Information from the Commission - Forward programme for steel for the first half of 1999 and for 1999 as a whole
Date: 1999-01-29
Institutions: European Commission
Subjects: economic forecasting, iron and steel industry, steel

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29.1.1999

FORWARD  PROGRAMME  FOR  STEEL  FOR  THE  FIRST  HALF  OF  1999  AND  FOR
1999  AS  A  WHOLE

(1999/C  24/02)

(Text  with  EEA  relevance)

INTRODUCTION

the  Union  against  certain  commercial  practices  which
may  further  worsen  the  precarious  situation  of  the
Community  steel  market.

The  effects  of  the  deteriorating  international  climate  on
the  Community  economy,  first  perceptible  in  1998,  will
probably  become  more  tangible  in  1999  as  dwindling
export  prospects  depress  investment  and  even  internal
demand.

After  gaining  strength  in  1997  and  the  first  part  of  1998,
economic  growth  in  the  Union  therefore  seems  to  be
about  to  slow  down  appreciably  in  1999,  setting  the  pace
for  industrial  activity  in  particular  and,  consequently,
steel  consumption.

The  significant  speeding(cid:220)up  of  activity  in  the  leading
steel(cid:220)using  sectors  up  to  spring  1998  laid  the  foundation
for  the  remarkable  upswing  in  demand  which,  in  turn,
triggered  a  spectacular 
imports  onto  the
Community’s  extremely  attractive  steel  market.

increase 

in 

However,  the  steady  deterioration  in  conditions  on  the
market  in  the  course  of  the  year,  as  a  result  of  the
destabilising  effect  of 
the  glut  of  outside  supplies,
provoked  a  collapse  in  steel  prices.

The  forecast  deceleration  in  activity  in  the  steel(cid:220)using
sectors  in  1999,  bound  up  with  the  general  economic
slowdown,  therefore  suggests  weaker  demand  for  steel
on  a  Community  market  which  has  lost  some  of  its
attraction  in  the  mean  time.  Nevertheless,  the  market
could  remain  under  pressure 
surplus  outside
supplies  forced  to  seek  an  outlet  at  a  time  when  export
prospects  are  shrinking.

from 

Given  the  risks  of  further  deterioration  of  both  the
Community  and  the  world  steel  market  and  with  no
prospect  of  any  rapid  improvement  in  the  situation  in  the
areas  hardest  hit  by  the  crisis,  the  Commission  calls  on
all  concerned  to  adopt  behaviour  commensurate  with
realities  on  the  steel  market  today  in  order  to  restore
long(cid:220)term  stability  as  soon  as  possible.

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

in  the 

The  economic  recovery  which  set  in  the  European  Union
in  1997  was  strong  enough  to  withstand  the  deterio(cid:220)
international  climate.  As  a  result,  the
ration 
Commission’s  autumn  forecast  of  GDP  growth  of  2,9(cid:216)%
in  the  EU  in  1998  even  marks  a  slight  improvement  (cid:220)  up
0,1(cid:216)%  over  the  previous  (spring  1998)  estimate.

This  growth  was  sustained  more  strongly  than  expected
by  internal  demand  which  took  over  from  exports  and
offset  the  decreasing  contribution  by  external  trade  as  it
fell  into  deficit  as  a  result  of  the  deterioration  in  the
international  economy.

However,  although  the  Commission’s  previous  estimate
pointed  to  faster  growth  in  1999,  the  autumn  forecast
now  expects  a  slowdown  in  activity.  GDP  growth  in  the
EU  is  expected  to  be  limited  to  2,4(cid:216)%  in  1999,  half  a
percentage  point  down  on  the  previous  forecast,  due  to
events  on  the  international  scene.

solid.  Conditions  of 

Nevertheless  the  foundations  on  the  domestic  market  are
still  undoubtedly 
supply  are
excellent,  the  return  on  investment  is  improving  and
interest  rates  and  inflation  are  unprecedentedly  low.  And
the  impending  introduction  of  the  euro  at  the  start  of
1999  is  an  added  stabilising  factor.

Despite  these  sound  foundations,  the  deteriorating  inter(cid:220)
national  climate  is  likely  to  affect  not  only  the  external
contribution  in  1999  but  also  internal  demand  and,  in
particular,  investment  in  response  to  lower  demand  for
exports.

For 
its  part,  the  Commission  will  ensure  that  the
behaviour  of  all  parties  concerned  keeps  within  the  rules
of  international  trade.  It  should  be  pointed  out  that  the
EU  has  commercial  policy  instruments  which  may  be
used  in  accordance  with  the  multilateral  rules,  to  protect

Nevertheless  investment  is  expected  to  continue  to  grow
strongly,  by  4,6(cid:216)%,  while  private  consumption,  boosted
by  high  consumer  confidence  and  the  improvement  on
the  labour  market,  is  expected  to  be  up  by  2,5(cid:216)%.

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Inflation  should  remain  low  with  some  improvement  in
the  trend  compared  with  the  previous  forecast,  taking
the  rate  down  to  around  1,7(cid:216)%  for  the  Union  as  a  whole
in  1999  and  1,6(cid:216)%  for  the  eleven  countries  in  the  euro
zone.

The  activity  trends  expected  in  the  steel(cid:220)using  sectors  in
1999  will  undoubtedly  lead  to  stabilisation  of  demand  for
steel.  Consequently,  given  the  difficulty  of  exporting  on
a  severely  disrupted  world  market,  steel  production  in
the  Community  should  be  down  on  1998,  despite  falling
imports.

Employment  grew  faster  than  expected 
in  1998,  by
1,2(cid:216)%  against  the  earlier  estimate  of  0,8(cid:216)%.  In  1999  this
is  expected  to  slow  down  to  0,9(cid:216)%,  a  downward  revision
of  0,2(cid:216)%.  The  outlook  for  unemployment  has  also
brightened  since  the  spring,  although  unemployment  has
been  falling  slower  than 
increasing,
the  growing  workforce.  Average  unem(cid:220)
because  of 
ployment  in  the  Union  is  expected  to  fall  from  10,9(cid:216)%  in
1996  to  10(cid:216)%  in  1998  and  9,5(cid:216)%  in  1999.

jobs  have  been 

Public  debt  is  expected  to  continue  to  fall  in  the  years
ahead,  albeit  slower,  following  the  consolidation  by  the
Member  States  to  meet  the  Maastricht  criteria.  The
average  deficit  in  the  Union  should  keep  falling  from
2,3(cid:216)%  of  GDP  in  1997  to  1,8(cid:216)%  in  1998  and  1,4(cid:216)%  in
1999.

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

2.1.(cid:217)CRUDE  STEEL  PRODUCTION

the  substantial  (8(cid:216)%) 

After 
in  1997,  steel
production  in  the  Union  continued  to  grow  throughout
the  first  six  months  of  1998  to  total  84,5  million  tonnes,
up  6,5(cid:216)%  on  steel  production  in  the  same  half  of  1997.

increase 

Since  then,  however,  steel  production  in  the  Community
has  slowed  down  steadily,  stabilising  in  the  third  quarter
of  1998  at  the  previous  year’s  level,  despite  successive
falls  of  around  2,4(cid:216)%  in  August  and  then  September.
According  to  the  most  recent  rapid  statistics,  Community
steel  production  is  likely  to  have  fallen  again  by  4(cid:216)%  in
October  and  5(cid:216)%  in  November  1998.

However,  taking  account  of  the  substantial  increase  in
imports  in  early  1998  and  today’s  considerably  higher
stock  levels  on  the  one  hand  and  the  foreseeable  fall  in
demand  as  a  result  of  the  slowdown 
in  the  steel(cid:220)
consuming  sectors  on  the  other,  steel  production  in  the
Community  will  probably  fall  sharply  in  the  months
ahead.

This  scenario  suggests  that  steel  production  in  the  Union
could  end  1998  on  162  million  tonnes,  as  indicated  in  the
Commission’s  previous  forecast(cid:216)(˛)  and  just  1,6(cid:216)%  up  on
1997.

(˛)(cid:217)OJ  C  233,  25.7.1998.

In  the  first  half  of  1999,  steel  production  in  the  Union
could  therefore  total  around  80  million  tonnes,  5(cid:216)%
down  on  the  same  half  of  1998.  A  slight  improvement  in
conditions  on  the  market  in  the  second  half  of  the  year
should  take  total  production  in  1999  to  157  million
tonnes,  2,5(cid:216)%  less  than  the  previous  year.

However,  this  falling  production  should  pose  no  major
problems  for  steelmakers  as  capacity  utilisation  rates
expected  to  remain  satisfactory  in  1999.

Nevertheless  the  Commission  renews  its  call  for  caution
on  the  part  of  all  involved,  since  both  the  Union  and  the
world  market  now  face  a  degree  of  upheaval  in  trade  in
steel  as  a  result  of  the  crisis  in  Asia,  at  a  time  when  the
signs  of 
steel
consumption  are  becoming  clearer  and  clearer  in  most
parts  of  the  world.

slowdown 

economic 

falling 

and 

The  table  in  Annex  1  "crude  steel  supply  and  demand’
gives  figures  and  summarises  trend 
in  consumption,
foreign  trade,  production  and  stocks  of  steel  in  the
European  Union  and  estimates  the  changes  expected  in
the  first  half  of  1999  and  for  1999  as  a  whole.

2.2.(cid:217)OUTLOOK  FOR  THE  FIRST  HALF  OF  1999  AND

FOR  1999  AS  A  WHOLE

the  final  analysis, 

international
In 
climate  in  1998  made  little  impact  on  economic  trends  in
the  European  Union,  where  excellent  growth  rates  were
maintained,  driven  principally  by  internal  factors.

the  deteriorating 

By  contrast,  the  less  favourable  export  prospects  clouded
by  events  on  the  international  scene  could  have  a  greater
impact  on  economic  growth  in  the  Union  in  1999  despite
the  solid  foundations  and,  hence,  industrial  activity.

The  first  symptoms  of  infection  as  the  crisis  in  Asia
spread  rapidly  to  other  regions  were,  however,  already
seen  in  the  Union  in  1998,  bringing  a  loss  of  confidence
on  the  part  of  industry  as  it  ran  into  its  first  problems
with  exports,  despite  its  very  high  capacity  utilisation
rates.

Against  this,  according  to  the  latest  economic  surveys,
consumer  confidence  does  not  yet  seem  to  have  been
affected  significantly  by  these  events.

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increase 

in  steel 

In  recent  meetings,  the  Union’s  steel  producers  reported
an  unprecedented 
imports  onto  the
Community  market  which  triggered  a  general  collapse  in
prices  in  the  second  half  of  1998.  Nor  did  they  hide  their
concern  about  the  prospects  for  1999  with  import  and
stock  levels  still  high  on  the  one  hand  and  a  slowdown  in
demand  for  steel  forecast  on  the  other.  As  regards
the
imports,  producers  wish 
to
Commission  vis(cid:220)a(cid:220)vis  players  outside 
restore  a  normal  flow  on  the  Community  market.

intervention  by 

the  Union 

firm 

At  recent  meetings  steel  dealers  confirmed  the  adverse
effects  on  prices  of  the  massive  import  of  steel  onto  the
Community  market  in  1998  and  expressed  a  degree  of
pessimism  about 
in  1999  as  the
likely  developments 
heavy  oversupply  from  both  internal  and  international
sources  will  dictate  the  increase  in  steel  prices.

The  surge  in  activity  in  most  steel(cid:220)consuming  industries
(some  of  the  principal  of  which  are  analysed  more
closely  below)  until  spring  1998  showed  clear  signs  of
slowing  down,  particularly  in  the  second  half  of  the  year.
After  the  first  half  of  1998  performance  in  the  motor
industry  and  in  mechanical  and  electrical  engineering
weakened  somewhat  although  a  slow  improvement  was
seen  in  the  building  industry  thoughout  the  year.

In  the  first  half  of  1999  activity 
in  the  steel(cid:220)using
industries  is  likely  to  be  slower  than  the  fast  pace  in  the
same  half  of  1998  but  could  then  pick  up  to  produce
results  for  the  whole  year  comparable  to  or  slightly
below  the  previous  year.

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

flourished  with 

Up  until  the  first  half  of  1998  primary  processing  as  a
whole 
in
production  and  sales  on  both  the  Community  and  the
international  market  allowing  optimum  capacity  utili(cid:220)
sation  and,  consequently,  bigger  profit  margins.

improvements 

tangible 

From  the  start  of  the  second  half  of  1998,  however,  the
bright  economic  climate  clouded  rapidly  as  activity  in
certain  steel(cid:220)using  sectors  slowed  down  and 
imports
settled  at  a  very  high  level  while  export  opportunities
contracted 
international  market
destabilised  by  substantial  oversupply.

sharply 

on 

an 

In  some  branches  of  the  industry,  such  as  steel  tube
manufacture,  the  change  of  climate  was  more  abrupt
than  in  others.  By  contrast,  in  the  branches  connected
primarily  with 
some
weakening  of  demand  the  situation  can  still  be  regarded
as  good  enough,  leaving  aside  the  marked  downward
price  trend.

industry,  despite 

the  motor 

Continuation  of  these  trends  in  1999  with  stock  levels
in  the  recent  boom  presages  a  marked
higher  than 
deterioration  in  the  current  situation,  particularly  in  steel
tube  manufacture.

Accordingly,  demand  for  steel  should  suffer  a  more
marked  fall  in  the  first  half  of  1999  and  then  level  off  at
satisfactory  levels  in  the  second  half.

A.(cid:217)Steel  tubes

the  Community  market 

Despite  the  steady  contraction  expected,  steel  imports
onto 
should,  nevertheless,
remain  high,  while  exports  from  the  Community  industry
are  expected  to  stabilise  at  1998  levels.

Such  a  scenario  need  not  be  considered  dramatic  if  all
the  developments  outlined  are  accompanied  by  at  least  a
gradual  increase  in  prices,  which  is  needed  to  guarantee
the  viability  of  the  Community  steel  industry.

Tables  2  and  2a  in  the  Annexes  show  indicators  of
activity  in  the  main  steel(cid:220)consuming  industries  for  the
first  half  of  1999  and  for  the  year  as  a  whole.  The  data

After  developing  very  favourably  in  1997  and  into  the
first  half  of  1998,  the  steel  tube  market  in  the  Union
deteriorated  sharply  towards  the  end  of  1998,  after  a
short  slowdown.

Both  sales  and  prices  have  been  contracting  constantly
since  the  summer  to  the  extent  that  the  outstanding
results  of  the  first  half  of  1998  will  probably  be  wiped
out  by  the  underperformance  towards  the  end  of  the
year.

These  far(cid:220)reaching  changes  on  the  Community  tube
market  are  both  the  direct  and  indirect  consequence  of
the  crisis  in  South(cid:220)East  Asia  which  has  brought  in  its
wake  an  increase  in  imports  and  a  parallel  very  sharp
reduction  in  prices  for  most  products.

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For  steel  tubes  as  a  whole,  however,  the  1998  results  will
be  comparable  to  1997,  which  indicates  a  contraction  of
around  10(cid:216)%  over  the  second  half  of  the  year.

In  the  seamless  tubes  sector,  the  turn  tide  in  the  second
half  of  1998  will  mean  that  the  best  that  can  be  achieved
will  be  to  equal  the  1997  results.  However,  the  collapse
in  demand  from  the  oil  and  nuclear  industries  combined
with  the  lack  of  any  new  pipeline(cid:220)laying  schemes  have
exacerbated  pessimism  in  the  trade  about  the  short(cid:220)term
prospects  and  instilled  a  wait(cid:220)and(cid:220)see  attitude  amongst
dealers.

With  the  exception  of  the  motor  industry,  which  is  still
on  the  right  track,  no  hope  remains  of  any  improvement
in  market  conditions  for  these  products  in  1999,  which
could  see  production  of  seamles  tubes  fall  by  around
20(cid:216)%  given  the  extremely  high  import  levels  on  the  one
hand  and  the  loss  of  export  markets  on  the  other,
stemming  from  the  collapse  in  the  oil  industry  and  the
crisis  in  Asia.

In  the  case  of  small  welded  tubes  (not  more  than
406,4(cid:216)mm  in  diameter),  the  weakening  demand  over  the
second  half  of  1998  will  make  it  impossible  to  maintain
1997  sales  levels,  taking  account  of  the  modest  growth  in
the  first  half  of  the  year.

With  the  downturn  in  demand  confirmed  for  1999,  total
deliveries  of  small  welded  tubes  for  the  year  as  a  whole
will  be  down  by  between  5(cid:216)%  and  10(cid:216)%  due  to  low
the
demand  and  exports  but  also,  above  all, 
considerable  increase  in  imports,  particularly  of  gas  pipes
and  hollow  sections.

to 

The  market  in  large  welded  tubes  (over  406,4(cid:216)mm  in
diameter)  also  felt  the  repercussions  of  the  deterioration
in  international  trade  in  the  second  half  of  1998,  leaving
sales  for  the  year  as  a  whole  slightly  above  the  figures
recorded  by  the  Community  industry  in  1997,  buoyed  by
the  healthy  performance  in  the  first  half.  By  contrast,  the
fall  in  sales  forecast  in  1999  is  likely  to  be  extremely
abrupt  as  the  lack  of  new  projects  seriously  depletes  new
orders  in  the  Union.

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

satisfactory 

In  the  first  half  of  1998  activity  in  the  wire(cid:220)drawing
industry  was  extremely 
the
European  Union,  except  in  the  United  Kingdom,  with
sales  up  by  5(cid:216)%  to  6(cid:216)%  compared  with  the  first  six
months  of  1997.  Despite  the  big  increase  in  imports,
prices  for  drawn  wire  held  steady  throughout  this  period,
sustained  by 
the  motor  and
mechanical  engineering  industries.

firm  demand 

throughout 

from 

In  the  second  half  of  1998,  the  slowdown  in  internal
demand  and,  above  all,  the  marked  contraction  of
exports  dictated  activity  in  the  Community  wire(cid:220)drawing
industry,  taking  production  and  sales  for  the  year  as  a
whole  to  2(cid:216)%  or  3(cid:216)%  higher  than  the  previous  year.

The  downward  trend  in  volumes  and  prices  observed  in
the  second  half  of  1998  could  gain  strength  slightly  in
the  early  months  of  1999,  compared  with  the  high  levels
in  the  same  period  of  1998.  On  the  whole,  however,
1999  should  bring  a  degree  of  stabilisation  at  around  the
previous  year’s  volumes,  allowing 
steady
improvement  expected,  particularly  towards  the  end  of
the  year.

the 

for 

Closely  associated  with  activity  in  the  motor  industry,
the  wire(cid:220)drawing  industry  recorded  very  healthy  results
in  the  first  six  months  of  1998.  Consequently,  even  the
slight  slowdown  in  demand  in  the  second  half  of  the
year,  reflecting  different  trends  in  the  motor  industry  in
the 
individual  EU  Member  States,  should  spell  no
significant  reduction  in  the  results  for  the  year  as  a
whole,  which  the  trade  considers  sufficiently  good  and,
in  any  event,  better  than  the  previous  year.

However,  the  wire(cid:220)drawing  industry  in  the  Community
will  directly  suffer  the  consequences  of  the  weakening  of
carmakers’  activity  in  various  countries  in  1999,  with  the
risk  of  a  steady  deterioration  in  the  market  conditions
for  its  products  and,  consequently,  sales  2(cid:216)%  to  4(cid:216)%
down  on  1998.

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

Activity  levels  in  the  cold(cid:220)rolling  industry  were  extremely
good  in  1998,  although  there  were  signs  of  a  return  to
normal  towards  the  end  of  the  year.  Overall,  deliveries
of  cold(cid:220)rolled  strip  in  1998  were  an  estimated  10(cid:216)%  up
on  the  previous  year’s  sales  volumes.

This  trend  was  all  the  more  remarkable  in  that  it  marked
a  significant  improvement  over  the  1997  results,  which
themselves  were  excellent.

Against  all  expectations,  in  1998  even  exports  of  cold(cid:220)
rose
strip 
rolled 
significantly,  despite 
international
climate.

an  unpropitious 

non(cid:220)Community 

countries 

to 

Imports 
into  the  European  Union,  particularly  from
Russia,  also  rose  substantially  to  increase  their  share  of
the  Community  market.

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After  summer  1998  orders  began  to  return  to  normal  but
this  is  not  expected  to  have  any  consequences,  since
capacity  utilisation  rates 
industry
remain  excellent.

in  the  cold(cid:220)rolling 

the  expectations 

Generally, 
for  1999  are  not  very
promising.  Nevertheless  the  industry  is  hoping  for  total
sales  volumes  slightly  lower  than  in  1998.

the  downward  price 

The  one  cause  for  concern  in  the  industry  at  the  moment
is 
trend  brought  about  by
competition  from 
imports  and  products  obtained  by
slitting  cold(cid:220)rolled  sheet  from  the  ECSC  steel  industry.

This 
industry  has  been  concentrating  principally  on
structural  improvements  to  allow  greater  diversification
towards  supplying  the  motor  and  mechanical  engineering
industries  more  in  the  future,  rather  than  the  building
industry.

In  1999  production  and  sales  volumes  in  this  industry  are
not  expected  to  differ  significantly  from  the  previous
year’s  levels,  despite  some  stockbuilding  at  the  end  of
1998.

Price  prospects,  however, 
seem  dimmer,  primarily
because  of  the  downward  trend  for  slit  cold(cid:220)rolled  strip.

Because  the  Community’s  wide  cold(cid:220)formed  products
industry  depends  heavily  on  the  building  industry  in
general,  it  was  unable  to  keep  pace  with  the  increases  in
sales 
the  primary  steel(cid:220)
processing  industry  in  1998.

the  other  branches  of 

in 

Instead,  its  results  for  the  first  half  of  1998  were  only
slightly  better  in  volume  terms  than  those  for  the  same
period  in  1997,  primarily  because  the  pattern  of  demand
was  more  favourable  for  corrugated  sheet  than  for
sandwich  panels.

The  very  weak  improvement  in  demand  in  the  building
industry  brought  no  increase  in  consumption  of  wide
sections  in  the  second  half  of  1998,  while  the  oversupply
led  to  fiercer  competition  and,  inevitably,  lower  prices
inter  alia  due  to  the  availability  of  alternative  products.

industry’s  expectations 

for  1999  are  not  very
The 
encouraging  since  on  the  one  hand  it  seems  difficult  to
curb  the  downward  price  trend  as  long  as  overcapacity
persists  while  on  the  other  hand  the  weak  demand  from
the  building  industry  holds  out  no  hope  of  bigger  orders
for  wide  sections.  Consequently,  in  1999  sales  by  this
industry  will  remain  at  the  same  volumes  as  in  the  two
previous  years.

Activity  in  the  long(cid:220)formed  products  industry  remained
relatively  strong 
in  1998,  with  deliveries  up  by  an
estimated  5(cid:216)%  or  6(cid:216)%  compared  with  1997.

Although  generally  more  vulnerable,  this  sector  suffered
no  significant  increase  in  imports  in  1998  with  the  result
that  prices  for  its  products  held  steady  all  year  long.

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

Gradually  the  benefits  of  the  strengthening  economic
recovery  in  the  Union  in  1997  and  1998  worked  their
way  through  to  even  the  building  industry,  where  they
generated  a  modest  increase  in  overall  activity  in  1998
after  five  consecutive  years  of  deep  recession.

For  the  first  time  in  years,  virtually  every  country  in  the
European  Union,  including  Germany,  could  witness  an
upswing  in  overall  activity  in  the  building  industry  in
1999,  with  only  Denmark  still  in  difficulty  in  this  sector.

Nevertheless,  the  signs  of  recovery 
in  the  building
industry  are  expected  to  remain  within  far  narrower
margins  than  in  all  the  other  branches  of  the  Community
economy,  with  estimated  average  growth  of  1(cid:216)%  in  1998
and  0,9(cid:216)%  in  1999.

reveals 

this  changing  context 

However, 
the
subsectors  depending  on  public  funding  will  have  to  wait
longer  before  they  can  record  more  substantial  growth
rates.  For 
reason  wider  use  of  partnership
arrangements  between  the  public  and  private  sectors  is
envisaged,  even  for  funding  small(cid:220)scale 
infrastructure
projects.

that 

this 

In  the  case  of  house(cid:220)building,  recent  trends  have  varied
considerably  from  one  Member  State  to  another  in  the
Union,  depending  on  the  improvements  in  employment
conditions  and  the  lowering  of  mortgage  rates  in  each
country.

For  example,  1998  will  have  brought  a  distinct  increase
in  new  housing  starts  in  response  to  greater  demand
from  the  private  sector  in  Sweden,  Spain,  Irland  and
Portugal,  yet  private  sector  demand  will  have  generated
growth  of  under  2(cid:216)%  in  this  subsector  in  the  United
Kingdom.  In  France,  the  improvement  in  the  number  of
building  permits  has  not  been  followed  by  a  similar
upturn  in  new  starts.  In  Italy,  the  tax  relief  for  reno(cid:220)
vation  and  maintenance  schemes  will  have  proved  a
disincentive  to  building  new  housing.  And  in  Germany
this  activity  as  a  whole  will  have  remained  in  recession.

Against  this,  the  overcapacity  in  the  sector  is  another  risk
factor  which,  in  the  long  term,  could  undermine  the
stability  of  prices  on  the  EU  market  which  have  been
safe  up  until  now.

In  1999  the  recession  expected  in  this  sector  in  the
United  Kingdom  will  decide  the  average  result  in  the
Union  which  could  nevertheless  show  an  increase  in

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volumes  by  an  estimated  1(cid:216)%,  given  the  continuing  very
strong  upturn  in  this  subsector  in  Sweden  and  Portugal
and  the  recovery  in  prospect  in  other  countries.

Boosted  by  the  favourable  economic  climate 
in  the
Union,  non(cid:220)residential  construction  will  have  benefited
more  from  activity  in  the  private  sector  than  in  the  public
sector  in  1998,  except  in  Italy,  where  there  were  big
the  good
increases 
performances  on 
the
score 
Netherlands,  Belgium  and  Ireland  will  have  been  offset
by  the  negative  results  in  Germany,  while  activity  in
France  will  have  remained  weak,  despite  gradually
gaining  pace  in  the  course  of  the  year.

investment.  However, 
in 

Italy,  Spain, 

in  public 

this 

improvement 

The  prospects  for  1999  remain  generally  promising,  with
in  Germany  and
in  sight  even 
some 
companies’ 
revive
expected 
non(cid:220)residential  construction  in  France  to  make  up  for
the  sluggish  investment  by  local  autorities.

requirements 

to  help 

Accordingly,  vehicle  registrations  in  Spain  grew  by  over
15(cid:216)%  in  the  first  ten  months  of  1998,  under  the  impact
of  the  incentive  schemes  still  in  force,  whereas  in  Italy
registrations  fell  by  0,5(cid:216)%  over  the  same  period,  with
sharp  reductions  over  the  last  few  months  after  similar
schemes  ended  in  July  1998.  At  the  same  time  increases
of  between  12(cid:216)%  and  19(cid:216)%  were  reported 
in  other
Member  States,  such  as  France,  the  Netherlands,  Ireland
and  Finland,  yet  under  5(cid:216)%  in  Germany  and  the  United
Kingdom.

The  Community  car  market  should  keep  heading  in  the
right  direction  in  the  very  short  term,  probably  setting  an
all(cid:220)time  volume  record  in  1998,  with  total  registrations
up  by  around  4(cid:216)%  compared  with  1997.

To  harness  this  highly  favourable  demand  trend  in  the
Union  and  taking  account  of  the  good  export  levels,
automobile  production  in  the  Community  should  also  set
a  new  record  in  1998  at  well  over  15  million  vehicles.

Even  in  the  civil  engineering  subsector,  trends  varied
widely  from  one  Union  country  to  another  in  1998.
the  United
Results  remained  negative 
Kingdom  and  Denmark,  due  to  weak  public  investment,
but  growth  in  Italy,  Spain  and  France,  in  particular,
helped  to  hold  these  activities  steady  in  the  Community
as  a  whole.

in  Germany, 

In  1999,  depsite  an  estimated  4(cid:216)%  reduction  in  new
vehicle  registrations  on  the  Community  market  due,
primarily,  to  the  ground  expected  to  be  lost  on  the
Italian  market,  volumes  should  still  attain  the  third
highest  score  of  all 
time  behind  1998  and  1992.
However,  many  more  uncertainties  persist  about  export
trends  for  vehicles  from  the  Community  on  a  world
market  shaken  by  the  crisis  in  Asia  and  by  relocation.

In  1999  civil  engineering  projects  are  expected 
to
stabilise  at  1998  levels  in  view  of  the  lack  of  major  infra(cid:220)
structure  projects  and  the  Member  States’  difficulties
with  revitalising  public  spending  in  this  area.

2.3.(cid:217)OUTLOOK  FOR 

IMPORTS  AND  EXPORTS  OF

STEEL  PRODUCTS

2.2.3.(cid:217)The  motor  vehicle  market

Demand  for  motor  vehicles 
in  the  Union  has  been
picking  up  strongly  since  1994  and  continued  its  upward
trend  until  1997  with  remarkable  results  pushing  regis(cid:220)
trations  of  new  vehicles  up  by  an  estimated  average  of
4,5(cid:216)%  per  year  over  the  entire  period.

Since  the  start  of  1998  even  bigger  increases  in  vehicle
registrations  in  the  Union  have  been  recorded  every
month,  with  the  combined  results  for  the  first  ten  months
of  the  year  up  by  6,5(cid:216)%.

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

Some  Member  States  are  still  somewhat  late  in  for(cid:220)
warding  their  external  trade  statistics  for  steel,  which
means  it  is  very  difficult  to  estimate  quantities  or  forecast
trends.  This  is  particularly  unfortunate  at  the  present
time  since  there  is  a  certain  amount  of  disruption  to
international  trade  in  steel  but  no  way  of  ascertaining  the
full  scale  in  time  to  take  action.

At  the  time  of  writing,  the  figures  available  for  the
European  Union  as  a  whole  cover  the  first  eight  months
of  1998  and  show  major  changes  in  Community  steel
imports  from  and  exports  to  third  countries.

However,  the  Community  market  is  a  mosaic  of  15
countries,  all  obeying  comparable  economic  rules  but
each  with  their  own  unique  characteristics  and  with
registration  trends  sometimes  varying  widely  from  one
country  to  another.

The  figures  show  that  the  Community’s  steel  imports
have  risen  substantially  with  an  increase  during  the  first
half  of  1998  of  about  66(cid:216)%  compared  with  the  first  half
of  1997.  In  terms  of  volume,  that  imports  are  equivalent

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to  about  95(cid:216)%  of  the  Community’s  total  steel  imports  in
1996.

A  more  detailed  analysis  of  the  figures  for  this  half  of
1998  also  shows  a  considerable  increase  in  Community
steel  imports  from  Asia  and,  for  some  Member  State
markets  such  as  Italy,  the  UK,  Benelux,  etc.,  these  were
the  major  external  source  of  supply.

This  leaves  no  doubt  whatsoever  as  to  the  changes  and
the  direct  impact  they  are  having  on  the  Community
market  as  a  whole,  where  a  sharp  fall  in  prices  has  been
quick  to  follow.

During 
the  period  under  review,  Community  steel
exports,  on  the  other  hand,  have  fallen  by  about  17(cid:216)%
compared  with  the  first  half  of  1997,  confirming  that  the
downward  trend  is  gathering  pace.

The  combined  effects  of  a  big  rise  in  steel  imports  and  a
sharp  fall  in  exports  have  seriously  upset  the  Community
steel  market,  which  has  always  been  in  surplus  in  the  past
and,  for  the  first  time  ever,  showed  a  deficit  for  the  first
half  of  1998.

The  progressive  fall  in  demand  over  the  year  and  the
stockbuilding  at  all  levels  of  the  economic  chain  should
nevertheless  lead  to  a  gradual  decline  in  the  rise  in
imports  in  the  short  term,  especially  since  Community
prices  have  now  reached  a  critical  level.

Despite  their  foreseeable  slowdown  during  the  second
half  of  1998,  imports  are  nevertheless  expected  to  rise  by
about  50(cid:216)%  for  the  year  as  a  whole  and  the  continuing
downward  trend  in  exports  should  leave  them  down
about  20(cid:216)%  over  the  year  as  a  whole  as  compared  with
1997.

The  first  half  of  1999  should  see  Community  steel
levels,  though  slightly
imports  stabilise  at  fairly  high 
lower  than  in  1998,  since  the  crisis  that  has  blown  up  in
various  parts  of  the  world  is  spilling  over  onto  the
Community  economy,  affecting  the  general  economic
climate  in  particular.  Community  exports  are,  however,
expected  to  stabilise  at  the  volumes  seen  during  the  first
half  of  1998.

The  year  1999  as  a  whole  is  likely  to  see  steel  imports
onto  the  Community  market  shrink  by  about  20(cid:216)%,
while  exports  are  set  to  stabilise.

This  scenario  shows  how  critical  the  situation  may
become  as  a  result  of  the  disruption  to  the  international
steel  trade,  which  started  with  the  crisis  in  South(cid:220)East
Asia  that  has  now  spread  to  other  countries.

In  this  changing  situation,  the  Commission  can  therefore
only  once  again  urge  all  operators  on  the  Community
steel  market  to  act  in  a  responsible  manner  given  that
there  are  fewer  opportunities  than  in  the  past.

This  is  to  avoid  any  worsening  of  the  present  situation
and 
to  restore
long(cid:220)term  stability  as  soon  as  possible.

the  maximum  of  help 

to  provide 

that 

its  part, 

the  Commision  will  ensure 

For 
the
behaviour  of  all  parties  concerned  keeps  within  the  rules
of  international  trade.  It  should  be  pointed  out  that  the
EU  has  commercial  policy  instruments  which  may  be
used,  in  accordance  with  the  multilateral  rules,  to  protect
the  Union  against  certain  commercial  practices  which
may  further  worsen  the  precarious  situation  of  the
Community  steel  market.

2.3.2.(cid:217)The  world  economy  in  1999

The  worsening  crises  in  Asia  and  Russia  and  the  risk  of
their  speading  to  the  whole  of  Latin  America  have  to
some  extent  affected  the  international  economic  climate
and  economic  trends  have  been  revised  downwards
across  the  board  as  a  result.  This  situation  is  so  serious
that,  according  to  the  most  recent  estimates,  world
growth  is  set  to  increase  by  only  2,5(cid:216)%  in  1999  as
against  an  estimate  of  some  4(cid:216)%  the  year  before.

The  deteriorating  prospects  for  world  economic  growth
in  1999  are  the  result  of  the  obivous  problems  in  stabi(cid:220)
lising  the  economies  of  Asia  and  Russia.  These  problems
have  been  compounded  by  the  upswing  in  Europe  after
several  years  of  stagnation  and  by  developments  in  the
US  economy,  which 
slipping
compared  with  the  remarkable  growth  recorded  during
the  last  five  years.

signs  of 

showing 

is 

Against  this  international  economic  backdrop,  Europe  is
expected  to  be  the  major  centre  of  growth,  in  particular
the  eleven  countries  of  the  euro  zone,  and  should  take
over  top  position  from  the  USA,  whose  economy  is  still
expanding  but  is  set  to  slow  down.  The  Latin  Amercian
countries  are  faced  with  a  growing  trade  deficit  and
should  see  business  slow  down,  the  Asian  economies  are
likely 
the  Russian
economy  looks  like  it  will  find  it  difficult  to  achieve
stability.

to  pick  up  only  gradually  and 

In  the  world  steel  market,  this  economic  outlook  points
to  a  very  slight  rise 
in  1999,  with
production  probably  stabilising  at  1998  levels  given  the
different  rates  of  development  in  Europe  and  Asia,  in
particular  now  that  new  capacity  has  been  brought  into
service  in  certain  regions  short  of  steel.

in  consumption 

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The  international  steel  trade  is  nonetheless  likely  to  be
upset  by  the  high  levels  of  surplus  supply  looking  for  a
market  which,  if  protectionist  measures  are  taken,  could
be  directed  towards  other,  more  open  markets.

2.3.2.1.(cid:217)The  United  States

The  slowdown  in  the  US  economy,  which  was  still
limited  in  1998,  is  likely  to  increase  and  to  keep  growth
down  to  about  2(cid:216)%  in  1999,  but  with  investment  still
remaining  buoyant.  The 
the  US
industry’s  competitiveness  is  expected  to  boost  exports
and  may  in  future  help  to  reduce  the  country’s  trade
balance  deficit,  which  rose  to  a  record  figure  in  1998.

improvement 

in 

The  climate  of  confidence  both  in  the  industry  and
among  consumers  has  gradually  waned  because  of
problems  in  the  emerging  countries  and  the  expected
slowing(cid:220)down  in  the  economy.  US  steel  consumption  is
therefore  forecast  to  fall  slightly  in  1999  after  six  years
of  remarkable  rises.  US  steel  production,  on  the  other
hand,  looks  set  to  increase  now  that  new  capacity  has
been  brought  into  service  and  this  should  help  to  reduce
the  country’s  shortage  of  steel  products.

Steel 
imports  onto  the  US  market  are  expected  to
continue  exerting  strong  pressure  in  1999  despite  the  raft
of  trade  protection  measures  introduced  and/or  planned
with  regard  to  some  foreign  supply.

2.3.2.2.(cid:217)Economic  situation  in  Japan

The  Japanese  economy  is  expected  to  see  a  slight  upturn
in  1999  with  growth  of  0,5(cid:216)%  following  the  deep
recession  of  1998.  The  plan  announced  by  the  Japanese
Government  to  relaunch  the  economy,  which 
in
particular  based  on  recapitalising  the  banking  sector  and
major  tax  reductions,  should  therefore  help  to  reverse
the  country’s  economic  trends  and  to  restore  a  healthy
climate  of  confidence  in  the  business  world.  In  addition,
Japanese  exports  to  some  Asian  markets  are  likely  to
increase,  while  exports  to  the  USA  may  see  a  sharp  fall.

is 

In  the  steel  sector,  domestic  production  could  rise  by
3(cid:216)%  to  5(cid:216)%,  following  the  sharp  fall  in  1998,  to  meet  the
needs  of  a  parallel  increase  in  domestic  consumption  and
a  slight  rise  in  demand  from  the  countries  in  its  area  of
influence.  Less  Japanese  steel  is  therefore  expected  to  be
seen  on  the  US  and  Community  markets.

2.3.2.3.(cid:217)The  economies  of  China  and  South(cid:220)East  Asia

The  economic  recoveries  in  the  crisis(cid:220)ridden  countries  of
Asia  will  be  gradual.  The  domestic  industry,  which  has
returned  to  excellent  levels  of  competitiveness  following
wholesale  devaluations,  therefore  looks  posed  to  play  a
major  part  in  the  general  economic  upturn  as  a  result  of
strong  growth  in  exports.

In  the  steel  sector,  some  investment  in  new  capacity  had
already  been  postponed  and  this  capacity  is  now  not
expected  to  be  brought  into  service  before  the  end  of
1999.  Domestic  steel  production  should  therefore  see  a
rise  of  only  1,5(cid:216)% 
is
expected  to  increase  by  around  2(cid:216)%.  The  countries  in
this  area  will  therefore  continue  to  be  short  of  steel,
except  South  Korea,  which  has  a  sizeable  steel  industry
and  is  in  surplus.

in  1999,  while  consumption 

is  relatively  well  protected  by 

China,  which 
its  size
against  any  spillover  from  the  crisis,  appears  to  be  with(cid:220)
standing  the  economic  recession  in  Asia.  The  Chinese
economy  is  still  reaping  the  rewards  of  the  government’s
control  and  modernisation  measures  and  the  country’s
economy  is  still  developing  soundly,  with  a  growth  rate
of  about  6(cid:216)%  in  1998,  though  this  is  expected  to  slow
down  in  1999.

In  1999,  investment  is  expected  to  increase  in  infra(cid:220)
structure  and  mechanical  engineering  in  particular,  but
exports  are  likely  to  continue  suffering  in  the  face  of
further  strong  competition  from  the  countries  in  the
devalued  currency  zone.

The  trend  seen  with  regard  to  investment  should  lead  to
a  rise  in  demand  for  steel,  but  this  is  likely  to  be  met  by
an  equivalent  increase  in  domestic  production,  leaving
the  country’s  debit  balance  unchanged.

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

The  countries  of  Latin  America  should  see  overall
growth  of  slightly  below  3(cid:216)%  in  1998,  but  this  is  set  to
slow  down  in  1999.  The  Brazilian  Government’s  crisis
measures  to  limit  public  spending  and  raise  taxes  are
expected  to  boost  growth  in  what  is  the  most  important
economy  in  this  area.

Steel  consumption  is  forecast  to  rise  slightly  in  1999,
while  the  supply  surplus  in  this  region  should  be  about
8  million  tonnes  since  production  is  falling  slightly.

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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

Most  of  the  central  and  eastern  European  countries
(CEEC)  are  still  on  the  upward  slope  of  economic
recovery  which  started  in  1994.  Growth  rates  differ  from
one  country  to  another,  but  in  overall  terms  the  progress
is  most  certainly  positive.

The  local  steel  markets  are  all  still  enjoying  favourable
trends  with  regard  to  demand,  often  accompanied  by
parallel  rises  in  domestic  production,  so  there  is  virtually
no  change  in  the  surplus  of  steel  products  for  which  a
market  must  be  found.

The  increase  in  steel  consumption  in  this  area  is  also
pushing  up  Community  exports  of  higher(cid:220)value  steel
products.  The  Community  market  is  nevertheless  still  the
main  outlet  for  these  countries’  surplus  supply,  which
represents  about  40(cid:216)%  of  their  production.

During  the  last  six  months,  for  example,  the  prices  of
hot(cid:220)rolled  sheet  on  the  Community  market  have  fallen
by  nearly  25(cid:216)%.  Only  coated  sheet  has  been  able  to  limit
the  general  downward  trend  in  prices  since  there  has
in
from 
been 
particular.

strong  demand 

the  motor 

industry 

For  long  products,  the  price  fall  seen  during  the  last  six
months  is  about  15(cid:216)%  for  light  long  products  (concrete
reinforcing  bars,  wire  rod  and  merchant  bars)  and  10(cid:216)%
for  beams.

Steel  prices  in  the  European  Union  have  not  yet  reached
the  all(cid:220)time  low  seen  at  the  beginning  of  1993,  but  have
very  quickly  dropped  close  to  it,  and  the  economic
situation  on  the  world  market  gives  little  hope  of  this
trend  being  reversed  in  the  months  ahead.  The  only  way
of  restoring  a  sustainable  balance  to  the  Community  steel
market  would  be  to  adjust  supply  to  the  new,  lower
demand  on  the  world  market.

The  incipient  economic  revival  in  Russia  has  suddenly
come  to  a  standstill  following  the  stock  exchange  crisis,
which  led  to  a  sharp  depreciation  of  the  rouble  in  1998.
in  Russia,  to  which  no  quick
The  economic  crisis 
solution  is  likely  to  be  found,  has  further  increased  the
steel  surplus,  which  will  strengthen  the  country’s  position
as  the  world’s  major  exporter.

2.5.(cid:217)TRENDS  BY  PRODUCTS

Flat  products

- Hot(cid:220)rolled  coil

In  1999,  even  if  production  looks  set  to  decline,  there
will  be  a  further  fall  in  steel  consumption  and  so  foreign
markets  will  provide  the  only  chance  of  survival  for  the
steel  industry,  which  is  already  in  difficulties.

2.4.(cid:217)PRICE  TRENDS

The  fall  in  demand  for  steel,  first  of  all  in  South(cid:220)East
Asia  but  then  in  other  regions,  has  very  quickly  produced
a  glut  on  the  world  market  and  seriously  disrupted  inter(cid:220)
national  trade.

On  the  world  market,  prices  began  falling  during  the
first  half  of  1998.  In  less  than  a  year,  flat  products  have
therefore 
long
products  between  15(cid:216)%  and  30(cid:216)%.  The  prices  of
hot(cid:220)rolled  coil  and  cold(cid:220)rolled  sheet  are  currently  the
lowest  for  10  years.

lost  about  25(cid:216)%  of  their  value  and 

in 

the  high 

imports  and 

The  market  for  hot(cid:220)rolled  coil  has  deteriorated
considerably  in  the  wake  of  events  in  Asia.  The
massive  rise 
level  of
Community  production  have  produced  a  surplus  on
the  Community  market,  causing  prices  to  collapse
and  a  gradual  build(cid:220)up 
in
particular  of 
tubes.  In  addition,  a  wait(cid:220)and(cid:220)see
attitude  on  the  part  of  buyers  has  led  during  the
second  half  of  1998  to  quite  a  sharp  fall  in  the
number  of  orders  placed  with 
the  Community
industry.

in  merchant  stocks, 

On  the  international  coil  market,  given  the  serious
disruption  to  the  world  market  the  current  weakness
of  the  dollar  is  helping  to  redirect  a  larger  proportion
of  the  surplus  to  the  Community  market,  slowing
down  Community  exports  of  coil.

- Cold(cid:220)rolled  sheet

Thanks  to  their  buoyant  economies  and  their  domestic
price  levels,  North  America  and  Europe  have  quickly
the  main  destinations 
become 
the  out(cid:220)of(cid:220)the
ordinary, 
low(cid:220)cost  exports.  Given  this  situation  and
despite  the  satisfactory  level  of  consumption,  the  balance
between  supply  and  demand  on  the  Community  steel
market  has  been  seriously  upset  over  the  last  few  months
and  this  is  having  a  disastrous  impact  on  prices.

for 

Although  demand  is  holding  up,  there  is  also  strong
pressure  on  the  prices  of  cold(cid:220)rolled  sheet.  The
disruptive  imports  from  certain  third  countries  are
still  on  the  increase  and  the  market  situation  for  these
products  is  therefore  becoming  increasingly  difficult,
especially  since  merchants  and 
the  steel  service
centres  are  awaiting  developments  and  final  users  are
holding  back  their  orders.

29.1.1999

EN

Official  Journal  of  the  European  Communities

C  24/11

- Coated  sheet

these  products,  the  market  is  not  expected  to  pick  up
for  several  months.

in  South(cid:220)East  Asia  has  reduced 

The  crisis 
local
consumption  of  all  coated  products.  This  has  led  to
substantial  flows  from  Asia  to  the  North  American
and  European  markets.

In  the  coated  sheet  sector,  hot(cid:220)rolled  galvanised  sheet
has  been  hardest  hit  since  imports  are  rising  at  the
very  time  when  new  production  capacity  is  being
brought  into  service.

for 

sheet 

Electro(cid:220)galvanised 
industry,
however,  has  been  particularly  vigorous  for  a  long
time  and 
imports.
Demand  it  therefore  still  high  and  prices  are  stable  in
this  sector  at  the  moment.

less  affected  by  the 

is  much 

car 

the 

- Quarto  plate

For  higher(cid:220)grade  steels,  the  situation  is  less  worrying
since  there  is  strong  demand  from  users  such  as  the
engineering  industry  and  the  motor  industry.  Orders
have  nevertheless  been  falling  for  several  weeks
because  of 
the
stocks  and 
slowdown  in  business  on  the  part  of  some  users.

the  high 

levels  of 

- Concrete  reinforcing  bars

In  general  terms,  there  has  not  been  any  significant
fall  in  demand  in  the  Community  during  1998,  but
the  drop  in  exports  and  the  pressure  of  imports  have
nevertheless  upset  the  European  market  in  concret
reinforcing  bars.  Although  the  rates  for  scrap  and
production  costs  have  fallen  a  great  deal,  these
products  have  become 
for
Community  producers.

less  profitable 

far 

Demand  on  the  Community  market  is  relatively  satis(cid:220)
factory.  The  large  welded  tubes  sector,  building  and
engineering  are  still  creating  a  high  level  of  demand,
despite  serious  doubts  about  future  demand  for  these
products.  The  situation  is  different  for  merchants,
who  have  very  big  stocks  in  view  of  the  massive
imports  from  third  countries.  The  pressure  on  the
market  from  the  glut 
is  obviously  pushing  down
prices  and  causing  final  users  to  hold  back  their
orders  in  the  hope  of  even  lower  prices.

- Merchant  bars

following 

stable  demand,  rising  consumption  and
Despite 
the
little  above  normal 
stocks  only 
production  stoppage  during  the  summer,  the  prices  of
merchant  bars  have  come  down  towards  the  end  of
the  year  in  line  with  the  trend  seen  for  other  steel
products.  Even  the  higher(cid:220)grade  steels  are  affected,
in  particular  because  of  the  weakness  of  the  dollar
and  the  fall  in  the  rates  for  scrap.

Long  products

- Heavy  sections  and  beams

Demand  for  beams  on  the  European  market  picked
up  in  1998  and  its  expected  to  continue  on  this  trend
in  the  early  part  of  1999.  Stocks  started  to  fall  in  the
first  quarter  of  1998  and  the  current  situation  is  satis(cid:220)
factory.  Despite  this  relatively  healthy  state  of  affairs,
however,  the  gradual  fall  in  exports  and  the  rise  in
imports  have  reversed  the  price  trend  seen  since  the
middle  of  the  year.  The  possibility  of  the  US  market
being  closed  as  a  result  of  anti(cid:220)dumping  measures
may  aggravate  the  situation  at  the  beginning  of  1999.

- Wire  rod

Demand  for  wire  rod  for  welded  mesh  is  stagnant
due  to  the  slack  trade  in  the  building  industry.  The
production  stoppages  during  the  summer  did  not
reduce  stocks  to  the  level  hoped  for.  Indeed,  the
situation  on  the  world  market  deteriorated  during
this  period,  leading  to  a  drop  in  exports  and  a  rise  in
imports.  With  the  winter  approaching,  a  period
which  generally  does  little  to  boost  consumption  of

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

1999  AND  1999  AS  A  WHOLE

The  Community  economy  has  been  seeing  a  strong
upturn  throughout  1997  and  for  a  good  part  of  1998,
holding  its  own  in  the  face  of  the  crises  in  Asia  and
Russia.

However,  the  negative  effects  of  the  worsening  inter(cid:220)
national  climate  are  expected  to  have  a  further  impact  on
economic  growth  in  the  Community  in  1999  and  to
cause  industrial  activity  to  gradually  slow  down  given  the
poorer  outlook  for  exports  to  most  foreign  markets.

The  negative  impact  of  international  events  was  already
starting  to  make 
itself  felt  on  the  Community  steel
market  at  the  beginning  of  1998  in  the  form  of  a
in
increase 
tremendous 
exports  and  the  collapse  of  prices.

imports,  a  sizeable  drop 

in 

Demand  for  steel  was  very  strong  up  to  the  autumn  of
1998,  but  has  since  been  showing  signs  of  slippage,  this
being  expected  to  increase,  in  particular  during  the  first
half  of  1999,  as  business  in  the  steel(cid:220)using  industries  is
set  to  slow  down.

C  24/12

EN

Official  Journal  of  the  European  Communities

29.1.1999

The  Community  steel  market,  which  has  become  less
attractive  now  that  prices  have  collapsed,  should  come
under  less  pressure  from  imports  in  1999.  However,  the
lower  levels  of  exports  compared  with  the  past  and  the
steel
need 
production  develops,  with  demand  expected  to  stabilise
during  the  year  following  a  gradual  quickening  in  the
pace  of  business  among  the  user  industries.

stocks  will  determine  how 

to  balance 

Given  these  trends  as  indicated  in  Table  1  (Crude  steel
supply  and  demand),  real  steel  consumption  during  the
first  half  of  1999  is  expected  to  be  81  milion  tonnes,  4(cid:216)%
down  on  the  excellent  figure  for  the  corresponding
period  of  1998.  With  stocks  forecast  to  fall  to  the  level
of  demand,  apparent  consumption  should  be  79  million
tonnes,  a  bigger  fall  compared  with  real  consumption.
Also,  given  that  steel  imports  are  expected  to  fall  in  a
Community  market  which  is  much  quieter  than  during
the  first  half  of  1998  and  that  a  small  rise  is  forecast  for
Community  exports,  equilibrium  production  should  be
around  80  million  tonnes,  a  fall  of  5,3(cid:216)%  compared  with
the  record  figure  achieved  during  the  first  half  of  1998.

The  gradual  improvement  that  might  take  shape  during
the  year  suggests  that,  for  1999  as  a  whole,  real  steel
consumption  should  stabilise  at  159  million  tonnes,  the
level  seen  a  year  earlier.  However,  in  view  of  the  need  to
rebalance  stocks,  in  particular  during  the  first  half  of
1999,  apparent  consumption  is  forecast  to  be  157  million
tonnes,  a  decrease  of  3,1(cid:216)%  on  the  excellent  level  of  the
previous  year.  Furthermore,  the  gradual  fall  in  imports
and  the  stabilisation  expected  for  exports  mean  that
is  estimated  at  157  million
equilibrium  production 
tonnes,  down  by  3,1(cid:216)%  compared  with 
the  record
production  seen  in  1998.

3.(cid:217)RAW  MATERIALS

3.1.(cid:217)THE  SCRAP  MARKET

The  worsening  of  the  precarious  situation  on  the  inter(cid:220)
national  steel  market  in  1998  is  likely  to  have  constantly
therefore  gradually
for  scrap  and 
reduced  demand 
brought  down  the  price  of  this  raw  material  for  the  steel
industry.

Even  on  the  Community  and  US  markets,  the  price  of
scrap  has  been  falling  unabated,  in  particular  because  the
Community  industries  need  to  limit  steel  production  to
check  the  fall  in  the  price  of  steel  products.

Furthermore,  since  steel  stocks  are  fairly  high  at  the
moment  and  demand  looks  set  to  slow  down  in  1999,

the  demand  for  scrap  should  continue  to  fall  at  least
during  the  first  half  of  the  year.  There  is  therefore
nothing  to  rule  out  a  further  slight  fall  in  scrap  prices,
even  though  supply  should  quickly  adapt  to  the  market
conditions,  which  may  moderate  any  further  fall  and
even  guarantee  stability  during  the  year.

3.2.(cid:217)IRON  ORE

The  crisis  in  Asia  is  likely  to  have  reversed  the  trends
throughout  1998,  even  on  the  main  steel  markets,  and
demand  for  scarp  could  suffer  as  a  result  in  the  next  few
months.

Negotiations  for  supplies  of  this  raw  material  in  1999
will  therefore  be  more  complicated  in  view  of  the  lower
demand  even  from  the  Community  and  the  US  steel
industries,  which  will  need  to  adapt  their  production
now  that  there 
international
market.

large  glut  on  the 

is  a 

The  low  demand  from  the  Asian  countries  in  general,  the
sufficiently  satisfactory  stocks  in  Japan  and  the  diffi(cid:220)
culties  affecting 
is
expecting  steel  consumption  to  fall,  suggest  that  demand
for  iron  ore  will  fall  in  1999  as  compared  with  1998  and
hence  that  trade  in  this  raw  material  will  return  to
normal,  with  prices  possibly  falling  slightly.

the  Community 

industry,  which 

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

Despite  the  sustained  demand  for  ferro(cid:220)alloys  in  the
European  Union  this  year,  the  sharper  rise  in  supply  over
demand  is  upsetting  the  market.  The  prices  of  several
products  were  already  under  pressure  during  the  first
half  of  1998  and  have  fallen  further  towards  the  end  of
the  year.

For  the  first  half  of  1999,  the  trend  in  the  ferro(cid:220)alloys
market  is  for  demand  to  be  relatively  weak  compared
with  supply.  However,  a  certain  balance  may  be  achieved
if  price  movements  help  supply  to  adjust  to  the  market
changes.

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

During  the  first  seven  months  of  1998,  tin  production
icreased  by  about  10(cid:216)%  compared  with  the  same  period
of  1997.  Apparent  consumption  of  this  metal,  however,
rose  only  very  slightly  during  this  time.  The  forecasts  are
for  demand  to  remain  firm 
in  Europe  and  North
America,  but  this  will  not  stop  prices  from  falling  slightly
in  view  of  the  expected  increase  in  exports  from  China.

29.1.1999

EN

Official  Journal  of  the  European  Communities

C  24/13

After  a  slight  rise  put  at  0,1(cid:216)%  to  7,76  million  tonnes
for  1998,  world  consumption  of  zinc  could  see  a  rise  of
3(cid:216)%  in  1999,  taking  it  to  7,99  million  tonnes.  On  the
Community  market,  zinc  consumption  is  not  expected  to
increase  by  more  than  about  2(cid:216)%  next  year.

World  production  of  zinc,  which  looks  set  to  rise  by
2,8(cid:216)%  to  7,93  million  tonnes  in  1998,  could  see  a  rise  of
2,1(cid:216)%  in  1999  to  8,09  million  tonnes.  Exports  from  the
Far  East  in  1999  look  likely  to  stabilise  at  a  level  similar
to  that  seen  in  1998.

Zinc  prices  in  1998  have  been  on  a  downward  trend.
However,  prices  are  likely  to  pick  up  in  1999  if,  as
expected,  there  is  an  increase  in  demand  from  certain
third  countries.

For  1998  as  a  whole,  the  International  Nickel  Group  is
counting  on  a  surplus  on  the  nickel  market  which  may
exceed  11(cid:216)000  tonnes.  Production  will  remain  stable,
while  consumption  will  fall  at  world  level,  except  in  the
USA  and  the  Community,  where  there  will  be  sizeable
increases.

Despite  intentions,  supply  is  still  in  surplus,  so  nickel
prices  are  very  weak  at  the  moment.  The  rates  could
nevertheless  improve  during  the  first  half  of  1999  if  the
market  leaders  actually  reduce  their  production  levels  to
achieve  a  better  balance  between  the  supply  and  demand
for  this  raw  material.

4.(cid:217)EMPLOYMENT

For  a  number  of  years  now,  employment 
the
Community  steel  industry  has  become  more  specialised.
Technical  changes  along  with 
reorganisation  have
therefore  regularly  led  to  the  shedding  of  numerous  jobs
in  the  Community  industry.

in 

These  trends  are  part  of  the  plan  to  increase  the  overall
competitiveness  of  this 
industry  and  mean  that  the
workforce  is  continually  faced  with  new  demands  and
the  need  for  continuous  training.

Again  during  the  last  few  years,  a  number  of  public
companies  have  been  restructured,  usually  followed  by
privatisation  to  boost  their  competitiveness.  Similarly,
business  groupings  between  certain  private  European
producers  have  made  it  possible  to  exploit  the  benefits  of

the  single  market  more  fully,  but  have  often  led  to
internal  restructuring  in  the  end.

The  benefits  of  this  process,  which  are  making  the  steel
sector  buoyant  once  again,  are  beyond  discussion.
However,  the  Community  steel  industry  must  continue
with 
international  competi(cid:220)
tiveness,  with  the  negative  impact  this  will  have  on  jobs.

its  efforts  to 

increase 

its 

In  the  past,  jobs  have  been  shed  by  means  of  age(cid:220)related
schemes,  which  have  enabled  restructuring  to  be  handled
more  smoothly.  However,  the  use  of  these  schemes  has
had  strange  effects  on  the  companies’  age  pyramid,
resulting  in  a  loss  of  skills  among  the  workforce.

introduced 
special
Some  companies  have 
schemes 
labour,  providing
part(cid:220)time  working  arrangements  to  retain  the  knowledge
and  skills  of  the  older  workers.

therefore 
the  surplus 

to  mop  up 

figure  may  reflect 

Net  job  losses  in  1999  are  estimated  at  around  11(cid:216)000.
This 
the  difficulties  which  are
expected  in  the  market  for  flat  products,  though  it  shows
improved  compared  with  the
that  the  situation  has 
serious  crisis  years.

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

training  and 

for 

The  11(cid:216)000  job  losses  expected  in  1999  do  not,  however,
represent  the  number  of  workers  who  will  be  eligible  for
ECSC  aid.  There  are  various  reasons  for 
in
particular  the  fact  that  some  Member  States  have  not
signed  up  to  these  restructuring  policy.

this, 

For  1999,  the  funds  in  the  ECSC’s  budget  for  traditional
aid  for  retraining  in  the  coal  and  steel  industries  amount
to  EUR  75  million.

C  24/14

EN

Official  Journal  of  the  European  Communities

29.1.1999

ANNEX

TABLE  1

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

Outturn

1995

1996

1997

First  half
of  1998
(R1)

Estimate

Second  half
of  1998
(R2)

(million  tonnes)

Forecast

1998
(R2)

First  half
of  1999

1999

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

Changes  in  producer
stocks

Production

142,6

139,5

149,8

84,5

74,5

159,0

81,0

159,0

+(cid:216)3,0

145,6

16,5

21,6

+(cid:216)5,0

155,7

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

135,5

12,2

27,9

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

147,2

+(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

85,5

11,5

10,5

0,0

84,5

76,5

10,5

8,5

+(cid:216)3,0

77,5

+(cid:216)3,0

162,0

22,0

19,0

+3,0

162,0

(cid:134)(cid:216)2,0

79,0

8,0

11,0

(cid:134)(cid:216)2,0

80,0

(cid:134)(cid:216)2,0

157,0

18,0

19,0

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

157,0

(˛)(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  stock  in  Germany,  France,  the  UK  and  Benelux.

TABLE  2

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

(Not  seasonally  adjusted)

Sector

First  half  of  1999
(first  half  of  1998(cid:216)=(cid:216)100)

First  half  of  1998
(first  half  of  1997(cid:216)=(cid:216)100)

1999
(1998(cid:216)=(cid:216)100)

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

Manufacture  of  metal  articles

Mechanical  engineering

Electrical  engineering

Motor  vehicles

Other  means  of  transport

Building/civil  engineering

103,9

103,5

104,9

104,0

104,7

103,1

108,7

108,5

108,3

112,4

106,9

101,8

103,6

103,3

104,9

102,2

105,1

103,0

106,1

106,6

105,6

108,2

107,2

101,8

(˛)(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.

29.1.1999

EN

Official  Journal  of  the  European  Communities

C  24/15

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  Kindom

Spain

Sector/Indicator

I/1999

1999

I/1999

1999

I/1999

1999

I/1999

1999

I/1999

1999

Manufacture  of  metal
articles

103,4

103,0

103,6

103,0

Mechanical  engineering

103,1

102,0

102,8

102,0

Electrical  engineering

103,7

103,0

105,5

104,5

Motor  vehicles

103,5

102,0

101,8

102,0

Other  means  of  transport

104,2

104,0

102,7

108,0

Building/civil  engineering

101,4

101,0

101,0

101,0

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

108,5

110,0

110,3

112,0

111,4

113,0

111,8

110,0

106,2

110,0

106,7

107,0

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

first  column,  activity  indicator  first  half  of  1999  (first  half  of  1998(cid:216)=(cid:216)100)
second  column,  activity  indicator  1999  (1998(cid:216)=(cid:216)100)

TABLE  3

Changes  in  the  numbers  employed  in  the  steel  industry

(including  apprentices)

Member  State

Number  of  employees  (in  ’000)

(Reference  month)

(Most  recent  month)(cid:216)(˛)

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.

12,3  (July  1997)

20,7  (April  1997)

1,2  (July  1997)

12,2  (July  1998)

21,0  (April  1998)

1,2  (July  1998)

82,3  (August  1997)

80,1  (August  1998)

2,1  (July  1997)

23,2  (July  1997)

38,3  (June  1997)

7,2  (December  1996)

0,4  (December  1996)

36,6  (April  1997)

4,8  (June  1997)

12,1  (July  1997)

2,1  (June  1997)

14,4  (July  1997)

36,0  (May  1997)

2,0  (July  1998)

23,1  (July  1998)

38,4  (June  1998)

7,1  (December  1997)

0,4  (December  1997)

38,5  (April  1998)

4,2  (June  1998)

11,9  (July  1998)

1,9  (June  1998)

14,4  (July  1998)

33,9  (May  1998)

291,1  (1997)

290,3  (1998)

(˛)(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.

Change
(%)

(cid:134)(cid:216)0,8(cid:217)

(cid:134)(cid:216)1,4(cid:217)

0,0(cid:217)

(cid:134)(cid:216)2,7(cid:217)

(cid:134)(cid:216)4,8(cid:217)

(cid:134)(cid:216)0,4(cid:217)

+(cid:216)0,3(cid:217)

(cid:134)(cid:216)1,4(cid:217)

0,0(cid:217)

+(cid:216)5,2(cid:217)

(cid:134)(cid:216)12,5(cid:217)

(cid:134)(cid:216)1,7(cid:217)

(cid:134)(cid:216)9,5(cid:217)

(cid:216)0,0(cid:217)

(cid:134)(cid:216)5,8(cid:217)

(cid:134)(cid:216)0,27