Information from the Commission - Forward programme for steel for the second half of 1998 and for 1998 as a whole
Date: 1998-07-25
Institutions: European Commission
Subjects: EU programme, economic growth, economic stabilisation, iron and steel industry, single market, steel

C  233/2

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Official  Journal  of  the  European  Communities

25.7.98

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

(98/C  233/02)

(Text  with  EEA  relevance)

INTRODUCTION

1. ECONOMIC  SITUATION  IN  THE  EUROPEAN

UNION

The  strength  of  the  economic  recovery  in  the  European
Union  since  1997  has  gradually  pushed  optimism 
in
industry  and  among  consumers  to  new  heights.

Economic  growth  in  the  Community  now  seems  to  be
led  more  by  internal  factors,  which  have  been  gathering
momentum  and  compensating 
in
export  activity  -  a  direct  or  indirect  consequence  of  the
crisis  in  Asia,  with  its  as  yet  untold  adverse  effects.

the  downturn 

for 

The  spring  1998  forecasts  confirm  the  strength  of  the
recovery,  despite  a 
international  climate
less  clement 
clouded  by  the  crisis  in  Asia.  The  prospects  for  sustaining
this  recovery  remain  good,  with  domestic  demand
gradually  taking  over  from  exports  as  the  driving  force
for  growth.

Economic  growth  in  the  EU,  revised  to  2,7(cid:216)%  for  1997,
proved  slightly  faster  than  forecast  last  autumn  (2,6(cid:216)%).

Industrial  activity  picked  up  appreciably  over  this  period
in  response  to  growing  demand,  particularly  inside  the
Union.

From  the  surveys  conducted  up  until  April  1998,  most  of
the  confidence  indicators  point  to  a  degree  of  continuity
in  the  improvement  observed  since  mid(cid:220)1996  and  have
hardly  been  dimmed  by  events  in  Asia.

The  quickening  pace  of  the  economic  recovery  in  the
Union  gave  a  great  boost  to  the  steel  market,  where
conditions  surely  but  steadily  improved,  in  terms  of  both
volumes  and  prices.

Up  until  now  the  Community  steel  industry  has  benefited
from  the  ensuing  improvements  in  demand  and  prices.
However,  the  attractive  prices,  combined  with  the  need
to  find  outlets  for  the  surplus  supply  released  onto  the
world  market  by  events  in  Asia,  have  triggered  a  sizeable
increase  in  steel  imports  onto  the  Community  market,
particularly 
start  of  1998,  while  export
the 
prospects  have  shrunk.

since 

The  Commission  therefore  repeats  its  recommendation
to  all  concerned  to  exercise  caution  and  adopt  industrial
and  business  strategies 
in  tune  with  reality  and  the
potential  on  the  internal  and  international  market.  In
particular,  the  crisis  in  Asia  and  its  impact  on  trade,
coupled  with  the  dwindling  sales  prospects  in  regions
short  of  steel,  demand  responsible  behaviour  on  the  part
of  operators  to  safeguard  as  long  as  possible  the  stability
of  the  Community  steel  market,  hard  won  at  the  expense
of  great  sacrifices  both  in  financial  terms  and  jobs.

Order  books  have  filled  up,  despite  a  slight  weakenig  of
export  orders,  and  production  prospects  remain  good.  As
a  result,  confidence  in  industry  and  among  consumers
returned  to  the  heights  attained  before  the  short(cid:220)lived
downturn  in  January  1998.

Against  the  autumn  1997  forecast,  GDP  growth  in  the
European  Union 
in  1998  has  therefore  been  revised
downwards  just  slightly,  by  0,2(cid:216)%,  to  2,8(cid:216)%.

The  impact  of  the  crisis  in  south(cid:220)east  Asia  should  be
partly  offset  by  lower  interest  rates  and  falling  prices  for
materials,  both,  to  some  extent,  the  result  of  events  in
that  part  of  the  world.

foreign 

Exports  from  the  Community  rose  by  9,3(cid:216)%  in  1997  and
the  balance  of 
valuable
contribution  of  some  0,4(cid:216)%  to  growth  in  the  EU.  Never(cid:220)
theless  this  net  contribution  to  growth  should  fade  as
export  growth  is  expected  to  slow  to  around  7(cid:216)%  in
1998,  mainly  in  the  wake  of  events  in  Asia.

trade  made  a 

Although  the  prospects  for  the  second  half  are  not  so
bright,  results  in  1998  are  still  expected  to  be  slightly
better  than  in  1997.

Growth  in  private  consumption  should  rise  from  2(cid:216)%  for
the  EU  as  a  whole  in  1997  to  2,6(cid:216)%  in  both  1998  and
1999,  boosted  by 
lower  savings  ratio,  modest
the 
increases  in  real  pay  and  greater  job  creation.

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Private  investment  has  been  revised  upwards  in  most
Member  States,  with  a  few  exceptions.  Consequently,  the
investment  forecasts  for  the  EU  as  a  whole  are  virtually
unchanged.  Equipment  investment  growth  is  expected  to
rise  from  4,4(cid:216)  in  1997  to  6,4(cid:216)%  in  1998  and  7,0(cid:216)%  in
1999.

The  downward  revision  of  the  growth  forecast  makes
little  difference  to  prospects  on  the 
labour  market.
Employment  in  the  European  Union  grew  by  0,4(cid:216)%  in
1997  with  further  increases  of  0,8(cid:216)%  expected  in  1998
and  1,1(cid:216)%  in  1999,  representing  around  3,4  million  new
jobs  between  1997  and  1999.

largely 

factors, 

to  demographic 

Due 
in
employment  will  not  necessarily  be  matched  by  an  equal
fall  in  unemployment.  Average  unemployment  in  the  EU
fell  from  a  peak  of  just  under  11(cid:216)%  in  1996  to  10,7(cid:216)%  in
1997  and  is  expected  to  fall  further  to  10,2(cid:216)%  in  1998
and  9,8(cid:216)%  in  1999.

rise 

the 

This  pushed  steel  production  in  the  Union  in  1997  to  a
record  159,5  million  tonnes,  up  8(cid:216)%  on  1996  and  even
slightly  above  the  latest  optimistic  forecast  of  158  million
tonnes(cid:216)(˛).

for 

figures 

steel  production 

The  monthly 
the
Community  showed  the  pace  picking  up  sharply  once
again  from  January  to  March  1998  giving  a  growth  rate
first  quarter
of  almost  10(cid:216)%  once  again 
compared  with  production  in  the  corresponding  quarter
in  1997.

the 

for 

in 

According  to  a  rapid  survey,  steel  production  in  April
and  May  was  only  2,3(cid:216)%  and  3,3(cid:216)%  higher  than  in  April
and  May  1997  respectively,  curbing 
the  cumulative
increase  for  the  first  four  months  of  this  year  compared
with  the  corresponding  period  in  1997.

Consequently,  to  meet  the  still  fast(cid:220)growing  domestic
demand  and  export  commitments,  steel  production  in  the
Union  will  very  probably  continue  to  develop  favourably,
albeit  at  a  slower  rate,  to  end  the  first  half  at  around
84  million  tonnes.

The  average  inflation  rate  in  the  EU,  measured  by  the
private  comsumption  deflator,  was  down  from  2,6(cid:216)%  in
1996  to  2,1(cid:216)%  in  1997  and  should  remain  around  2(cid:216)%  in
both  1998  and  1999.  Compared  with  autumn  1997,  the
forecasts  have  been  revised  downwards  by  0,3(cid:216)%  for
1998  and  0,1(cid:216)%  for  1999.

However,  the  very  significant  increase  in  imports  in  the
first  half  of  the  year  and  the  weakening  of  demand
forcast  in  the  second  half  of  the  year  should  take  steel
production  in  the  Community  back  slightly  below  levels
in  the  second  half  of  1997  to  end  1998  on  162  million
tonnes,  very  close  to  the  last  forecast(cid:216)(˛)  and  up  1,6(cid:216)%
on  production  in  1997.

The  average  public  debt  in  the  EU  in  1997  proved  lower
than  forecast,  on  2,4(cid:216)%  of  GDP,  as  a  result  of  low
interest  rates  and  slightly  faster  growth  whereas  the
deficit/GDP  ration  was  still  6,1(cid:216)%  in  1993  and  4,2(cid:216)%  in
1996.  The  average  deficit  in  the  EU  should  keep  falling
to  1,9(cid:216)%  in  1998  and  1,6(cid:216)%  in  1999.

2.(cid:217)STEEL  MARKET  SITUATION  AND  OUTLOOK

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

COMMUNITY

steady, 

relatively 

long(cid:220)lived 

steel
This 
production  has  brought  with  it  more  efficient  and,  in
some  cases,  optimum  use  of  capacity  and  thus  made  an
increasing  contribution 
the  operating
improving 
to 
results  of  steelmakers  in  the  Community.

increase 

in 

them 

the  Commission  urges  undertakings 

However, 
to
exercise  caution  when  drawing  up  their  production
programmes  and  encourages 
their
investment,  research  and  innovation  more  to  improving
product  quality,  protecting  jobs  and  the  environment  and
keeping  production  costs  under  control,  considering  not
only  the  risks  inherent  in  steel  trade  trends  on  the
Community  and  world  markets,  as  a  result  of  the  crisis
in  south(cid:220)east  Asia,  but  also  the  slowdown  forecast  in
steel  consumption  in  the  second  half  of  1998.

to  gear 

The  table  1,  "Crude  steel  supply  and  demand’,  gives
figures  and  summarises  recent  trends  in  consumption,
foreign  trade,  production  and  stocks  of  steel  in  the
European  Union  and  estimates  the  changes  expected  in
the  second  half  of  1998  and  for  1998  as  a  whole.

Crude  steel  production  in  the  Community  kept  up  high
growth  rates  throughout  1997,  speeding  up  at  the  end  of
the  year  to  take  production  in  December  to  13(cid:216)%  up  on
the  December  1996  figure,  which  itself  had  been  high.

(˛)(cid:217)OJ  C  31,  29.1.1998.

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25.7.98

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

FOR  1998  AS  A  WHOLE

However,  in  terms  of  volumes  this  combination  of  trends
will  not  damage  the  1998  results  for  the  Community
steel  industry  which  will  undoubtedly  be  better  than  the
1997  figures.

The  appreciably  brighter  general  economic  climate  in  the
European  Union,  initiated  by  an  excellent  international
situation  and  the  stable  dollar,  has  gradually  restored
confidence  among 
the
Community,  while  the  greater  momentum  built  up  by
international  factors  now  seems  set  to  counterbalance  the
curbing  of  exports.

industry  and  consumers 

in 

In  this  changing  climate,  the  renewed  optimism  instilled
in  the  industry  by  the  increased  orders  and  continuing
improvements  in  capacity  utilisation  looks  likely  to  stay
is  settling
and  the  climate  of  consumer  confidence 
around  the  high  reached  at  the  end  of  1997  according  to
the  latest  economic  surveys.

In  recent  meetings,  although  the  Union’s  steel  producers
considered  conditions  on  the  Community  steel  market
extremely  favourable,  they  nevertheless  stressed  that  the
growing  supply  from  certain  third  countries  could  upset
the  balance  and  have  adverse  repercussions  on  price
stability,  all  the  more  so  because  since  early  1998  these
imports  have  been  concentrated  on  specific  markets
within  the  Union.

At  the  latest  meetings,  steel  dealers  expressed  greater
reservations  about  market  trends  in  the  months  ahead
since  demand  outstrips  supply  in  some  branches,  while  in
others  abundant  supplies,  particularly  from  certain  third
countries,  are  putting  heavy  pressure  on  prices.

Nevertheless  the  notable  surge  in  activity  in  the  steel(cid:220)
consuming  industries  (some  of  the  principal  ones  are
analysed  more  closely  below)  throughout  1997  and  into
the  start  of  1998  is  further  evidence  of  the  strength  of
the  economic  recovery  in  the  European  Union.  More
specifically,  there  have  been  constant  improvements  in
performance  in  the  motor  industry,  growth  rates  have
long  been  high  in  mechanical  and  electrical  engineering
and,  somewhat  more  recently,  the  building  industry  in
turn  seems  to  be  back  on  the  right  track.

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

2.2.1.(cid:217)Primary  processing

In  1997  all  branches  of  primary  processing  will  have
benefited  more 
steady
improvement  in  the  economic  climate  in  the  European
Union,  including  the  sectors  where  activity  is  tied  closely
to  trends  in  the  building  industry.

expected 

from 

than 

the 

Demand,  and  in  many  cases  prices,  on  the  Community
market  rose  gradually  throughout  1997  in  all  branches  of
this  industry,  which  was  also  able  to  seize  the  ample
opportunities  for  direct  exports  on  the  world  market.

In  early  1998  the  markets  for  the  various  primary
processing  products  continued  to  exceed  even  the  most
optimistic 
is,  however,
perceptible  in  various  branches  of  this  industry,  where
constantly  rising  imports  combined  with  stockbuilding
presage  general  stabilisation  at  best  in  the  months  ahead.

expectations.  A 

slowdown 

In  any  event,  considering  the  1997  performances,  the
stabilisation  forecast  in  various  branches  in  the  second
half  of  1998  would  still  represent  a  very  good  level  of
activity,  sure  to  maintain  current  capacity  utilisation  rates
which  are  far  higher  than  they  were  in  1996.

In  the  second  half  of  1998,  however,  the  stage  seems  to
be  set  for  some  slowdown  of  activity  in  individual  sectors
after  the  strong  growth  in  1997  and  early  1998.  This
could  bring  a  slight  contraction  of  demand  for  steel.  This
weaker  domestic  demand  could  result  in  steel  imports
levelling  off  at 
levels,  with  further
reductions  in  exports  from  the  Community.

the  high  1997 

The  marked  improvement  in  steel  tube  manufacture  in
1997  produced  a  net  increase  in  production  of  around
10(cid:216)%  for  all  types  of  tube  combined,  although  the  figure
was  slightly  higher  for  seamless  tubes  (11,6(cid:216)%)  and
slightly  lower  for  small  welded  tubes  (8,9(cid:216)%).

A.(cid:217)Steel  tubes

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looks  very  strong,  even  though 

in  1996,  the  1997
Coming  after  fairly  poor  results 
performance 
imports
onto  the  Community  market  grew  to  11,2(cid:216)%  above  1996
levels  in  the  case  of  seamless  tubes  and  15,8(cid:216)%  for  small
welded  tubes.  Combined  consumption  of  tubes  of  all
types 
the  European  Union  rose  by  only  2,1(cid:216)%
however.  This  was  due  to  the  collapse  in  consumption  of
large  welded  tubes, 
intended  mainly  for  the  export
market  (down  by  48(cid:216)%),  since  consumption  of  seamless
tubes  and  of  small  welded  tubes  rose  by  6,9(cid:216)%  and
9,5(cid:216)%(cid:217)respectively.

in 

Exports  of  tubes  from  the  Community,  particularly  of
large  welded  tubes  which  are  traditionally  high,  rose
again  in  1997  by  almost  34(cid:216)%  in  volume  terms,  on  top  of
the  excellent  results  achieved  in  1996.

In  1998  a  further  pick(cid:220)up  in  activity  is  forecast  in  the
seamless  tubes  sector  in  the  first  half  of  the  year,  led
principally  by  export  sales  to  the  oil  and  gas  industries.

B.(cid:217)The  wire(cid:220)drawing  industry

In  1997  activity  in  the  wire(cid:220)drawing  industry  gradually
caught  up  after  a  rather  poor  1996,  with  across(cid:220)
the(cid:220)board  increases  both  in  demand,  particularly  from
third  countries,  and 
in  production.  Sales  of  drawn
products  even  exceeded  the  latest  forecasts  by  8(cid:216)%  in
1997,  as  export  sales  proved  far  higher  than  expected.

From  the  orders  already  taken,  production  can  be
expected  to  rise  by  a  further  3  to  4(cid:216)%  in  the  first  half  of
1998,  one  reason  being  strong  exports.

In  the  second  half  of  1998  activity  in  the  Community
wire(cid:220)drawing  industry  should  weaken  as  a  result  of  the
forecast  downturn 
in  external  demand  which  will
probably  not  be  fully  offset  by  the  revival  expected  in  the
building  industry  or  by  the  sound  general  investment
performance.

Against  this,  the  small  increase  in  domestic  consumption,
due  primarily  to  investment  in  the  mechanical  engin(cid:220)
imports,
eering 
some  of  which  have  been  rising  very  strongly  since  the
start  of  1998.

industry,  should  be 

largely  offset  by 

the  second  half  of 

to  buoyant
The  general  economic  conditions  point 
domestic  demand 
the  year.
in 
However,  exports  are  expected  to  fall,  particularly  on
the  OCTG  market,  even  without  cutbacks  in  the  oil
companies’  programmes.  Despite  the  risks  of  knock(cid:220)on
effects  from  the  crisis  in  Asia,  weldless  tube  production
could  settle  at  1997  levels,  which,  all  in  all,  were  highly
satisfactory.

Imports,  however,  will  continue  to  take  around  a  quarter
of  the  Community  market  in  this  field.

The  small  welded  tubes  market  should  see  a  little  growth
in  consumption  during  the  first  half  of  1998  due  to
firmer  demand  from  the  motor  and  building  industries.
In  the  second  half  of  the  year,  however,  it  cannot  be
ruled  out  that  the  marked  upward  trend  in  imports  could
hit  production  of  small  welded  tubes,  particularly 
if
export  sales  level  off.

However,  the  slowdown  expected  in  this  branch  in  the
second  half  of  1998  should  not  damage  the  results  for
the  year,  which  should  show  a  net  levelling(cid:220)off  or  slight
increase  in  consumption  of  drawn  wire,  compared  with
1997  levels,  sustained  by  the  steady  recovery  in  demand
from 
strong
demand  from  the  motor  industry,  which  is  still  heading
in 
right  direction.  Even  keeping  up  a  pace
comparable  to  1997  in  wire  drawing  can  be  considered
highly  satisfactory,  to  say  the  least.

industry  and  continuing 

the  building 

the 

After  fairly  poor  results  in  1996,  activity  in  the  general
drawing  industry  gained  pace  in  1997,  spurred  by  a  very
the
sharp 
Community.

from  carmakers 

in  demand 

increase 

in 

tangible
Consequently,  1997  will  have  brought  a 
recovery  in  this  sector,  with  sales  volumes  unexpectedly
up  by  at  least  10(cid:216)%  to  take  them  back  to  the  very  high
1995  figures.

The  first  half  of  1998  should  push  consumption  of  drawn
products  up  further  to  an  estimated  6(cid:216)%  above  the
figures  for  the  corresponding  half  of  1997,  as  demand
from  the  motor  industry  holds  firm.

large  welded  tubes 

The  situation  for 
is  particularly
healthy.  Prospects  are  excellent,  even  in  the  medium
term,  given  the  orders  taken  already,  most  of  them  for
the  export  market.  The  1998  results  for  large  welded
tubes  will  therefore  be  better  than  the  1997  figures,  in
terms  of  both  production  and  exports.

However,  a  slight  downturn  in  demand  could  follow  in
the  course  of  the  second  half  of  1998.  Taking  the  year  as
a  whole,  in  volume  terms  sales  of  drawn  products  will
probably  rise  by  a  further  3(cid:216)%  or  so  compared  with
1997,  which  itself  was  an  excellent  year.

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C.(cid:217)Cold(cid:220)rolling  and  forming

In  1997  the  cold(cid:220)rolling  industry  returned  its  best  results
for  decades.  Growth  in  this  sector  in  1997  unexpectedly
far  exceeded  the  5(cid:216)%  forecast  to  end  at  around  15(cid:216)%
above  the  poor  1996  performance.

The  greatest  progress  was  made  in  Germany,  Italy  and
France,  but  highly  positive  trends  were  recorded  in  the
United  Kingdom  and  Spain  too.

principally  to  more  sustained  demand  for  formed  sheet
for  roofing  for  industrial  buildings,  despite  the  stronger
competition  from  alternative  aluminium  products  more
widely  used  to  renovate  asbestos  cement  structures.

Given  the  excellent  results  in  1997,  keeping  activity  in
this  branch  in  1998  as  a  whole  at  a  level  comparable  to
the  previous  year  must,  however,  be  considered  satis(cid:220)
factory,  at  least.  In  any  event,  the  faster  pace  expected  in
the  building 
in  the  Union  could  stimulate
further  demand  for  wide  sections  in  the  future.

industry 

Demand  for  cold(cid:220)rolled  strip  was  even  firmer  in  the  first
few  months  of  this  year,  to  the  extent  that  80(cid:216)%  of
production  for  the  entire  year  is  already  accounted  for
by  the  orders  taken  in  the  first  quarter.

In  the  long(cid:220)products  forming  sector  too,  trends  in  1997
were  far  better  then  forecast.  Sales  volumes  picked  up
strongly  in  1997  and  largely  made  up  for  the  10(cid:216)%  drop
suffered  in  1996.

industry  and
The  growing  demand  from  the  motor 
makers  of  electrical  and  non(cid:220)electrical  machinery
combined  with  the  heavy  demand  for  exports  have
breathed  fresh  optimism 
into  the  cold(cid:220)rolling  sector
despite  the  competition  from  slit  strips,  particularly  from
imports  onto  the  Community  market.

In  the  first  part  of  1998  demand  continued  to  improve,
although  it  has  levelled  off  since  the  end  of  the  first
quarter.  The  forming  industry  depends  heavily  on  trends
in  the  building  industry,  in  both  renovation  and  new
starts,  and  has  been  trying  to  diversify  into  other  sectors
heading  in  the  right  direction  to  find  opportunities  for
lasting  growth.

Stocks  of  cold(cid:220)rolled  strip  held  by  producers  and  users  in
low.  By  contrast,  a  substantial
the  Community  are 
build(cid:220)up  of  raw  material  reserves  has  been  reported  in
the  cold(cid:220)rolling  industry  to  meet  the  need  to  cater  for
the  highly  promising  demand  trends.

Nevertheless  manufacturers  of  cold(cid:220)formed  products
seem  fairly  optimistic  about  prospects  for  the  second  half
of  1998  and  consider  the  levelling(cid:220)off  of  demand  at  the
very  high  levels  achieved  in  the  second  half  of  1997
highly  positive,  given 
long(cid:220)formed
that 
products  are  still  negligible  on  the  Community  market.

imports  of 

Consequently,  the  situation  in  the  cold(cid:220)rolling  sector  will
remain  excellent  throughout  the  second  half  and  for
1998  as  a  whole,  with  sales  up  by  around  10(cid:216)%,  even
compared  with  the  remarkably  good  volumes  in  1997.

The  wide(cid:220)products  forming  industry  reaped  the  benefits
of  the  brighter  economic  climate  in  1997,  despite  the
continuing  weakness  of  activity  in  the  building  industry,
which  is  still  by  far  the  leading  user  of  such  products.
Last  year  consumption  of  wide  sections,  particularly  of
sandwich  panels,  grew  strongly  and,  taken  as  a  whole,
even  surpassed  the  5(cid:216)%  estimate  made  at  the  end  of
1997.

In  the  first  half  of  1998  consumption  of  these  products
can  still  be  expected  to  be  2  to  3(cid:216)%  up  over  the  first  half
of  1997.  However,  the  drying(cid:220)up  of  new  orders  for
delivery  more  than  three  months  ahead,  particularly  for
in  sales
sandwich  panels,  suggests  a  small  downturn 
volumes  in  the  second  half.  As  a  result,  for  1998  as  a
whole  a 
in
levelling(cid:220)off  or,  at  best,  small 
comsumption  of  wide  sections  can  be  expected,  due

increase 

The  trade  regards  equalling  the  1997  results,  in  volume
and  price  terms, 
in  1998  as  thoroughly  acceptable,
particularly  in  anticipation  of  a  steady  improvement  in
the  building 
long
sections.

leading  consumer  of 

industry,  the 

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

inflation  remaining  under  control, 

the  economic  recovery  has  been  gaining
Although 
strength  in  every  European  Union  country  since  1997,
with 
interest  rates
keeping  low  and  employment  prospects  improving,  the
combined  effect  has  not  yet  made  any  clear  impact  on
any  activity  in  the  building  industry  in  the  European
Union  as  a  whole.

in  the  building
In  1997  the  variation 
industry  in  the  Community  as  a  whole  was  scarcely
higher  than  in  1996  in  volume  terms  despite  far  more
marked  growth  in  this  sector  in  various  Member  States.

in  production 

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behind 

improvement 

Since  the  end  of  1997  and  the  start  of  1998,  however,
the  benefits  of  the  economic  recovery  in  the  Community
are  becoming  more  apparent  in  the  building  industry  in
the  vast  majority  of  Member  States,  albeit  with  wide
lagging
variations  from  one  country  to  another  and 
somewhat 
economic
the 
conditions.  For  example,  development  prospects  in  the
building  industry  in  1998  remain  relatively  bright  in  the
the  Netherlands,
United  Kingdom,  Spain, 
Portugal,  Sweden  and  Belgium  in  particular.  In  France
the  industry  is  gradually  making  up  the  ground  lost  in
previous  years  but 
is  no  sign  of
improvement  yet  and  activity  in  this  sector  remains  very
sluggish,  despite  public  investment,  particularly  in  the
railways.

in  Germany  there 

Italy, 

in 

Nevertheless  activity  in  this  sector  will  intensify  once
Member  States  have  finished  the  clean(cid:220)up  of  their
finances  which  has  limited  public  investment  and  curbed
the  recovery  in  the  building  industry  in  particular  so  far.

In  the  case  of  house(cid:220)building,  the  situation  seems  quite
bright  in  the  United  Kingdom,  fuelled  by  investments  in
private  housing.  In  Spain  and  Italy,  the  trend  is  also  on
the  up,  thanks  to  renovation  programmes,  while 
in
France  there  are  also  signs  of  recovery  in  the  multi(cid:220)
storey  housing  sector.

In  Germany,  by  contrast,  the  tightening(cid:220)up  of  taxation,
inter  alia,  by 
inheritance  tax  burden,
coming  after  a  marked  contraction  in  new  housing  starts
in  the  west  of  the  country,  will  militate  against  the
recovery  expected  in  1998.

increasing  the 

the 

for  non(cid:220)residential  construction, 

As 
investments
planned  will  sustain  the  upward  trend  in  this  sector  in
the  United  Kingdom  and  Spain  in  1998.  In  Italy,  by
contrast,  there  will  be  a  slight  recession  in  this  activity,
following  the  10(cid:216)%  growth  achieved  in  1997  with  the
help  of  tax  relief,  whereas  in  France  the  increase  in
building  permits  granted  will  not  be  enough  to  avert  a
slight  downturn  in  construction.  And  there  will  be  an
even  greater  recession  in  this  industry  in  Germany,  due
to  falling  investment  in  the  new  L…nder  and  the  large
unoccupied  stock.

In  the  case  of  civil  engineering  projects,  after  five
consecutive  years  of  contraction,  the  tide  has  turned  in
Italy,  primarily  due  to  public  investment  in  the  south  of
the  country.  The  situation  is  similar  in  Spain,  after  two
consecutive  years  of  declining  activity.

2.2.3.(cid:217)The  motor  industry

For  years  demand  for  motor  vehicles  in  the  European
the
Union  has  been  picking  up,  as 
substantial 
in  registrations  of  new  vehicles
which  rose  by  a  combined  total  of  around  20(cid:216)%  between
1994  and  1997,  compared  with  the  1993  figures.

illustrated  by 

increases 

incentives  and  other 

Buoyed  by  the  economic  recovery,  greater  consumer
confidence,  a  less  wait(cid:220)and(cid:220)see  attitude  on  the  part  of
households, 
internal  factors,  the
motor  vehicle  market  has  made  great  strides,  with  regis(cid:220)
trations  up  6,4(cid:216)%  in  1996  and  again  by  4,8(cid:216)%  in  1997,
albeit  with  wide  variations  in  some  Member  States  as
support  schemes  have  been  launched  or  have  come  to  an
end.

these  excellent  results, 

Following 
the  motor  vehicle
market  in  the  Community  has  remained  on  the  up  since
the  start  of  1998.  However,  the  trend  has  been  far  more
marked  than  in  the  past,  with  new  registrations  up  by  an
average  of  12,3(cid:216)%  in  the  first  quarter,  with  spectacular
increases 
the  United
Kingdom  and  Spain  in  particular.  In  April  and  May,  the
pace  of  new  registrations  slowed  down  slightly,  giving  a
Community(cid:220)wide 
the  first  five
months  of  1998.

increase  of  8(cid:216)%  for 

Italy,  France, 

in  Germany, 

This  performance  is  attributable  to  the  combined  effect
of  the  internal  factors  mentioned,  plus  the  launch  of
several  new  models  on  the  market.  However,  the  motor
vehicle  market  in  the  Union  should  slow  down  tangibly
in  the  months  ahead,  with  registrations  for  the  year  as  a
whole  likely  to  be  around  2(cid:216)%  higher  than  in  1997.

Throughout  this  period  the  Community  motor  vehicle
industry  has  benefited  greatly  from  the  strong  domestic
demand  and  the  excellent  export  opportunities.  These
have  enabled  it  to  step  up  production  rates  but  not,
however,  to  shorten  delivery  times  for  certain  new
models.

This  indicates  intense  activity  throughout  1998  in  this
major  steel(cid:220)using  industry.

2.3.(cid:217)OUTLOOK  FOR  IMPORTS  AND  EXPORTS  OF

STEEL  PRODUCTS

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

The  situation  in  this  sector  is  gradually  settling  down  in
France,  still  showing  signs  of  slight  recession  in  Germany
and  could  deteriorate  further  in  the  United  Kingdom  if
the  decision  to  construct  the  Channel  Tunnel  Rail  Link
is  delayed  any  longer.

in  forwarding
The  delays  by  some  Member  States 
statistics  on  trade  in  steel  between  the  European  Union
and  third  countries  have  been  partly  reduced,  but  much
still  needs  to  be  done  in  this  respect.

C  233/8

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25.7.98

At  the  time  of  writing,  the  data  available  for  the
European  Union  as  a  whole  only  fully  covers  1997  and
the  first  quarter  of  1998.  Estimates  have
most  of 
therefore  been  made  for  a 
large  proportion  of  the
outstanding  data  for  the  first  six  months  of  1998  and  this
may  affect  the  accuracy  of  the  forecast  given  that  it  is
very  unclear  in  particular  whether  certain  trade  flows
will  be  affected  by  the  Asian  crisis.

following  the  shift  in  some  trade  flows  will  adversely
affect  Community  industry  exports.

Moreover,  since  the  beginning  of  1998,  there  has  been  a
concentration,  on  the  Italian  market  in  particular,  of
substantial  quantities  of 
third
countries,  producing  instability  capable  of  spreading  to
other  Community  markets.

from  various 

steel 

figures 

for  1997  as  a  whole  show 

The 
the
Community’s  steel  imports  increased  overall  by  17(cid:216)%,
though  more  substantial  rises  were  seen 
imports
of  long  products  (up  21(cid:216)%)  and  semi(cid:220)finished  products
(up  19(cid:216)%).

that 

in 

As  for  origins,  the  main  increases  were  from  the  Central
and  Eastern  European  countries,  the  republics  of  the
former  USSR,  and  the  former  Yugoslavia,  amounting  in
1997  to  a  total  of  9,6  million  tonnes,  about  67(cid:216)%  of  the
Community’s  total  steel  imports,  as  against  7,3  million
tonnes,  or  60(cid:216)%  of  imports,  in  1996.

Community  steel  exports,  however,  fell  by  15(cid:216)%  in  1997
compared  with  the  excellent  levels  seen  in  1996  due  to
internal  demand  during  the  year,  despite
increasing 
attractive  world  prices.

A  more  detailed  analysis  of  the  data  for  1997  as  a  whole,
however,  shows  that,  taken  together,  Community  steel
exports  to  the  Central  and  Eastern  European  countries,
the  CIS  and  the  former  Yugoslavia  rose  by  26(cid:216)%,  while
exports  to  Asia  fell  by  a  good  31(cid:216)%.  Nevertheless,
although  the  increase  in  Community  steel  exports  to  the
countries  of  the  first  region  is  only  about  400(cid:216)000  tonnes,
the  drop  in  exports  to  the  latter  region  is  expected  to
have  exceeded  2  million  tonnes.

The  crisis  in  south(cid:220)east  Asia  should  therefore  in  1997
only  have  produced  a  fall  in  Community  steel  exports  to
this  region  since 
the  Asian
imports  of  steel 
countries  fell  by  21(cid:216)%.

from 

The  impact  on  the  Community  market  of  the  shift  in  the
world  steel  trade  should  therefore  have  been  quite
modest  in  1997.

The  trends  outlined  on  the  basis  of  the  statistics  available
even  for  the  first  three  months  of  1998  point  to  a  62(cid:216)%
the  Community  market
into 
rise 
compared  with  the  same  three  months  in  1997  and  a
further  fall  in  Community  exports.

imports 

steel 

in 

The  upward  trend  in  demand  and  the  steady  rise  in  the
level  of  Community  prices  attracted  excess  supply  from
certain  third  countries,  pushing  up  imports,  while  the
need  to  meet  sustained  internal  demand  and  the  changes

in  the  rise  of  steel 

in  principle  see  a
The  second  half  of  1998  should 
imports  onto  the
slowing  down 
Community  market  given 
is
forecast  to  fall  and  that  prices  are  expected  to  level  off
or  even  consolidate  slightly.  For  1998  as  a  whole,  steel
imports  into  the  Community  are  likely  to  be  significantly
higher  than  in  1997.

that  domestic  demand 

Steel  exports  from  the  Community,  on  the  other  hand,
will  continue  to  fall  during  the  second  half  of  1998
because  of  the  need  to  meet  domestic  demand  and  the
keener  world  market  competition.  For  1998  as  a  whole,
these  exports  will  therefore  decline  in  net  terms,  though
remaining  at  very  satisfactory  levels.

the  European  Union, 

inside  and  outside 
following 

Considering  the  expected  growth  in  the  international
steel  trade  and  the  forecast  decrease  in  opportunities
both 
in
into  service  of  new
the  entry 
particular 
capacity  in  regions  short  of  steel,  the  Commission  would
again  urge  all  parties  concerned  to  be  cautious,  especially
in  terms  of 
industrial  and  commercial  strategies,  to
ensure  that  the  healthy  state  of  the  Community  market,
which  has  been  achieved  gradually  and,  let  it  be  said,  at
the  cost  of  great  sacrifices  in  financial  terms  and  jobs,
can  be  maintained  over  time.

for 

to  use 

its  part, 

is  prepared,  where
The  Commission, 
necessary, 
the  existing  commercial  policy
instruments  in  order  to  ensure  that  the  fairly  healthy
state  of  the  Community  steel  market  is  not  adversely
affected  by  the  actions  of  certain  exporters  to  the  EU
contrary  to  the  rules  of  international  trade.

2.3.2.(cid:217)The  world  economy  in  1998

After  peaking  between  the  latter  part  of  1997  and  the
early  part  of  1998,  the  word  economy  looks  set  to  slow
down  gradually  in  the  wake  of  the  Asian  crisis  and  the
slower  growth  in  the  USA,  though  the  general  upturn  in
Europe  partly  makes  up  for  this.

The  Community  will  therefore  provide  the  main  thrust
international
behind  world  growth, 

even 

the 

if 

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environment  is  not  as  conducive  as  in  1996/97.  The
USA,  however,  under  growing  direct  and 
indirect
pressure  from  the  Asian  crisis,  should  see  its  economic
cycle  slow  down  further,  even  if  the  crisis  to  some  extent
helps  curb  inflation.  Given  the  changes  needed  in  various
Asian  countries  which  are  in  recession,  Asia  is  likely  to
see  a  considerable  fall  in  its  economic  activity,  despite
the  stability  factor  provided  by  the  Chinese  economy  and
very  slight  growth  in  Japan.

In  the  world  steel  market,  both  demand  and  production
are  expected  to  be  slightly  lower  than  in  1997.  Much
bigger  changes  are,  however,  expected  in  trade  between
one  geographical  region  and  another  due  to  the  shift  in
some  trade  flows  following  the  Asian  crisis  and  the
bringing  into  operation  of  new  capacity,  in  particular  in
regions  short  of  steel.

2.3.2.1.(cid:217)The  United  States  of  America

The  US  economy  should  see  a  gradual  fall  in  growth
and,  for  1998,  its  growth  rate  is  expected  to  be  2,5(cid:216)%  as
against  3,8(cid:216)%  in  1997.

However,  investment,  vehicle  production  and  building  in
general  will  remain  strong  and  continue  to  play  an
important  part  in  the  growth  expected  this  year.

Steel  comsumption  therefore  looks  set  to  rise,  though  the
forecast  increase  in  production,  in  particular  now  that
new  capacity  has  been  brought 
into  service,  should
reduce  the  need  for  imports  of  steel  products.

There  is  also  some  likelihood  that  the  strength  of  the
dollar,  which  is  having  a  considerable  impact  on  surplus
international  supply  seeking  new  outlets  following  the
events  in  Asia,  will  put  further  pressure  on  the  USA’s
trade  deficit  with  some  countries  at  the  expense  of
Community  steel  exports  to  that  market.

2.3.2.2.(cid:217)Economic  situation  in  Japan

The  Japanese  economy  is  expected  to  see  relatively  low
growth  of  between  0,5  and  1(cid:216)%  again  in  1998,  which  is
likely  to  further  increase  its  trade  surplus.

There  is  a  clear  loss  of  confidence  over  the  country’s
in  broadly  export(cid:220)driven
economic  prospects,  except 

industries,  since  there  are  still  no  signs  of  an  upturn  in
investment  and  domestic  consumption.

In  the  steel  sector,  the  weakness  of  domestic  demand
and  the  reduced  sales  opportunities  in  the  Asian  region
could,  despite  the  fall  in  steel  production,  undoubtedly
increase  the  Japanese  steel  on  the  world  market.

2.3.2.3.(cid:217)The  economies  of  China  and  south(cid:220)east  Asia

Growth  rates  in  south(cid:220)east  Asia  should  be  considerably
lower  in  1998,  with  more  or  less  marked  variations  from
one  country  to  another.  Painful  but  necessary  changes
are  being  made  to  cope  with  the  crisis.

In  the  steel  sector,  there  should  be  a  considerable  fall  in
consumption 
in
this  year  and  a  very 
production.  On  the  trade  front,  however,  imports  are
likely  to  fall  considerably.

slight  rise 

to  control  and  modernisation  by 

Responding 
the
government,  the  Chinese  economy  is  still  going  through
a  buoyant  phase,  even  though  the  stability  of  the  yuan  is
uncertain.  Its  growth  of  about  9(cid:216)%  in  1997  looks  likely
to  fall  slightly  in  1998  to  8(cid:216)%,  the  mainstays  still  being
investment 
capital  goods.  Steel
consumption  in  China  is  expected  to  rise  again  this  year,
along  with  production,  so  the  country’s  steel  shortage
will  change  very  little.

in  building 

and 

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

the  economies  of  Latin  America  are 

still
All  of 
developing  soundly,  even  though  the  Asian  crisis  should
cause  exports  to  fall  in  one  country  or  another.  The
average  growth  of  the  countries  in  this  region  in  1998
will  nevertheless  be  in  the  order  of  3  to  4(cid:216)%.

Steel  consumption  in  these  countries  should  rise  by  3(cid:216)%
in  1993  to  about  28  million  tonnes.

The  events  in  Asia  should  lead  to  a  decrease  in  steel
exports  from  the  Latin  American  countries,  while  imports
should  increase  sharply,  reducing  the  trade  surplus  of  all
the  countries  in  this  region  this  year  to  about  8  million
tonnes,  5(cid:216)%  down  on  1997.

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2.3.2.5.(cid:217)Situation  and  prospects  in  the  Central  and  Eastern

European  countries  and  the  republics  of  the  CIS

the  Central  and  Eastern
The  economic  climate  of 
European  countries  is  clearly  improving  considerably  and
the  upturn  which  began  in  1994  has,  in  terms  of  growth,
constantly  boosted  GNP  since  1996.

market,  even  though  it  has  been  possible  to  repeat  the
first  quarter’s  prices  and  in  some  cases  even  increase
them  for  deliveries  during  the  second  quarter.  The
announced  arrival  of  a  more  abundant  supply  at  low
prices  as  a  direct  and/or  indirect  result  of  the  events  in
Asia  could  well  reverse  the  trend  in  the  prices  of  flat
products  in  the  months  ahead.

For  steel,  the  shrinkage  in  the  local  markets,  given  the
broad  surplus  in  steel  production,  has  made  it  necessary
to  look  for  markets  abroad.

In  the  second  half  of  1998,  even  the  forecast  increase  in
domestic  consumption  will  not  be  enough  to  absorb  the
growth  in  production,  and  the  loss  of  one  or  other
foreign  market  may  therefore  lead  to  a  larger  proportion
of  the  surplus  steel  supply  of  the  Central  and  Eastern
European  countries  being  diverted  to  the  Community.

The  economic  situation 
in  Russia  has  been  slowly
improving  since  the  introduction  of  the  reforms  and  the
country’s  growth  is  set  to  increase  further  in  1998,  even
if  the  rate  is  not  likely  to  exceed  1(cid:216)%.

The  consumption  of  long  products  is  increasing  in  the
European  Union  together  with  the  rise  in  investment.
This  encouraging  domestic  situation  does  not,  however,
make  up  for  the  losses  caused  by  the  fall  in  export
opportunities.  As  with  flat  products,  there  is  still  some
pressure  on  prices,  especially  since  scrap  rates  are  already
falling.  The  slowdown  in  exports  and  the  rising  trend  of
imports  and  stocks  are  therefore  not  factors  which  will
help  prices  to  stabilise  firmly  in  this  sector.  Furthermore,
some  price  decreases  have  already  been  seen  for  concrete
reinforcing  bars  and  wire  rod  for  wire  mesh,  while  the
prices  of  other  products  are  merely  stabilising  at  the
moment.

2.5.(cid:217)TRENDS  BY  PRODUCT

is
industry,  steel  production 
For  the  steel 
expected  to  rise  in  1998,  after  falling  in  1997,  and
domestic  consumption  should  grow  by  about  2(cid:216)%.

in  Russia 

Flat products

-(cid:217)hot(cid:220)rolled  coil

For  trade  in  steel,  Russian  exports  seem  likely  to  fall
slightly  in  1998  since  the  large  quantities  of  semi(cid:220)finished
products  exported  in  1997,  in  particular  to  the  Asian
countries,  will  be  more  difficult  to  place  with  other
buyers.

The  economic  situation  in  Ukraine  still  shows  no  signs  of
improving  and,  in  1997,  GDP  fell  by  3(cid:216)%.

For  steel,  given  the  very  low  level  of  domestic  demand
and  the  poorer  outlook  for  exports,  production  is  forcast
to  fall  in  1998.

2.4.(cid:217)PRICE  TRENDS

last  few
Following  the  gradual  rises  seen  since  the 
months  of  1996,  the  prices  of  flat  products  are  now
under  a  certain  amount  of  pressure  in  most  European
Union  countries.  Although  domestic  demand  has  held  up
well,  the  signs  are  increasingly  clear  that  any  changes  in
the  prices  of  these  products  will  be  rather  sluggish  during
the  second  half  of  1998.  Although 
in
imports  from  Asia  can  be  discerned  at  the  moment,
except  for  the  concentration  referred  to  in  the  Italian
market,  the  Community  industry  is  still  benefiting  less
from  export  opportunities  than  in  the  past.  Furthermore,
the 
imports  will
some 
undoubtedly  have  an  adverse  effect  on  the  flat  products

significant  rise 

little  change 

low(cid:220)cost 

in 

Demand  from  the  main  consuming  sectors  is  still  satis(cid:220)
factory,  stocks  are  at  a  normal  level  and  deliveries  are
stabilising  on  an  upward  trend.  However,  orders  seem  to
be  falling  slightly  compared  with  the  end  of  1997  and  the
early  part  of  1998  due  to  significantly  higher  imports
from  third  countries.  This  situation  is  probably  the  result
of  a  shift  in  some  trade  flows  to  European  markets,  but
it  could  put  domestic  price  stability  at  risk  if  it  worsens
during  the  next  few  months.

-(cid:217)cold(cid:220)rolled  sheet

Business  in  the  main  consuming  sectors  such  as  the
motor  industry  and  tube  manufacture  is  very  sustained
and  demand  for  steel  remains  at  a  very  good  level.
Stocks  are  perceptibly  rising,  though  without  giving  the
slightest  cause  for  concern  at  the  moment.  However,  the
sharp  rise  in  imports,  in  particular  to  the  Italian  and
Spanish  markets,  and 
the  announcement  of  greater
volumes  on  the  entire  Community  market  could  push
prices  down  during  the  second  half  of  1998.

-(cid:217)coated  sheet

The  situation  for  galvanised  sheet  has  been  exceptional
for  a  number  of  months  due  to  high  demand  from  the

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motor  industry  and  increasingly  from  the  building  sector.
Despite  new  capacity  recently  having  been  put 
into
operation  and  the  very  high  levels  of  use  of  production
tools,  the  market  supply  of  these  products  is  still  inad(cid:220)
equate.

and  limited  opportunities  for  export  sales.  The  prices  of
concrete  reinforcing  bars  are  therefore  falling  again,
even  though  the  rates  for  scrap  are  also  falling  at  the
same  time.

Electrogalvanised  sheet  is  in  much  the  same  situation  as
galvanised  sheet,  but  the  drop  in  exports  to  south(cid:220)east
Asia  and  the  forecast  increase  in  imports  could  upset  the
prices  of  these  products  during  the  second  half  of  1998.

-(cid:217)quarto  plate

These  products  are  currently  profiting  from  a  very
healthy  situation  on  both  the  European  market  and  the
world  market.  Strong  demand,  especially  from  the  large
welded  tubes  sector,  and  the  current  stability  of  the
dollar  continue  to  allow  for  a  measure  of  optimism  as
regards  future  changes  in  this  field,  at  least  until  the  end
of  the  year.  This  sound  situation  could  nevertheless  to
some  extent  be  endangered  by  an  increase  in  certain
imports  from  third  countries.

Long products

-(cid:217)heavy  sections  and  beams

Thanks  to  the  good  weather  throughout  the  winter,
demand  for  these  products  was  very  high  until  the  first
few  months  of  the  year.  Nevertheless,  merchant  stocks
are  tending  to  build  up  and  this,  together  with  the
constant  rise  in  imports,  could  push  down  the  prices  of
beams  during  the  second  half  of  the  year.

-(cid:217)wire  rod

in 

trade 

The  traditional  worldwide  flows  of  low(cid:220)quality  steel,
such  as  wire  for  welded  mesh,  are  changing  in  some
ways,  in  particular  as  regards  products  from  the  Central
and  Eastern  European  countries  and  Turkey.  These
changes 
the  Community
industry  and  supply  on  the  European  market  is  currently
in  surplus,  which  is  already  depressing  prices  to  some
extent.  For  higher(cid:220)grade  steel,  the  situation  is  far  better
thanks  to  sustained  demand  from  the  motor  industry  and
the  mechanical  engineering  industry  and  the  demand  for
exports.

indirectly  affect 

-(cid:217)Concrete  reinforcing  bars

The  recently  seen  improvement  in  the  balance  on  the
European  market  between  supply  and  demand 
for
concrete  reinforcing  bars  is  currently  impaired  by  the
combination  of  a  slowdown  in  demand,  a  rise  in  imports

-(cid:217)Merchant  bars

Thanks  to  a  lower  level  of  supply  at  the  beginning  of  the
year,  these  products  are  in  a  stable,  balanced  situation  as
regards  both  stocks  and  prices.  In  general  terms,  the
increase  in  investment  in  the  European  Union  is  still  a
in  demand  for
positive  factor  for  the  expected  rise 
merchant  bars  and  prices  during  the  second  half  of  the
year.

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

OF  1998  AND  1998  AS  A  WHOLE

Exports,  still  very  sustained  again  in  1997  despite  the
events  in  Asia,  have  made  a  major  contribution  to  the
growth  of  the  Community  economy,  which  is  set  to
benefit  further  still  from  better  changes 
in  various
domestic  factors.

The  strength  of  the  economic  upturn  in  the  European
Union,  which  has  boosted  business  in  the  main  steel(cid:220)
consuming 
Community
consumption  during  the  first  half  of  1998  again  quite
significantly  and  this  has  largely  made  up  for  the  slump
in  export  orders.

industries, 

pushed 

up 

improvement 

The  gradual 
in  the  conditions  on  the
Community  steel  market  since  the  end  of  1996  has,
however,  increased  imports  very  significantly,  especially
since  the  beginning  of  1998,  and  this  has  to  some  extent
led  to  stockpiling  by  some  users  in  particular.

Sectoral  activities  are  forecast  to  stabilise  to  some  extent
during  the  second  half  of  1998,  leading  to  a  slight  fall  in
steel  consumption  as  compared  with  the  excellent  levels
seen  in  the  second  half  of  1997,  so  the  performance  for
the  year  as  a  whole  should  be  slightly  down  on  the  first
half  of  1998.

period 

The  trends  outlined  therefore  suggest  that,  for  the
second  half  of  1998  (as  indicated  in  tables),  real  steel
consumption  will  be  73  million  tonnes,  2(cid:216)%  down  on  the
corresponding 
apparent
in 
consumption  should  fall  by  about  0,6(cid:216)%  to  75  million
tonnes.  With 
increase
significantly  and  steel  exports  to  fall  by  about  11,8(cid:216)%,
equilibrium  steel  production  is  forecast  to  be  78  million
tonnes,  a  fall  of  2,5(cid:216)%  on  the  figure  for  the  second  half
of  1997.

imports  also 

1997,  while 

expected 

to 

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25.7.98

the 

second,  real 

those  expected  during 

Given  the  changes  seen  during  the  first  half  of  the  year
and 
steel
consumption  for  1998  as  a  whole  is  forecast  to  be  155
million  tonnes  and  apparent  consumption  158  million
tonnes,  increases  of  3,5(cid:216)%  and  4,8(cid:216)%  respectively  on  the
1997  levels.  Community  imports  should  rise  again  by
fall  again  by  12,1(cid:216)%.  Steel
25,9(cid:216)%  and  exports 
production 
therefore  estimated  at
162(cid:217)million  tonnes,  an  increase  of  1,6(cid:216)%  on  1997.

the  Union 

in 

is 

3. RAW  MATERIALS

3.1.(cid:217)THE  SCRAP  MARKET

by  increasing  the  quality  of  pellets  and  the  production
capacity  and  improving  the  routing  of  mining  products.

3.3.(cid:217)FERRO(cid:220)ALLOYS

The  sustained  demand  for  ferro(cid:220)alloys  seen  during  the
second  half  of  1997  in  the  European  Union  stabilised
throughout  the  first  half  of  1998.  However,  a  more
pronounced  increase  in  supply  over  demand  is  putting
some  pressure  on  prices,  as  has  already  been  seen  for
ferro(cid:220)silicon  and  ferro(cid:220)silico(cid:220)manganese.

For  the  second  half  of  1998,  the  market  trend  in  ferro(cid:220)
alloys  points  to  a  relative  balance  between  supply  and
demand  and  prices  are  therefore  not  expected  to  vary
widely.

The  demand  for  scrap  in  Europe  and  the  United  States  is
still  relatively  firm,  particularly  because  of  the  increase  in
electrical  steel  production.

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

Some  unusual  flows  in  the  international  trade  in  scrap,
some
with  considerable  quantities  concentrated 
markets,  have  nevertheless  gradually  produced  a
temporary  supply  surplus,  even  in  places  where  demand
was  very  sustained.  This  is  a  direct  or  indirect  result  of
the  fall  in  demand  for  scrap  from  the  Asian  countries
and  has  caused  the  price  of  scrap  to  fall  in  nearly  all
parts  of  the  world.

in 

During  the  next  few  months,  the  international  scrap
market  is  not  expected  to  see  any  particular  changes
since  the  supply  of  this  raw  material  adapts  quickly  to
changes  in  demand.  The  trend  in  scrap  prices  is  therefore
not  forecast  to  change  in  the  very  short  term.

3.2.(cid:217)IRON  ORE

The  substantial  rise  in  the  world  steel  production  and  the
greater  trend  towards  the  use  of  pellets  underlie  the
record  level  of  iron  ore  production  in  1997.  Compared
with  1996,  the  volumes  of  commercial  trade  in  this  raw
material  have  therefore  risen  substantially.  The  extent  of
this  has  been  such  that,  for  some  time,  the  need  to  bring
supply  into  line  with  demand  has  led  to  delivery  delays,
due  especially  to  routing  difficulties.

During  the  first  half  of  1998,  demand  for  iron  ore  was
firm  and  prices  rose  slightly,  even  if  a  small  fall  is
expected  for  the  year  as  a  whole  due  to  the  forecast  fall
in  consumption  in  some  Asian  countries.

In  1997,  tin  production  rose  slightly  compared  with
1996,  while  apparent  consumption  of  this  metal  remained
virtually  unchanged  during  this  period.

The  forecasts  are  for  demand  to  remain  strong  for  the
rest  of  the  year,  despite  the  Asian  crisis,  but  thanks  to  a
healthy  economic 
in  Europe  and  North
America.

situation 

Since  January,  the  price  of  this  raw  material  for  the  steel
industry  has  risen  by  about  12(cid:216)%  and,  this  year,  tin  will
be  one  of  the  few  metals  which  sees  its  price  increase.

For  1998,  world  consumption  of  zinc,  which  will  be
similar  to  the  level  in  1997,  is  forecast  to  rise  very
slightly  by  0,6(cid:216)%  to  around  7,8  million  tonnes,  while  its
performance  on 
the  Community  market  should  be
slightly  better.

World  production  of  zinc  could  see  a  rise  of  3,3(cid:216)%  in
1998.  Nevertheless,  following  the  record  levels  achieved
in  1997,  a  big  fall  in  exports  from  the  Eastern  countries,
in  particular  China,  should  help  to  reduce  the  surplus
supply  on  the  Western  market.

Zinc  prices,  which  have  been  somewhat  volatile  after
peaking  in  August  1997,  are  note  expected  to  vary  to  any
great  extent  during  the  second  half  of  1998,  and  even  a
slight  fall  is  not  unlikely  seeing  that  the  supply  on  the
market  is  forecast  to  rise  due  to  the  trend  towards  stock
reduction.

Nevertheless,  given 
for  market
supplies,  producers  are  continuing  to  try  to  adjust  supply

the  growing  needs 

The  latest  revised  figures  of  the  International  Nickel
Group  point,  for  1997,  to  an  increase  of  5,7(cid:216)%  in  nickel
in
production  and  7,2(cid:216)% 

in  consumption.  The  rise 

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consumption  is  due  mainly  to  the  sharp  increase  in  the
production  of  stainless  steel.

The  fall  in  consumption  in  Asia  should  be  made  up  for
by  higher  consumption  in  the  USA  and  Europe  and,  up
to  the  end  of  1998,  the  forecast  is  therefore  for  supply
and  demand  to  be  relatively  balanced.  Nickel  prices  will
continue  to  fall  slightly  until  the  end  of  the  year,  even
though  exports  from  Russia  are  forecast  to  decrease.

4.  EMPLOYMENT

The  steel  industry  is  going  through  a  sound  period,
thanks  to  the  healthy  economy,  and  the  effects  of  this
can  also  be  seen  on  employment,  where  there  have  been
fewer  job  cuts  than  in  the  past.

A  recent  forecast  puts  net  job  losses  at  around  8(cid:216)000  in
1998.  This  figure  reflects  the  relative  stability  seen  in
1997  and  shows  how  much  the  market  situation  has
improved  compared  with  the  crisis  years  of  1992  to  1996,
when  on  average  up  to  26(cid:216)000  workers  a  year  lost  their
jobs  throughout  the  Union.

These  cuts  could  nevertheless  be  higher  still  in  Germany
due  to  mergers  and  rationalisation,  in  Spain  where  the
most  recent  restructuring  plan  is  coming  to  an  end  and
in  the  United  Kingdom  for  a  number  of  reasons.

Company  mergers  and  new  technological  applications
could  therefore  lead  to  further  adjustments  to  the  steel
industry  workforce  in  the  future,  which  will  require  new
support  schemes.

In  the  past,  workforce  adjustments  have  been  made  by
giving  early  retirement,  which  has  enabled  companies  to
make  deep,  swift  cuts  in  staff.  However,  less  use  is  now
being  made  of  such  schemes.

Over  the  years,  early  retirement,  a  relatively  easy  way  of
taking  workers  out  of  the  labour  market,  has  proved
very  costly.  In  addition,  the  companies’  age  pyramid  now
no  longer  allows  the  workforce  to  be  quickly  reduced  by
retiring  the  oldest  workers  and  so  some  Member  States
will  be  resorting  more  frequently  to  alternative  schemes.

Following  France’s  experience,  some  governments  are
therefore  introducing  new  schemes  such  as  "phased  early
retirement’  to  enable  companies  to  reduce  the  total
number  of  working  hours.  This  means 
the
knowledge  and  skills  of  the  older  workers  can  be
retained  without  having  to  dismiss  younger  workers  who
might  not  necessarily  be  able  to  find  another  job  quickly
at  a  time  of  high  unemployment.

that 

The  Commission  will  continue  to  apply  its  social  policy
to  workers  in  the  industry  who  continue  to  be  affected
by  restructuring  or  closures.  Except  for  training  and  self(cid:220)
employment  schemes,  which  may  be  cofinanced  by  the
in  bilateral
ESF,  all  other  measures  provided 
agreements  on  aid  for  retraining  under  Article  56(2)(b)
of  the  ECSC  Treaty  will  therefore  be  maintained  until
the  Treaty  expires  in  2002.

for 

For  1998,  the  funds  in  the  ECSC’s  budget  for  traditional
aid  for  retraining  in  the  coal  and  steel  industries  amount
to  ECU  70  million.

C  233/14

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25.7.98

Table  1

Crude  steel  supply  and  demand(cid:216)(˛)

EUR(cid:220)15

Apparent  user
consumption  (a)

Change  in  merchant
stocks  (b)

Apparent  consumption

Imports  EUR(cid:220)15

Exports  EUR(cid:220)15

Change  in  producer  stocks

+(cid:216)5,0

Production

155,7

1995

1996

142,0

139,4

+(cid:216)3,0

145,0

17,0

22,7

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

135,4

12,2

28,0

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

147,2

Outturn

First  half
1997

Second  half
1997
(R1)

1997
(R1)

Estimate

First  half
1998
(R2)

(million  tonnes)

Forecast

Second  half
1998

1998

75,3

0,0

75,3

6,9

12,0

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

79,4

74,5

149,8

82,0

73,0

155,0

+(cid:216)1,0

75,5

7,4

11,9

0,0

80,0

+(cid:216)1,0

150,8

14,3

23,9

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

159,4

+(cid:216)1,0

+(cid:216)2,0

83,0

10,0

10,5

75,0

8,0

10,5

+(cid:216)3,0

158,0

18,0

21,0

+(cid:216)0,5

+(cid:216)0,5

+(cid:216)1,0

84,0

78,0

162,0

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

This  aggregate  is  close  to  actual  consumption.  It  includes  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  UK  and  Benelux.

Table  2

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

(not  seasonally  adjusted)

Period

Sector

Manufacture  of  metal  articles

Mechanical  engineering

Electrical  engineering

Motor  vehicles

Other  means  of  transport

Building/civil  engineering

Second  half  1998
(second  half  1997(cid:216)=(cid:216)100)

Second  half  1997
(second  half  1996(cid:216)=(cid:216)100)

1998
(1997(cid:216)=(cid:216)100)

1997
(1996(cid:216)=(cid:216)100)

104,8

104,1

103,8

104,0

107,7

101,2

105,7

106,6

107,1

108,4

111,7

99,6

103,8

105,9

104,7

105,1

106,3

100,8

104,6

105,1

105,7

106,8

111,9

100,1

(˛)(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.

Source:  Commission  data.

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Table  2(a)

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

II/1998

1998

II/1998

1998

II/1998

1998

II/1998

1998

II/1998

1998

Manufacture  of  metal
articles

103,0

104,0

102,8

104,3

Mechanical  engineering

105,0

106,0

101,9

104,8

Electrical  engineering

104,3

105,0

101,9

102,8

Motor  vehicles

104,9

105,0

102,8

104,7

Other  means  of  transport

101,0

101,0

109,1

109,1

Building/civil  engineering

100,0

99,5

101,0

101,0

-

-

-

-

-

-

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

first  column,  activity  indicator  second  half  1998  (second  half  1997(cid:216)=(cid:216)100),
second  column,  activity  indicator  1998  (1997(cid:216)=(cid:216)100).

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

101,0

111,5

110,2

105,0

112,4

103,1

Table  3

Changes  in  the  numbers  employed  in  the  steel  industry

(including  apprentices)

Number  of  employees
(in  ’000)

(Reference  month)

(Most  recent  month)(cid:216)(˛)

12,7  (December  1996)

22,6  (December  1996)

1,2  (December  1996)

82,8  (February  1997)

2,0  (December  1996)

23,0  (December  1996)

38,1  (January  1997)

7,3  (December  1996)

0,4  (December  1996)

12,5  (December  1997)

20,4  (December  1997)

1,2  (December  1997)

80,6  (February  1998)

2,1  (December  1997)

22,8  (December  1997)

38,5  (January  1998)

7,1  (December  1997)

0,4  (December  1997)

37,5  (December  1996)

37,8  (December  1997)

4,9  (January  1997)

12,2  (December  1996)

2,2  (December  1996)

13,6  (December  1996)

36,5  (December  1996)

4,3  (January  1998)

12,1  (December  1997)

2,0  (December  1997)

13,6  (December  1997)

35,2  (December  1997)

299,6  (December  1996)

291,1  (December  1997)

Change
(%)

(cid:134)(cid:216)1,6

(cid:134)(cid:216)9,7

0,0

(cid:134)(cid:216)2,7

+(cid:216)5,0

(cid:134)(cid:216)0,9

(cid:216)1,0

(cid:134)(cid:216)2,7

0,0

+(cid:216)0,8

(cid:134)(cid:216)12,2

(cid:134)(cid:216)0,8

(cid:134)(cid:216)9,1

(cid:216)0,0

(cid:134)(cid:216)3,6

(cid:134)(cid:216)2,8

Member  State

Austria

Belgium

Denmark

Germany

Greece

Spain

France

Finland

Ireland

Italy

Luxembourg

Netherlands

Portugal

Sweden

United  Kingdom

EUR(cid:220)15(cid:216)(ˇ)

Source:  Eurostat.

(˛)(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.