry  appears
to  be  showing  tangible  signs  of  recovery  in  a  number  of
Member  States,  including  the  United  Kingdom,  Italy,
Portugal,  Sweden  and  Finland.

Trade  on  the  Union’s  cold  rolled  strip  market  should
continue  to  see  a  sizeable  increase  in  intra(cid:220)Community
flows  as  a  result  of  keen  internal  competition,  while
imports  seem 
level  off  and  exports  should
remain  negligible.

likely  to 

improvements  observed 

While  the  economic 
in  most
Member  States  have  as  yet  brought  only  slight  benefit
for  building  activity  in  general,  there  is  no  doubt  that  the
economic  prospects  for  1998  are  restoring  a  degree  of
confidence  in  this  important  sector’s  expected  recovery.

Despite  the  remarkable  pick(cid:220)up  in  the  industry’s  activity,
with  the  most  productive  companies  achieving  optimum
utilization  of 
remain
somewhat  narrow  due  to  growing  competition  on  the
market  from  alternative  products  obtained  from  the
slitting  of  cold  rolled  sheet.

financial  margins 

capacity, 

The  situation  on  the  cold(cid:220)forming  market  has  gradually
improved  since  the  beginning  of  1997,  especially  for
wide(cid:220)formed  products,  with  sales  up  by  around  5(cid:216)%  on

Better  economic  conditions  in  1998,  including  a  pick(cid:220)up
in  investment,  continuing  low  interest  rates,  controlled
inflation  and  a  certain  easing  of  restrictive  official
policies,  should  boost  the  recovery  of  the  building
industry  in  the  Union.

the  German  building
Despite 
this  positive  outlook, 
in  1996,  will
industry,  which  dipped  considerably 
continue  to  be  in  slight  recession  in  1997  and  remain
stable 
its  poor
performance  in  the  new  L…nder.

in  1998,  notably  on  account  of 

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All  in  all,  the  bottoming(cid:220)out  of  the  industry’s  downturn
in  Germany  and  the  prospects  of  an  upturn  in  France,
Spain  and  Austria  should  support  general  building
recovery  in  the  EU.

2.2.3.(cid:217)The  motor  industry

in 

the  United  Kingdom,  Portugal, 
In  1997 

Consistently  low  interest  rates  and  improved  employment
prospects  have  boosted  new  residential  construction,
the
particularly 
Netherlands,  Sweden  and  Denmark. 
the
construction  of  new  housing  also  intensified  in  Spain  and
Belgium.  On  the  other  hand,  the  low  level  of  demand
resulting  from  fiscal  pressure  and  the  generally  gloomy
economic  climate  also  affected  building  activity,  which
continued  to  decline  in  Germany,  France,  Austria  and
Italy.

In  the  Community  as  a  whole,  residential  construction
should  increase  slightly  in  1998.

increase 

As  regards  non(cid:220)residential  construction.  1997  saw  a
slight 
investment,  while  public
investment  continued  its  downward  course  of  previous
years.

in  private 

level,  activity  declined  even  further 

in
At  national 
France,  Germany  and  Spain,  while  firm  recovery  became
apparent  in  Italy,  the  United  Kingdom,  the  Netherlands,
Sweden,  Portugal  and  Belgium.

For  1998  the  level  of  activity  in  the  Union  as  a  whole
should  be  very  slightly  up,  thanks  mainly  to  private
investment.

Civil  engineering  projects,  highly  dependent  on  public
investment,  have  continued  to  suffer  the  adverse  impact
of  restrictive  policies  in  various  Member  States.  1997  will
thus  have  been  the  fifth  year  running  of  very  low  levels
of  activity,  owing  to  the  sharp  fallbacks  recorded  in  such
countries  as  France,  Spain,  Germany  and  Austria.

The  only  countries  with  an  increased  volume  of  public
works  in  1997  were  the  United  Kingdom  and  Portugal,
thanks  to  major  infrastructure  projects  currently  under
way.

For  1998,  given  the  promising  general  economic  outlook,
civil  engineering  projects  could  resume  a  slightly  upward
trend,  after  a  long  period  of  lethargy.

The  pick(cid:220)up  in  demand  for  motor  vehicles  in  the  EU  in
1996,  with  registrations  of  new  vehicles  up  6,4(cid:216)%,  was
followed  by  a  short(cid:220)lived  dip  in  the  market,  though  the
resulting  drop  in  new  vehicle  registrations  was  quickly
offset  after  the  first  quarter  of  1997.

Since  April  1997, 
shown
registration 
substantial  average  increases  each  month  in  all  Member
States,  so  that  the  combined  results  for  the  first  11
months  of  the  year  were  up  by  a  further  4,4(cid:216)%  or  so  on
the  excellent  results  of  the  same  period  in  1996.

figures  have 

The  improvement  on  Europe’s  motor  vehicle  market  is
due  essentially  to  a  spectacular  recovery  (+(cid:216)41(cid:216)%)  in
demand  for  new  cars  in  Italy  since  incentives  came  into
force  at  the  beginning  of  the  year.

improvement  was  also  shown  by 

Considerable 
the
Spanish  market  (+(cid:216)11(cid:216)%),  which  also  benefited  from
fiscal  aid  measures,  and  by 
the  United  Kingdom,
Swedish,  Irish,  etc.  markets.

Over  the  same  period,  however,  the  end  of  motor  vehicle
support  measures  in  France  produced  a  decisive  drop
((cid:134)(cid:216)22(cid:216)%) 
in  the  number  of  registrations,  as  on  the
Austrian  market,  while  the  German  market  was  virtually
unchanged.

Given  these  developments  on  the  Union  motor  vehicle
market,  registrations  in  1997  may  be  expected  to  be  up
by  a  further  3  to  4(cid:216)%  on  1996’s  very  good  performance.

It  should  also  be  noted  that  the  Community  motor
industry’s  exports  remained  very  satisfactory  in  1997.

As  for  the  forecast  for  the  EU  motor  vehicle  market  in
1998,  the  beneficial  impact  of  economic  decisions  should
encourage  its  development  still  further.  However,  given
that  consumers  may  well  adopt  a  wait(cid:220)and(cid:220)see  attitude  in
the  face  of  the  tight  budgetary  regime  generated  by
economic  and  monetary  union,  there  can  be  little  hope
overall  of  very  good  registration  figures,  despite  the
appearance  of  new  models  on  the  market.

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So  unless  unforeseeable  artificial  phenomena  occur,
registrations  of  new  vehicles  in  the  EU  should  level  out
or  even  taper  off  slightly  in  1998.

2.3.(cid:217)OUTLOOK  FOR 

IMPORTS  AND  EXPORTS  OF

STEEL  PRODUCTS

2.3.1.(cid:217)European  Union  external  trade  statistics  for  steel

Persistent  delays  by  a  number  of  Member  States  in
forwarding  their  external  trade  statistics  have  meant  that,
despite  the  earlier  efforts,  a  proper  analysis  cannot  be
made  of  recent  developments  on  the  steel  market  for  the
Community  as  a  whole,  thus  making  estimates  of  future
trends  more  arbitrary.

At  the  time  of  writing,  the  available  external  trade  data
barely  cover  the  first  quarter  for  all  the  Member  States
of  the  Union.  However,  by  estimating  the  missing  data
for  the  various  countries,  it  is  possible  to  analyse  trends
for  the  first  half  of  1997,  though  with  a  small  margin  of
inaccuracy  which  will  inevitably  affect  the  quality  of  the
forecast.

It  thus  appears  that  during  the  first  half  of  1997  the
Community’s  steel  imports  increased  overall  by  around
3(cid:216)%,  while  at  the  end  of  the  first  quarter  they  were  some
11(cid:216)%  down.  These  figures  suggest  that  as  early  as  the
second  quarter  of  1997  the  upswing  in  steel  prices  in  the
EU  had  the  effect  suggested  in  the  previous  forecast.

More  detailed  examination  of  these  trends  shows  that
growth  in  imports  has  been  particularly  marked  for  long
products  (+(cid:216)24(cid:216)%),  while  for  flat  products  the  estimated
data  point  to  a  slight  fall  ((cid:134)(cid:216)2(cid:216)%).

Considering  the  lack  of  statistical  data  for  the  second
part  of  1997,  it  is  very  hit(cid:220)and(cid:220)miss  to  estimate  devel(cid:220)
opments  in  steel  imports  on  a  very  open  and  competitive
they  also  play  a  very
Community  market,  where 
important  part.  However,  given  the  trend  in  imports  into
the  market  during  the  first  half  of  1997  and  since  both
demand  and  prices  went  up  during  the  second  part  of  the
year,  the  increase  in  imports  for  the  year  as  a  whole  will
quite  likely  be  more  pronounced  than  forecast.

In  the  second  half  of  1997,  the  Union’s  steel  exports  are
holding  up  at  very  satisfactory 
levels  thanks  to  the
dollar’s  good  performance  on  the  financial  markets.  For
1997  as  a  whole,  however,  the  volume  of  Community
steel  exports  is  likely  to  be  slightly  down  on  that  given  in
the  previous  forecast,  representing  quite  a  significant
drop  compared  with  exports  in  1996.

Steel  imports  should  continue  to  rise  slightly  during  the
first  half  of  1998  given  the  prospect  of  further  increases
in  both  demand  and  prices  on  an  increasingly  attractive
Community  market.

The  export  market,  on  the  other  hand,  faces  uncertainty,
relating  particularly  to  the  movement  of  the  dollar,  but
also  to  the  financial  crisis  in  certain  South(cid:220)East  Asian
countries.  However, 
information
available  suggests  that  although  slightly  down  on  1997,
Community  steel  exports  will  remain  at  very  satisfactory
levels  in  1998.

collation  of 

the 

None  the  less,  considering  the  longer(cid:220)term  trends  in
world  supply,  and  despite  the  good  short(cid:220)term  prospects
for  demand  both  inside  and  outside  the  Union,  the
Commission  is  aware  of  the  possibility  that  certain  trade
flows  might  shift  due  to  the  crisis  in  South(cid:220)East  Asia,
and  would  renew  its  appeal  to  the  Community  industry
not  to  let  individual  investment,  business  management
the
and  commercial 
balance  of  the  Community  steel  market,  which  is  wide
open  and,  needless  to  say,  greatly  influenced  by  business
cycles.

strategy  decisions  compromise 

It  must  be  stressed,  though,  that  the  Union’s  healthier
general  economic  situation  should  ensure  a  degree  of
stability  for  all  manufacturing  activities,  including  the
building  industry,  and  so  offer  even  more  encouraging
prospects  for  the  Community  steel  industry  in  1998.

2.3.2.(cid:217)The  United  States  economy

Economic  growth  in  the  USA  remained  very  strong
again  during  the  first  half  of  1997,  even  though  the
three(cid:220)monthly  growth  rates  have  had  to  be  revised
downwards.  At  the  moment  at  least,  the  US  economy
does  not  show  any  signs  of  weakness,  which  means  that
capacity  can  continue  to  be  fully  utilized,  and  there  is
not  the  slightest  tension  with  regard  to  wages  and  prices,
as  in  the  past.

For  exports,  however,  the  estimated  statistics  for  the  first
half  of  1997  show  a  drop  of  11(cid:216)%  on  the  same  period  in
1996,  spread  fairly  evenly  over  the  first  full  quarter  and
the  second  estimated  quarter.

inflation  occurs,  the  US  economy
Unless  unexpected 
should  see  further  growth  rates  of  3,6(cid:216)%  in  1997  and
2,6(cid:216)% 
in  1998,  buoyed  up  by  continuing  vigorous
domestic  demand  and  a  further  increase  in  investment.

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The  strength  of  the  US  economy  has  produced  a  notable
increase  in  steel  imports  and  the  1997  figure  may  well
exceed  the  record  of  30  million  tonnes  set  in  1994.
However,  apparent  steel  consumption  could  start  to  fall
due  to  the  trend  towards  reducing  the  stocks  built  up  in
1996.  Over  the  next  few  months,  however,  the  increase
in  production,  now  that  new  capacity  has  been  brought
into  service,  and  the  greater  demand  in  the  main  partner
countries  should  lead  to  a  gradual  reduction  in  steel
imports  from  the  USA.

in  the  economy,  the
Despite  the  forecast  slowdown 
outlook  for  the  development  of  the  US  steel  market  in
1998  is  still  good.  Steel  consumption  could  continue  to
increase  slightly,  though  the  expected  rise  in  domestic
production  could  well  lead  to  a  slackening  off  of  imports
and  even  a  sharp  rise  in  US  steel  exports  to  third
countries.

2.3.3.(cid:217)Economic  situation  in  Japan

Mainly  due  to  the  collapse  of  private  demand,  the
abolition  of  certain  forms  of  tax  relief  and  the  increase  in
VAT,  economic  growth  in  Japan  is  expected  to  be  lower
in  1997  than  in  1996,  with  GDP  rising  by  only  1,3(cid:216)%.
The  Japanese  economy  should  nevertheless  start  to  pick
up  gradually,  with  GDP  rising  by  2,6(cid:216)%  in  1998,  unless
there  is  any  worsening  of  the  economic  and  financial
crisis  affecting  some  countries  of  South(cid:220)East  Asia,  which
may  adversely  affect  the  Japanese  economy.

The  sustained  performance  seen  early  on  in  the  year  in
the  motor  industry  and  shipbuilding  and,  to  a  lesser
extent,  in  mechanical  and  electrical  engineering  will  not
produce  any  significant  increase  in  steel  consumption  in
1997  because  of  the  need  to  reduce  stocks  previously
built  up,  in  particular  motor  cars  and  electronics  goods.

There  also  seems  to  be  no  short(cid:220)term  prospect  of  any
upturn  in  the  construction  industry  or  civil  engineering
given  the  fall  in  public  investment.

Steel  production,  however,  has  been  seen  to  be  rising
more  sharply  to  meet  a  temporary  increase  in  internal
demand  in  the  early  part  of  1997  and,  especially,  foreign
demand.

is  expected  to
In  1998,  domestic  steel  consumption 
increase  to  some  extent  in  Japan  given  the  improved
economic  climate  in  the  country,  which  suggests  there
will  be  less  Japanese  steel  on  the  export  market.

2.3.4.(cid:217)China  and  South  East  Asia

The  average  growth  rate  in  the  economies  of  South  East
Asia  should  be  around  6,5(cid:216)%  in  1997.  However,  despite
some  slowing  down  in  its  region,  economic  growth  could
still  be  an  average  of  about  8(cid:216)% 
in  1998.  It  may,
however,  be  necessary  to  revise  these  forecasts  if  the
economic  and  financial  crisis  affecting  various  countries
in  the  region  worsens.

The  improvements  in  the  construction  industry  in  South
Korea,  the  electronics  industry  in  Taiwan  and  investment
in  China  have 
steel
consumption  and  production  despite  the  economic  and
financial  difficulties  in  other  countries  in  the  region.

increase 

to  a 

slight 

led 

in 

On  the  trade  front,  even  if  steel  imports  are  likely  to  fall,
South(cid:220)East  Asia  will  still  be  a  vigorous  market  in  1998,
despite  its  substantial  structural  deficit,  though  this  is  set
to  come  down  further,  especially  when  new  capacity
comes  into  use.

the  measures 

In  China, 
for  economic  control  and
structural  modernization  already  in  place  have  helped  to
contain  the  country’s  economic  expansion  and  limit  the
increase  in  inflation.  Nevertheless,  economic  growth  in
China  is  expected  to  be  outstanding  once  again  in  1997
and  1998.

With  regard  to  the  steel  market,  consumption  should
stabilize  in  1997  after  the  successive  falls  in  1994  and
1995,  while  domestic  production,  which  is  still  rising
slightly,  has  contributed  to  a  further  increase  in  stocks.

For  1998,  the  need  to  reduce  stocks  and  a  possible
slowdown  in  demand  should  nevertheless  not  severely
reduce  steel  imports  to  the  country,  especially  given  the
need  for  major  conglomerates  to  export.

2.3.5.(cid:217)The  economies  of  the  countries  of  Latin  America

The  economies  of  the  countries  of  Latin  America  are
going  through  a  very  sound  period,  having  gradually
increased  their  average  growth  and  with  year(cid:220)on(cid:220)year
rates  expected  to  be  some  5(cid:216)%  in  1997  and  1998.

The  sharp  improvement  in  the  economic  climate  of  most
therefore  also
of 

this  region  has 

the  countries 

in 

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gradually  boosted  performance 
construction 
increase  in  steel  consumption  in  1997.

industries,  thus 

in 

the  motor  and
leading  to  a  significant

Steel  consumption  in  this  region  is  expected  to  further
increase  by  about  10(cid:216)%  in  1998  as  a  result  of  vigorous
economic  development  in  Mexico,  Argentina  and  Brazil.
However,  even  though  these  countries’  steel  imports  are
forecast  to  increase  and  their  exports  are  expected  to
fall,  their  surplus  supply  of  steel  products  still  looks
likely  to  be  about  10  million  tonnes  in  1998  in  view  of
the  increase  in  domestic  production.

2.3.6.(cid:217)Economic  situation  and  prospects  in  the  Central
and  East  European  countries  and  the  republics  of
the  CIS

Following  the  reforms  introduced  in  1994,  the  economies
of 
the  Central  and  East  European  countries  are
continuing  to  make  progress  and,  despite  their  fragility,
these  countries  are  expected  to  show  an  average  growth
of  about  5,2(cid:216)%  in  1997  and  5,7(cid:216)%  in  1998.

Benefiting  from  a  healthier  economic  situation,  industrial
production  and  especially  steel  production  in  the  Central
and  East  European  countries  increased  sharply  in  1997
and,  now  that  the  local  markets  have  shrunk,  exports
account  for  a  very 
large  share  of  almost  45(cid:216)%  of
domestic  steel  production.

For  1998,  steel  production  in  all  these  countries  is  set  to
increase  further,  though  the  expected  rise  in  domestic
consumption  indicates  that  steel  exports  from  the  Central
and  East  European  countries  will  slow  down.  It 
is,
however,  possible  that  the  forecast  fall  in  steel  imports  to
the  US  market  in  1998  will  lead  to  an  even  sharper  rise
in  exports  from  these  countries  to  the  European  Union,
in  particular  of  long  products.

Since  the  reforms  were  introduced,  there  has  been  a
major  improvement  in  the  economic  situation  in  Russia,
despite  the  scale  of  the  domestic  difficulties  which  still
have  to  be  overcome.  After  successive  years  of  negative
growth  up  to  1996,  the  Russian  economy  is  likely  to  see
a  slight  increase  in  GDP  in  1997,  set  to  rise  further  in
1998.

In  the  steel  sector,  the  expected  trends  for  1998  point  to
a  5(cid:216)%  rise  in  domestic  steel  consumption  and,  despite  a
slight  increase  in  production,  steel  exports  from  Russia,
mainly  of  semi(cid:220)finished  products,  could  fall  for  the  first
time.

2.3.7.(cid:217)Middle  East  and  Africa

The  economies  of  the  Middle  East  and  Africa  have
continued  to  make  good  progress  since  1990,  though  the
differences  from  one  country  to  another  are  sometimes
great.

The  average  growth  rates  for  these  countries  can  be
estimated  at  2,3(cid:216)%  for  1997  and  2,5(cid:216)%  for  1998.

For  steel,  the  introduction  of  new  capacity  is  likely  to
increase  steel  production  in  the  Middle  East,  possibly  to
12  million  tonnes  in  1998,  as  compared  with  domestic
steel  consumption  where  a  3,5(cid:216)%  increase  would  take
the  figure  beyond  11  million  tonnes.

For  Africa  as  a  whole,  the  increase  in  steel  consumption
is  expected  to  be  about  2(cid:216)%  in  1998,  bringing  the  figure
up  to  about  15  million  tonnes.  The  shortfall  in  the  steel
industry  in  this  region  will  therefore  remain  virtually
unchanged.

2.4.(cid:217)PRICE  TRENDS

Changes  in  the  exchange  rates  during  the  last  12  months,
in  particular  with  the  appreciation  of  the  dollar  against
European  currencies,  except  the  pound  sterling,  are  felt
to  have  been  among  the  main  factors  behind  the  reversal
of  the  situation  on  the  Community  steel  market.  Steel
together  with  all  manufactured  products  of  Community
origin  are  therefore  now  more  competitive  again  inter(cid:220)
nationally,  so  much  so  that  the  recovery  of  domestic
demand  and  the  stabilization  of  exports  at  excellent
levels  have  encouraged  prices  on  the  European  Union
steel  market  to  rise  gradually  in  1997.

With  regard  to  flat  products,  the  downward  price  trend
generally  stopped  at  the  end  of  1996,  and,  in  some  cases,
very  early  on  in  1997.  The  reversal  of  the  trend  has
therefore  been  quite  fast  and  substantial,  depending  on
the  products  and  Member  States  of  the  European  Union
concerned.  The  strong  demand  for  galvanised  sheet,
hot(cid:220)rolled  coil  and  heavy  sheet  has  caused  the  basic
prices  of  these  products  to  rise  by  about  15  to  20(cid:216)%  in
1997.

The  prices  of  cold(cid:220)rolled  sheet,  on  the  other  hand,  have
risen  more  slowly,  but  the  increases  seen  at  the  end  of
the  year  were  faster  for  these  products.  This  generally
upward  trend  seems  set  to  continue  at  least  during  the
first  six  months  of  1998.

long  products,  price 

levels  have  been
As  regards 
particularly  low  for  several  years  and  this  trend  was
confirmed  in  1996.  However,  now  that  foreign  demand
has  increased  thanks  to  improved  stock  levels  and  supply
which  is  more  closely  in  tune  with  market  requirements,
a  certain  balance  has  gradually  been  attained  once  again
on  the  Community  market,  which  has  also  helped  to
boost  prices 
long  products
in  this  field.  Taking  all 
together,  the  best  quality  products,  in  particular  those

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29.1.98

which  go  to  the  motor  industry  and  the  mechanical
engineering  sector,  saw  the  highest  rises  of  about  25(cid:216)%
in  basic  prices  in  1997  and  the  upward  trend  is  expected
to  continue  during  the  first  half  of  1998.  Long  products
for  the  construction  industry,  however,  saw  somewhat
lower  price  rises  throughout  1997.  The  trend  in  1998  will
nevertheless  largely  depend  on  climatic  conditions,  the
level  of  exports  from  third  countries  and  export  oppor(cid:220)
tunities.

2.5.(cid:217)TRENDS  BY  PRODUCT

Flat  products

- Hot(cid:220)rolled  coil

The  performance  of  the  hot(cid:220)rolled  coil  consuming
sectors  is  satisfactory  as  demand  from  tube  manu(cid:220)
facturers,  the  motor  industry  and  steel  service  centres
continues  to  expand  healthily.  The  level  of  stocks
held  by  dealers  and  users  is  normal  and  there  is  no
sign  of  overstocking  at  the  moment.  Deliveries  to  the
European  market  are  increasing  at  levels  well  above
those  seen  during  the  last  two  years,  the  rate  of  util(cid:220)
ization  of  capacity  is  high  and  delivery  periods  are
lengthening.  Given 
the
Community  market,  export  sales  falling  despite  the
profitable  level  of  world  market  prices.  The  upward
trend  for  these  products  seems  set  to  continue  during
the  first  half  of  1998,

rising  demand  on 

the 

- Cold(cid:220)rolled  sheet

The  growing  demand  for  cold(cid:220)rolled  sheet  from  the
main  consumers  has  enabled  installations  to  operate
at  high  levels  of  utilization,  even  though  delivery
times  for  these  products  have 
lengthened.  Stocks
have  built  up  over  the  last  few  months,  but  the  level
is  considered  to  be  well(cid:220)balanced,  given  the  current
level  of  business.  Demand  from  export  markets  is
good  and  prices  are  profitable  in  view  of  the  current
parity  of  the  dollar  with  European  currencies.  As
regards  imports,  deliveries  have  increased  to  some
extent,  in  particular  from  Slovakia,  Argentina  and
Turkey.  As  with  hot(cid:220)rolled  coil,  prices  of  cold(cid:220)rolled
sheet  have  also  been  rising  since  the  beginning  of
1997  and  this  trend  is  likely  to  be  conformed  during
the  first  half  of  1998,

thening  and  there  are  even  signs  of  a  slight  shortage
of  these  products  at  the  moment.  Prices  are  therefore
rising  rapidly  and  there  is  nothing  at  the  moment  to
suggest  that  this  trend  will  change.

For  electrogalvanized  sheet,  there 
is  considerable
demand  from  the  motor  industry,  though  some  of
this  has  been  transferred  to  galvanized  products.  The
high  level  of  the  dollar  and  the  vigorous  demand
from  the  world  market  are  also  increasing  exports  by
European  producers.  The  balance  between  supply
and  demand  is  therefore  pushing  up  prices  on  the
internal  market,  this  trend  looking  set  to  continue
during  the  first  half  of  1998,

- Quarto  plate

These  products  are  benefiting  from  a  number  of
positive  factors  which  have  appeared  during  1997  and
which  will  continue  to 
influence  the  market  for
quarto  plate  in  1998.  These  include  in  particular  the
high  value  of  the  dollar,  the  strong  demand  on  the
world  market  and  above  all  the  upturn  in  the  market
for  large  tubes  for  which  order  books  are  already
very  full.  As  with  other  flat  products,  delivery  times
have  lengthened  and  the  prices  of  these  products
continue  to  rise.  Dealers’  stocks  are  normal  and
dealers  are  doing  a  fine  job  in  offering  best  prices  for
short(cid:220)term  orders  which  producers  cannot  meet.
However,  the  rise  in  demand  and  prices  within  the
European  Union 
imports  from
certain  Central  and 
in  particular  East  European
countries.

is  again  attracting 

Long  products

- Heavy  sections  and  beams

With  a  particularly  healthy  export  market  and  the
recovery  of  demand  on  the  internal  market,  these
products  have  picked  up  well  in  1997.  Merchant
stocks  have  returned  to  normal  and  order  books  are
considered 
to  be  satisfactory.  This  situation  has
therefore  allowed  prices  on  the  Community  market
to  rise.  Whether  this  healthy  trend  will  continue,
however,  will  depend  on  changes  in  exports  and  the
level  of  imports  from  third  countries,

- Coated  sheet

- Wire  rod

The  demand  for  galvanized  sheet  from  both  the
motor  industry  and  the  construction  industry  is  very
sustained.  Order  books  are  full, 
installations  are
operating  at  full  capacity,  delivery  times  are  leng(cid:220)

Demand  from  the  construction  industry  is  still  poor
in  a  number  of  Member  States  of  the  European
Union.  However,  there 
in
demand  at  the  moment  for  wire  for  drawing  and  for
industries.
the  mechanical  engineering  and  motor 

is  a  marked 

increase 

29.1.98

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The  production  stoppages  in  the  summer  and  export
sales  in  1997  have  enabled  stocks  to  be  reduced  and
supply  to  be  brought  more  into  line  with  demand  on
the  internal  market.  The  prospects  for  the  beginning
of  1998  are  still  good  as  regards  both  exports  and  the
Community  market.  Prices  have  risen  considerably
during  the  year  and  it  is  very  likely  that  there  will  be
further  rises  again  at  the  beginning  of  1998,

business  further  still  to  take  advantage  of  the  oppor(cid:220)
tunities  provided  by  the  export  demand  as  well.  This
in  particular  provide  an  additional  boost  to
should 
internal  steel  consumption,  after  the  performance 
in
1997,  and  in  1998  should  again  help  support  the  gradual
improvement  of  the  Community  steel  market,  despite  the
expectations  of  higher  imports  and  a  further  reduction  in
Community  exports  of  steel  products.

- Concrete  reinforcing  bars

than 

consumption 

in  1996.  However, 

fell  by  about  5(cid:216)% 

The  consumption  of  concrete  reinforcing  bars  in  the
Community  in  1997  is  expected  to  be  about  2(cid:216)%
higher 
this  hides  big
disparities  between  the  various  markets  of  the  Union.
in
Although 
Germany,  increases  which  could  be  as  much  as  10(cid:216)%
have  been  recorded  in  some  other  countries  of  the
Union.  Competition  from  producers  in  Central  and
Eastern  Europe  and  the  former  USSR  is  putting
strong  pressure  on  the  export  market,  which  is  not
seen  to  be  very  keen  on  price  rises.  On  the  internal
market,  however,  supply  and  demand  are  more  or
less  in  balance  and  prices,  which  picked  up  again  in
1997,  now  seem  to  be  stabilizing.  This  situation  is
nevertheless  fragile  and  dealers  and  producers  will
have  to  act  with  caution  so  as  not  to  jeopardize  the
present  balance,  especially  during  the  winter  period,

On  the  basis  of  these  trends,  real  and  apparent  steel
consumption  during  the  first  half  of  1998  (as  indicated  in
Annex  1)  are  expected  to  increase  by  4,8(cid:216)%,  compared
with  the  respective  levels  for  the  same  period  in  1997,  to
79  million  tonnes,  with  no  movements  in  consumer  and
dealer  stocks.  Steel 
increase  by  about
imports  could 
14(cid:216)%  during  this  period  to  8  million  tonnes,  while
exports  look  set  to  fall  by  about  8(cid:216)%,  giving  an  estimate
for  equilibrium  production  for  the  six  months  of  about
82  million  tonnes,  an  increase  of  3,3(cid:216)%  on  the  figure  for
the  second  half  of  1997.

real  and  apparent 

For  1998  as  a  whole, 
steel
consumption  should  be  154  million  tonnes,  up  4,8(cid:216)%  on
the  respective  figures  for  the  previous  year,  in  view  of
stocks
the  expected 
throughout  the  period.

stability  of  dealer  and  user 

- Merchant  bars

The  combined  effects  of  an  increase  in  demand  and
the  production  stoppages  during  the  summer  are
expected  to  have 
improved  the  balance  between
supply  and  demand  on  the  Community  market.
Furthermore,  the  economic  outlook  forecast  for  1998
points  to  a  further  increase  in  demand  over  the  next
few  months.  If  this  balance,  which  is  still  fragile,  can
be  maintained,  prices  could  pick  up  and  stay  up
throughout  next  year.

2.6.(cid:217)CRUDE  STEEL  BALANCE  FOR  THE  FIRST  HALF  OF

1998  AND  ESTIMATES  FOR  THE  YEAR

The  expansion  of  the  Community  economy,  which  looks
set  to  increase  throughout  1998  thanks  to  higher  growth
in  investment  and,  to  a  lesser  extent,  consumption,  offers
excellent  prospects 
further  development  of
the 
industrial  performance  in  general.

for 

Benefiting  from  the  improved  economic  conditions  in  the
Union,  the  main  steel  users  are  expected  to  increase  their

Continuing  their  upward  trend,  steel  imports  should  rise
to  14  million  tonnes,  about  8(cid:216)%  higher  than  in  1997,  and
Community  exports  of  steel  products  are  likely  to  fall
again  by  8(cid:216)%  to  23  million  tonnes.  Community  steel
production  is  therefore  estimated  at  163  million  tonnes,
an  increase  of  3,2(cid:216)%  on  1997.

3.(cid:217)RAW  MATERIALS

3.1.(cid:217)SCRAP

Electrical  steel  works  contributed  more  than  integrated
steel  works  to  the  sharp  rise  in  crude  steel  production  in
the  European  Union  in  1997  and  demand  for  scrap  has
therefore  been  constantly  rising  throughout  the  year.
The  increase  in  consumption,  however,  has  not  yet  had
any  major  impact  on  scrap  prices,  which  have  stabilized
at  the  high  level  previously  reached.

It  has  been  possible  for  the  high  level  of  demand  from
plants  across  the  Union  to  be  met  by  the  supply  available
without  putting  any  particular  strain  on  the  market,
especially  following  the  reduction  in  Community  exports
of  scrap  to  Turkey,  which  is  increasing  its  domestic
collections  and  has  also  obtained  massive  supplies  from
the  CIS,  more  especially  Ukraine.  Exports  of  scrap  from

C  31/14

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29.1.98

the  Union  to  South(cid:220)East  Asia  have  also  fallen  due  to  the
financial  crisis  in  the  Korean  steel  industry  and  the  fact
that  Japan  recently  became  a  net  exporter  of  scrap.

The  continued  growth  of  Community  steel  production  in
1998  could  be  followed  by  a  rise  in  scrap  prices,  in
particular  given  demands  with  regard  to  quality.  This
trend  could  continue  further  if  exports  to  Asia  pick  up
again  once  the  financial  crisis  affecting  certain  countries
in  the  region  comes  to  an  end.

3.2.(cid:217)IRON  ORE

As  indicated  in  the  previous  forecast,  world  production
of  iron  ore  in  1997  is  likely  to  reach  the  record  figure
seen  in  1995.  This  is  quite  obviously  the  result  of  a
substantial  increase  in  consumption  due  to  the  market
increase  in  world  production  of  pig  iron  and,  to  a  lesser
extent,  of  pellets.  The  changes  in  the  demand  for  iron
ore  have  caused  supply  difficulties  over  the  last  few
months  due  to  traffic  saturation 
in  some  ports  of
loading.  Nevertheless,  world  exports  of  iron  ore  in  1997
will  be  more  than  in  1995.

During  the  first  few  months  of  1998,  world  demand  is
set  to  continue  the  upward  trend  seen  in  1997  and
therefore  to  remain  particularly  sustained.  The  changes
in  capacity  and  improvements  in  the  routing  of  mining
products  now  being  made,  in  particular  in  Brazil  and
Australia,  should  help  to  ease  any  future  tension  on  the
market.

With  regard  to  the  production  of  pellets,  which  are  in
particular  used  to  make  pre(cid:220)reduced  materials,  the  strong
demand  already  recorded  in  1996  and  1997  is  set  to
remain  at  the  same  levels  in  1998.

3.3.(cid:217)FERRO  ALLOYS

The  increase  in  demand  for  ferro  alloys  seen  in  the
European  Union  at  the  beginning  of  1997  was  confirmed
during  the  second  half  of  the  year.  However,  this  trend
benefited  imports  rather  than  domestic  production.  Only
certain  products  saw  price  increases,  with  the  abundance
of  supply  largely  going  to  meet  the  rise  in  consumption.

The  trend  on  the  ferro(cid:220)alloys  market  should  remain
unchanged  during  the  first  of  1998,  with  demand  and
supply  enjoying  parallel  growth,  giving  a  satisfactory
balance  on  the  market.  There  could,  however,  be  erratic
price  movements 
sizeable
proportion  of  the  supply  available  is  able  to  adapt  rapidly
to  the  changes  in  the  market.

some  products 

if  a 

for 

3.4.(cid:217)TIN,  ZINC  AND  NICKEL

The  most  recent  figures  show  tin  production  rising
slightly  during  the  first  half  of  1997  as  compared  with
the  first  six  months  of  1996.  The  level  of  apparent
consumption  of  this  raw  material,  on  the  other  hand,  has
not  given  any  signs  of  improving  over  this  period.  Never(cid:220)
theless,  apparent  consumption  of  tin  could  increase  to  a
slight  extent,  given  the  firmer  demand  during  the  second
half  of  1997,  but  this  will  not  be  able  to  prevent  a  surplus
of  about  7(cid:216)000  tonnes  building  up  by  the  end  of  1997.

The  prices  of  this  raw  material  for  the  steel  industry
stabilized  up  to  the  end  of  1997,  after  falling  by  about
10(cid:216)%  since  the  beginning  of  the  year.

For  1998,  although  demand  for  tin 
is  expected  to
continue  to  rise,  the  trend  will  not  have  any  effect  on
prices  since  production  will  increase  in  parrallel.

World  consumption  of  zinc,  which  is  estimated  to  rise  by
2,5(cid:216)%  to  7,75  million  tonnes  in  1997,  could  see  a  further
rise  of  2,4(cid:216)%  to  7,95  million  tonnes  in  1998.

the  Community  market, 

On 
zinc
consumption  should,  however,  be  lower,  rising  by  only
1,4(cid:216)%  in  1998.

changes 

in 

World  supply  of  this  raw  material, 
in  balance  with
demand  in  1997,  could  slightly  exceed  the  1998  level.

Zinc  prices  were  volatile  during  the  second  half  of  1997
and,  after  rising  to  1(cid:216)760  dollars  a  tonne  in  August  on
the  LME,  fell  to  1(cid:216)255  dollars  a  tonne  at  the  end  of
October.

In  1998,  zinc  prices  will  be  affected  by  stock  movements
and  the  rise  in  market  supply  following  the  opening  of
new  mines  and  are  not  expected  to  see  such  substantial
fluctuations  as  during  the  second  half  of  1997.

For  1997,  the  International  Nickel  Group  estimates  the
world  balance  between  supply  and  demand  of  nickel  at
+(cid:216)11(cid:216)400  tonnes.  This  estimate  is  based  on  an  increase
in  production  of  4,5(cid:216)%  and  a  rise  in  consumption  of
7,1(cid:216)%.  Nickel  consumption 
the  European  Union
during  the  year  has  risen  by  8,1(cid:216)%.

in 

The  balance  between  supply  and  demand  for  this  raw
material  could  narrow  during 
the  course  of  1998
provided  Russian  exports  remain  constant.  The  high
stocks  could 
the
production  and  consumption  of  nickel  and,  even  if  prices
rise,  the  increase  is  therefore  likely  to  be  rather  small.

fill  any  gap  between 

therefore 

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C  31/15

4.(cid:217)EMPLOYMENT

The  current  situation 
prospects  for  1998  are  very  good.

in  the  steel 

industry  and  the

During  this  period  of  growth,  the  jobs  situation  in  the
sector  is  therefore  definitely  improving  compared  with
previous  years,  even  if  more  losses  are  expected  due  to
further  restructuring,  rationalization  and  modernization.

Furthermore,  the  need  for  the  Community  steel  industry
to  achieve  greater  international  competitiveness  means
that  it  must  constantly  strive  to  produce  technological
innovation  and  streamline  its  businesses,  with  negative
consequences  for  employment  in  the  sector.

In  the  past,  most  of  the  workers  affected  by  restructuring
have  been  able  to  take  early  retirement,  the  most  widely
used  scheme  in  most  of  the  Member  States.

has  therefore  been  sought  for  some  workers,  while
arrangements  less  costly  than  early  retirement  have  been
introduced  for  others  (e.g.  gradual  early  retirement).

Given  the  favourable  market  situation,  the  trend  towards
the  large(cid:220)scale  shedding  of  jobs  in  the  steel  industry
should  diminish  in  1998,  except  in  Germany,  due  to
concentration  and  rationalization,  and  Spain  where  the
last  restructuring  plan  is  nearing  completion.

The  Commission  will  continue  to  implement  a  social
policy  for  the  sector  based  on  aid  for  retraining  pursuant
to  Article  56  (2)  (b)  of  the  ECSC  Treaty  until  the  Treaty
expires  in  2002.

The  net  job  losses  in  the  Community  steel  industry  in
1998  are  estimated  at  12(cid:216)000  workers,  concentrated
mainly  in  Germany,  the  United  Kingdom  and  Spain.
However,  the  number  of  workers  eligible  for  aid  will  be
lower  than  this  since  some  Member  States  will  not  be
participating  in  the  ECSC  redeployment  policy.

Over  the  years,  however,  national  social  schemes  have
changed  to  meet  employment  policy  requirements  more
closely  and  because  of  the  large  drop  in  the  number  of
workers  in  the  upper  age  groups.  External  redeployment

For  1998,  the  funds  in  the  ECSC’s  draft  budget  for
traditional  aid  for  retraining 
in  the  coal  and  steel
industries  amount  to  ECU  65  million.  However,  most  of
these  funds  will  probably  be  used  to  pay  for  the  social
effects  of  restructuring  in  the  steel  sector.

C  31/16

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29.1.98

ANNEX

TABLE  1

Crude  steel  supply  and  demand  -  EUR(cid:220)15(cid:216)(˛)

Out(cid:220)turn

1994

1995

1996

First  half
1997
(R1)

Estimate

Second  half
1997
(R2)

(in  million  tonnes)

Forecast

1997
(R2)

First  half
1998

1998

Apparent  user
consumption(cid:216)(a)

Change  in  merchant
stocks(cid:216)(b)

Apparent  consumption

Imports  EUR(cid:220)15

Exports  EUR(cid:220)15

134,9

142,0

139,5

+(cid:216)0,5

135,4

11,1

28,4

+(cid:216)3,0

145,0

17,0

22,7

75,4

0,0

75,4

7,0

12,0

(cid:134)(cid:216)1,0

79,4

71,6

147,0

79,0

154,0

0,0

71,6

6,0

13,0

0,0

78,6

0,0

147,0

13,0

25,0

(cid:134)(cid:216)1,0

158,0

0,0

79,0

8,0

11,0

0,0

82,0

0,0

154,0

14,0

23,0

0,0

163,0

(cid:134)(cid:216)4,0

135,5

12,2

27,9

(cid:134)(cid:216)4,0

147,2

Change  in  producer  stocks

+(cid:216)0,9

+(cid:216)5,0

Production

151,8

155,7

(˛)(cid:217)(cid:218)Conversion  factor  of  finished  products  to  crude  steel:  1.11.
(R1) Figures  revised  on  the  basis  of  out(cid:220)turn.
(R2) Partially  revised.
(a)

This  aggregate  is  close  to  actual  consumption.  It  concludes  changes  in  consumer  stocks  and  merchant  stocks  in  all  countries  except  Germany,  France,
the  United  Kingdom  and  Benelux.

(b) Change  in  merchant  stocks  in  Germany,  France,  the  United  Kingdom  and  Benelux.

TABLE  2

Indicators  of  activity  -  EUR(cid:220)12(cid:216)(˛)

(Not  seasonally  adjusted)

Sector

First  half  1998(cid:216)(ˇ)

First  half  1997(cid:216)(ˇ)

1998(cid:216)(—)

1997(cid:216)(—)

Manufacture  of  metal  articles

Mechanical  engineering

Electrical  engineering

Motor  vehicles

Other  means  of  transport

Building/civil  engineering

106,2

109,2

109,3

109,9

108,6

100,1

101,7

102,1

104,7

104,6

104,6

98,5

105,5

109,0

108,8

108,8

109,8

99,7

102,7

103,8

104,0

104,1

104,2

99,5

(˛)(cid:217)In  the  absence  of  basic  steel  consumption  data  by  sector  for  Austria,  Finland  and  Sweden,  these  indicators  refer  only  to  expected  development  in  the

Community  of  12.
Indexed  forecasts  of  the  level  of  activity  of  the  various  steel(cid:220)consuming  sectors  derived  by  weighting  national  data  provided  by  the  trade  associations  of
those  industries.  Some  figures  are  partial  estimates  as  the  data  for  certain  countries  are  not  available.

(ˇ)(cid:217)First  half  1996(cid:216)=(cid:216)100.
(—)(cid:217)1996(cid:216)=(cid:216)100.

Source:  Commission  data.

29.1.98

EN

Official  Journal  of  the  European  Communities

C  31/17

TABLE  2a

Trends  in  the  steel(cid:220)consuming  sectors  in  the  main  producer  countries(cid:216)(˛)

(Activity  indicators(cid:216)(ˇ))

Member  State

Germany

France

Italy

United  Kingdom

Spain

Sector/indicator

I/1998

1998

I/1998

1998

I/1998

1998

I/1998

1998

I/1998

1998

Manufacture  of  metal
articles

108,0

107,0

108,0

109,0

Mechanical  engineering

108,0

108,0

107,0

108,5

Electrical  engineering

109,0

109,0

108,0

108,0

Motor  vehicles

112,0

112,0

108,0

106,0

Other  means  of  transport

Building/civil  engineering

95,0

98,0

95,0

98,0

120,0

122,0

98,0

98,0

(˛) Source:  National  steel  users’  associations.
(ˇ)(cid:217)For  each  country:

first  column,  activity  indicator  first  half  1998  (first  half  1996(cid:216)=(cid:216)100)
second  column,  activity  indicator  1998  (1996(cid:216)=(cid:216)100).

-

-

-

-

-

-

103,5

107,0

107,5

104,5

105,0

-

-

-

-

-

-

-

-

-

-

-

-

-

95,0

96,0

124,0

129,0

119,0

120,9

106,0

106,0

104,0

122,4

102,5

103,5

TABLE  3

Changes  in  the  numbers  employed  in  the  steel  industry

(Including  apprentices)

Member  State

Number  of  employees  (in  thousands)

(Reference  month)

(Most  recent  month)(cid:216)(˛)

Austria

Belgium

Denmark

Germany

Greece

Spain

France

Finland

Ireland

Italy

Luxembourg

The  Netherlands

Portugal

Sweden(cid:216)(—)

United  Kingdom

EUR(cid:220)15

12,8  (June  1996)

23,2  (June  1996)

1,1  (March  1996)

85,6  (July  1996)

2,3  (July  1996)

23,6  (July  1996)

38,9  (August  1996)

7,4  (August  1996)

0,4  (March  1996)

39,1  (July  1996)

5,3  (August  1996)

12,4  (April  1996)

2,5  (April  1996)

14,8  (June  1996)

37,0  (June  1996)

12,4  (June  1997)

20,6  (June  1997)

1,2  (March  1997)

82,3  (July  1997)

2,1  (July  1997)

23,2  (July  1997)

38,8  (August  1997)

6,8  (August  1997)

0,4  (March  1997)

37,1  (July  1997)

4,8  (August  1997)

12,1  (April  1997)

2,1  (April  1997)

14,7  (June  1997)

35,9  (June  1997)

307,9  (March  1996)

293,1  (March  1997)

(˛)(cid:217)Most  recent  figures  available.
(ˇ)(cid:217)As  the  reference  period  is  not  the  same  for  all  countries,  this  average  is  only  indicative.
(—)(cid:217)Estimate.
Source:  Eurostat.

Change
(%)

(cid:134)(cid:216)3,1(cid:218)(cid:216)

(cid:134)(cid:216)11,2(cid:218)(cid:216)

+(cid:216)9,1(cid:218)(cid:216)

(cid:134)(cid:216)3,9(cid:218)(cid:216)

(cid:134)(cid:216)8,7(cid:218)(cid:216)

(cid:134)(cid:216)1,7(cid:218)(cid:216)

(cid:134)(cid:216)0,3(cid:218)(cid:216)

(cid:134)(cid:216)8,1(cid:218)(cid:216)

0,0(cid:218)(cid:216)

(cid:134)(cid:216)5,1(cid:218)(cid:216)

(cid:134)(cid:216)9,4(cid:218)(cid:216)

(cid:134)(cid:216)2,4(cid:218)(cid:216)

(cid:134)(cid:216)16,0(cid:218)(cid:216)

(cid:134)(cid:216)0,7(cid:218)(cid:216)

(cid:134)(cid:216)3,0(cid:218)(cid:216)

(cid:134)(cid:216)4,8(cid:216)(ˇ)