Information from the Commission - Forward programme for steel for the second half of 1999 and for the year as a whole (Text with EEA relevance)
Date: 1999-07-21
Institutions: European Commission
Subjects: iron and steel industry, steel

21.7.1999

EN

Official Journal of the European Communities

C 206/7

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

(1999/C 206/04)

(Text with EEA relevance)

INTRODUCTION

a reduction of 0,8 percentage points compared with last year’s
figures.

The deterioration of the international climate underlying the
marked slowing down of the economy in the European Union
forecast for 1999 seems likely to level off in the course of the
year. The downturn in economic growth in the Community
might therefore be confined to the first half of the year, with a
slight upturn on the horizon in the second half of the year
offering better prospects for industrial activity in particular.

These downward adjustments are attributable to various factors
connected with the rather poor international climate which is
to some extent by a better economic
nevertheless offset
performance than expected in the United States.

The weakening of the economy in the first half of the year,
aggravated by the general propensity to absorb stocks may
therefore be followed by increased industrial activity,
in
particular in the steel-using sectors. Accordingly,
the fore-
seeable improvement in demand in the short term, combined
with reduced demand as a result of
level of
production, the return of stocks to normal, and less pressure
from imports,
should help to create conditions on the
Community steel market which will bring about the higher
level of prices that is needed.

the lower

the economic fundamentals within the European
However,
Union remain solid, with no inflationary pressure, very low
interest rates and a high level of consumer confidence.

Consequently, the signs of a gradual stabilisation of the inter-
national climate suggest that the downturn in the Community’s
economic growth will be short-lived and that there could be a
slight upturn towards the second half of 1999.

in

difficulties

encountered

exporting
Nevertheless,
the
to third countries, and the risks of a
Community steel
deflection of
international supply flows as a result of an
increase of protectionist measures, make for a degree of uncer-
tainty as to whether the Union’s steel market can stabilise on a
is in the interest of all
lasting basis.
Community steel market operators to keep a close watch on
developments.

In this context,

it

1. ECONOMIC SITUATION IN THE EUROPEAN UNION

The spring 1999 economic forecasts confirm the GDP growth
rates for the Union and the euro zone for 1998 of 2,9 % and
3 % respectively, as predicted in the previous forecasts last
autumn.

Where the individual demand components are concerned,
exports and equipment investment are likely to suffer more
in the
consumption and
in 1999, while
construction sector are likely to be steadier. Nevertheless,
in
1999 investment growth in general should amound to 3,7 %
compared with 4,9 % in 1998, and the growth in private
consumption should level off at 2,6 %.

investment

Inflation, which has been steadily falling since 1991 and was
down to 1,5 % in 1998, should be further reduced in 1999,
possibly falling to 1,3 %, which would be a historic low for
recent decades.

Employment increased by 1,1 % in 1998, the highest rate of
increase since 1990, and should increase still further in 1999
although less rapidly because of the slowing down of growth.

These growth rates are attributable to the buoyancy of internal
demand although, as a result of the deteriorating international
climate, the Community economy slowed down somewhat in
the second half of 1998, a reduction in exports having affected
industrial production and investment.

Moreover, the temporary nature of the downturn in production
predicted for 1999 should not bring about major job losses,
and there should be a reduction of 0,4 percentage points in the
rate of unemployment, falling to 9,6 % of the working popu-
lation compared with 10 % in 1998.

For 1999 the latest forecasts indicate a slower rate of growth
for the Community economy compared with the autumn 1998
forecasts. Accordingly, it is expected that the GDP growth rates
for the European Union and the euro zone will fall to 2,1 %
and 2,2 % respectively,
downward
adjustment of 0,3 and 0,4 percentage points respectively and

corresponding

to a

The major progress achieved in recent years with regard to
budgetary consolidation has made it possible to reduce the
European Union’s average public deficit from 6,1 % of GDP
in 1993 to 2,3 % in 1997 and 1,5 % in 1998. The Union’s
average deficit should still be 1,5 % in 1999 despite slower
growth and less far-reaching budgetary adjustments.

C 206/8

EN

Official Journal of the European Communities

21.7.1999

2. STEEL MARKET SITUATION AND OUTLOOK

2.1. CRUDE STEEL PRODUCTION IN THE EUROPEAN UNION

Community steel production started to plummet in August
1998 following a fairly lengthy period of significant month-
on-month increases. This downward spiral culminated in
cancelling out over the year as a whole the average increase
of about 7 % recorded mid-year.

The very significant deterioration in market conditions in the
second half of the year and the fall in stocks resulted in major
reductions in steel production of 10 % and 20 % in November
and December
total
respectively, with the
production for 1998 levelled off at around the 1997 figure
(+ 0,1 %) at 159,6 million tonnes, 1,5 % down on the
estimate in the previous programme (1).

result

that

In the first three months of 1999 Community steel production
continued to shrink significantly and the cumulative reduction
in the first quarter compared with the corresponding quarter of
1998 was nearly 10 %.

In April and May production again fell significantly, with the
result that even allowing for a slowing down in this downwad
the year
for
trend it
production will amount
to around 76,5 million tonnes, a
9,7 % reduction compared with the first half of 1998.

is estimated that

the first half of

However, it is likely that following a period of reduction of
stocks and with lower import volumes compared with 1998
Community production will
increase in the second half of
1999. Consequently, the combined effect of these factors and
the more vigorous demand that is foreseeable from the user
sectors should result in a level of production of 78,5 million
tonnes in the second half of the year, an increase of around
4,5 % compared with the last six months of 1998.

Steel production in the Union for the year as a whole should
therefore amount
i.e. 2,6 %
down on the previous year and 1 % less than the previous
estimate (1). The increase in production in the second half of
1999 should therefore result in better utilisation of capacity.

to around 155 million tonnes,

to suffer

from the very adverse effects of

However, caution is still required, since the world market
continues
the
upheavals caused by oversupply from certain geographical
the inter-
areas, although the effects of
national market on the Union’s trade in steel should be less
significant than in 1998.

the disturbance of

(1) OJ C 24, 29.1.1999.

supply and demand(cid:146)
The table in Annex 1 (cid:145)Crude steel
summarises the volumes and trends for EU steel consumption,
external trade, production and stocks and estimates the changes
expected in the second half of 1999 and the year as a whole.

2.2. OUTLOOK FOR THE SECOND HALF OF 1999 AND FOR THE

YEAR AS A WHOLE

The significant slowdown in the Community economy in 1999,
attributable to the international economic crisis which has
industrial production and investment, should
affected trade,
is
be short-lived and a recovery, albeit a modest one,
expected for the second half of the year.

Against this background, the end of a lengthy period of a
general widespread reduction of stocks combined with an
improvement in the external climate should gradually restore
industrial confidence. This would help to improve overall
demand somewhat as a result of an upturn in inter-industry
orders and the growth of household consumption. In addition,
the steady improvement on the Asian markets in particular, the
good levels of external order flows and the strength of the
American dollar could promote a slight recovery in exports
in the course of the year unless there is renewed external
protectionism.

in the
The
improvement
therefore suggests that
observed in April
increase in economic activity in the course of
gradual
second half of 1999 given a favourable consumer climate.

indicator
there will be a
the

confidence

industrial

In this context, industrial activity should gradually intensify, in
particular in the main steel-using sectors where the demand for
steel was adversely affected until the beginning of 1999 by the
need to reduce stocks.

At recent meetings, however,
the steel producers expressed
in
their concerns not so much about
the significant
apparent steel consumption but more with regard to imports
and protectionist measures taken or planned by certain third
countries. They fear a possible deflection of export flows to the
Community market which will prevent the necessary increase
in internal steel prices.

fall

The steel dealers, on the other hand, were moderately opti-
mistic at those meetings since they are favourably disposed
towards the developments on the Community steel market
from which in fact
imports would seem to have
either already disappeared entirely or be likely to do so rapidly.

(cid:145)exotic(cid:146)

21.7.1999

EN

Official Journal of the European Communities

C 206/9

the gradual upturn in activity in the main
Consequently,
steel-using sectors (some of which are the subject of specific
analyses in this programme) suggests an improvement
in
consumption of steel products during the second half of
1999. Even despite certain export difficulties,
the motor
domestic
to enjoy
industry will
demand. The electrical engineering and electronics industries
should stay on track. As the mechanical engineering industry is
more affected by export difficulties, activity will be more
sluggish in that sector, while the construction sector will
strengthen its long-term growth performance.

considerable

continue

are

prospects

undoubtedly

forecast has

the market situation for these products
The worsening of
announced in the previous
therefore been
confirmed, although it should be put into the perspective to
some extent because of the excellent initial situation. Moreover,
there
gradual
good
improvement in activity in these branches of industry, with
the tubes sector, given the recuction in
the exception of
import volumes,
the destocking process and
the end of
especially the good progress being made in the user sectors,
heralding a recovery in demand in the months ahead.
Accordingly, for 1999 as a whole, with the exception of the
tuibes sector which is in a very poor situation, the results for
these branches of industry should be only slightly down on
1998.

of

a

This intensification of activity in the second half of 1999
should enable a considerable amount of catching-up to take
place following the considerable fall
in demand in the first
half of the year, in particular because of destocking, possibly
culminating for 1999 as a whole in steel consumption results
slightly below the figures for 1998.

The end of the destocking process should therefore be reflected
in more vigorous steel demand in the second half of 1999 from
which the domestic industry should be able to derive greater
benefit.

The steel market situation should therefore improve somewhat
in the course of the year, helping to push up steel prices
gradually in order to guarantee the return on the capital
invested in the sector.

A. Steel tubes

the year. Accordingly,

As indicated in the previous programme, the excellent results
in terms of steel tube sales volumes in the first half of 1998
were virtually wiped out by the slump in the market for these
total
prodcts in the second half of
production of steel tubes in the Union would seem to have
increased in 1998 by only about 1,9 %, attributable solely to a
significant increase in the production of
large welded tubes
based on existing export commitments which have not since
been renewed. In the first half of 1999 therefore the continued
heavy pressure of
imports and especially very low-priced
imports combined with the poor situation in the oil and gas
the reduction in stocks
sector and the adverse effects of
to the
considerably influenced tube-manufacturing activity,
point of entailing a further reduction in the capacity utilisation
rates which were already very low in this sector, resulting in
part-time working.

Tables 2 and 2a in the Annexes contain activity indicators for
the main steel-using sectors for the second half of 1999 and for
these indicators should be
the year as a whole. However,
treated with caution since the basic data were supplied by
the sectors concerned and there is not unanimous agreement
on them.

The present situation in the Community tube-manufacturing
industry may be described as dramatic, since there is no sign
of a reversal fo the trend in the market for these products in
the short term.

2.2.1. Primary processing

the products in question, on account of

Activity in primary processing as a whole slowed down
considerably following the break (in the second half of 1998)
in the economic upturn in evidence since the beginning of the
year. Since the early months of 1999 there has been a
continuation of the downward trends in the demand for and
the prices of
the
combined effects of destocking and the general economic
slowdown in the European Union in particular. While the
lengthy period of
main user sectors continued during that
downturn to record good results as
in
particular,
the considerable contraction in the demand for
and the prices of the products manufactured by the primary
processing industries culminated in growing pessimism in these
industries, in particular as regards the steel tube manufacturers.

regards volumes

In the seamless tubes sector, the constant fall in demand since
the second half of 1998 as a result of the cancellation of
orders, the lack of new oil company projects and the trend
towards a reduction in OCTG stocks continued until the first
half of 1999 without giving any signs of stabilising. For the
second half of the year the best that Community producers are
expecting is a more stable market situation, but
the 25 %
reduction in production estimated for 1999 looks unavoidable.

In the case of small welded tubes (up to 406,4 mm in diameter)
market conditions have also worsened since the end of 1998
but the good prospects in the main user sectors, the return of
stocks to normal and the reduction in imports suggest that
improvement in activity in the course
there will be gradual
of 1999 which may limit the fall
in production to around
only 2 % for the year as a whole.

C 206/10

EN

Official Journal of the European Communities

21.7.1999

However, the prospects are very poor as regards large welded
tubes (over 406,4 mm in diameter), since although in 1998 it
was possible to maintain a certain level of activity as a result of
existing exports contracts,
in 1999 the lack of new inter-
national
investment projects is likely to give rise to a net
there is widespread
reduction in production. Accordingly,
part-time working in this industry to delay the impending
end of the few contracts in progress and to avoid the current
situation resulting in the complete closure of works.

However, since the economic cycle in this sector, as for the
steel-making industry proper, has been affected by stock trends,
since the end of 1998 there has been a net reduction in new
orders in this sector. However, this can only be a temporary
effect of the need to return stocks to normal, since the motor
industry, the rolling sector’s main customer, is still vry busy.
Nevertheless, given the considerable falling-off
in orders in
recent months, it is not out of the question that the volume
of sales in this sector in 1999 will be 10 % down on 1998, i.e.
a return to the 1996 levels.

B. Drawing (wire and bars)

The volume of sale of products from the wire-drawing sector
increased overall by 3 % in 1998 despite their considerable
reduction in the second half of
the year. Where external
trade in these products is concerned, there was a significant
increase in imports to the EU market even though Community
exports of drawn wire increased in excellent
fashion. The
falling-off in activity observed from the second half of 1998
continued in the first quarter of 1999, in particular as a result
of the widespread reduction surplus stocks. However, there are
signs of an improvement in market conditions in the second
half of the year, enabling it to be estimated that for 1999 as a
whole the fall in volume will be limited to 2 % since activity in
this sector should remain on track in the months ahead given
the expected decline in
the prospects in the user sectors,
imports and the foreseeable increase in exports due to the
increase in the value of the dollar and the sustained growth
of the American economy.

Where the bar-drawing industry is concerned,
the overall
outcome for 1999 will be an increase in the volume of sales
of 7 to 8 %, in particular as a result of the strength of demand
from carmakers. EU steel
trade in this area has increased
considerably, with a 20 % rise in imports and a comparable
trend in Community exports. The 8 to 10 % reduction in
volume observed since the beginning of 1999 seems to be
to the tendency
attributable, as with drawn wire products,
for stocks to return to normal rather
than to an actual
reduction in consumption.

A recovery in demand is expected in the second half of 1999
since, even if activity in the motor industry stabilises, the end
of destocking by users should make it possible to achieve levels
of deliveries in excess of those for the second half of 1998.

C. Cold rolling and forming

Although less spectacular than the last forecast, the results for
the cold-rolled strip industry in 1998 were quite remarkable,
and the industry regards 1998 as the best year in absolute
terms in the post-war period, with a volume of sales which,
although in the final analysis only amounting to 3 %, made it
possible to achieve unprecedented profitability.

forcing it

The downturn has therefore plunged the rolling industry into a
to reduce production by
mood of pessimism,
resorting to part-time working, at a time when the competition
from imports and alternative products on the Community
market is clearly preventing an increase in prices. The rolling
industry is not hiding its scepticism about any improvement in
prospects in the very short term.

Where the forming of wide products is concerned, activity
overall was stable in 1998, with however a slight improvement
in the manufacture of corrugated sheet used in improvement
work on certain types of buildings.

As in other sectors of the primary processing industry the
demand for and prices of both sandwich panels and corrugated
stheet have steadily deteriorated since mid-1998. However, the
causes of these downward trends are attributable not only to
imports but also to the reduction in stocks and a return, for
certain applications, to the use of alternative less expensive
products. The demand for this type of sections also shrank at
the beginning of 1999. Nevertheless, with the slow upward
trend in the construction sector
to be
expected that for 1999 as a whole there will be a consolidation
of the results recorded in 1998 for this sector, which would
therefore continue to utilise its capacity to the extent of only
60 %.

in Europe,

is

it

Unlike the other primary processing sub-sectors, in 1998 the
forming of long products experienced a trend that was more
favourable than expected, with an increase in deliveries of
around 15 %. This
to have been due to a much
weaker recovery in the last two years and the less significant
influence of the economic cycle on developments in the sector.

seems

The downward trend in demand that started towards the end of
1998 continued more markedly until the beginning of 1999.
However, the slowing down of activity in this sector should be
confined to the first half of 1999 with the result that the
volume of sales for the year as whole will be only 2 to 3 %
lower than in 1998. The fragmentation of the sector continues
to encourage mergers, enabling large entities to target the inter-
national market more effectively. The small entities in this
sector should, on the other hand, aim at greater specialisation
to maintain their viability, given the low level of utilisation of
capacity.

21.7.1999

EN

Official Journal of the European Communities

C 206/11

2.2.2. Prospects for the construction sector

The recovery in the construction sector is continuing, following
several years of decline. Overall activity in the construction
sector in the EU increased by around 2 % in 1998, and
further growth in this sector is expected for 1999. The signs
are that in 1999 there will be an upturn in this sector in all the
EU countries
the
construction industry finally seems to have come out of the
is
recession, although the oversupply in the new L(cid:228)nder
delaying the recovery somewhat.

except Denmark.

In Germany

too

Where residential building is concerned, most of the countries
are likely to experience an upturn, as a result of the increase in
household incomes and the fall in interest rates, except in the
case of Denmark where there is a fall in private housing. New
housing starts should be particularly encouraging in France, the
the Netherlands, Belgium, Sweden and
United Kingdom,
Germany.

led by private-sector

Non-residential construction should continue to improve in
1999,
since public-sector
investments are unlikely to do better than achieve stability
following four years of downturn, despite the good prospects
for public-sector activity in Spain, Italy, the Netherlands and
Sweden.

activity

Civil engineering works increased slightly in 1999, given the
Italy,
good results achieved in terms of volume by Spain,
France, the Netherlands and Sweden, and the upturn should
blossom in 1999 as a result of the excellent prospects for this
activity in those countries and a marked improvement in the
situation in Germany in particular.

2.2.3. The motor vehicle market

The results achieved in 1998 with regard to the registration of
motor vehicles in the Union were much better than expected,
with a 7 % increase in volumes compared with 1997. This is
much higher than the 4 % increase expected which would have
placed the motor vehicle market on the average upward trend
observed in the last five years.

1999 since the fall in registrations that is foreseeable at present
for the currenct year will be only 2 % or thereabouts compared
with the 4 % reduction estimated earlier. This revision is
justified by good economic prospects in Spain, heralding an
additional year of considerable growth in registrations, and the
less marked reduction in car registrations in Italy despite the
end of the incentive measures.

Where motor vehicle production is concerned, the Community
industry recorded an increase of around 8 % in 1998,
exceeding the record in absolute terms of 16 million units
manufactured (private cars and light commercial vehicles).
For 1999 as a whole, taking into account the sound level of
exports on the one hand and the lower reduction in regis-
trations expected on the various EU markets on the other,
total production of private cars and light commercial vehicles
by the domestic industry should be about 2,5 % down on
1998, which still represents over 15,5 million units manu-
factured.

2.3. OUTLOOK FOR IMPORTS AND EXPORTS OF

STEEL

PRODUCTS

2.3.1. European Union external trade statistics for steel

The figures available in this field at the time of writing this
programme are more up-to-date than in the past and cover
1998 as a whole for all the European Union countries, though
some countries have provided more recent figures which also
cover the first few months of 1999.

An analysis of the external trade statistics shows an increase of
about 46 % in Community steel imports in 1998 as compared
with 1997, while Community exports fell by around 20 %
during the same period.
Imports slowed down considerably
during the last few months of 1998 compared with the very
sharp rise seen during the first half of the year, generating
much more marked trends. These
figures nevertheless
confirm the spectacular rise in imports onto the Community
market in 1998, in particular in steel products from Asia, with
volumes amounting to almost 4 million tonnes in crude steel
equivalent, about eight times more than in 1997.

The general underestimation of EU markets, attributable to
suprisingly and unexpectedly vigorous internal demand, new
models and lower prices, indicates to what extent the motor
vehicles
trend
compared with the lethargy affecting most other sectors since
autumn 1998.

sector had experienced a quite different

The EU’s external trade statistics for exports in 1998, on the
other hand, point in overall terms to a constant downward
trend throughout the year characterised by a fall of 59 % in
exports to Asia, but a rise in Community exports to the Central
and Eastern European countries (CEEC).

In the first five months of 1999 registrations of new vehicles
continued to increase at a very sustained rate, with a cumu-
lative average increase of 7,6 % at the end of May, with peaks
of 22 % in Spain and 12 % in France. Accordingly, even a
gradual
in the months
ahead followed by a slight change in the trend subsequently
will not prevent very satisfactory results from being achieved in

slowing-down in car

registrations

in steel

The Community market therefore went through a period of
profound upheaval
trade with third countries in
1998, not only causing Community prices to collapse, but
also upsetting the EU’s foreign trade balance, which is tradi-
tionally in surplus but is for the first time negative by about
1,5 million tonnes.

C 206/12

EN

Official Journal of the European Communities

21.7.1999

The first indications are that, during the first half of 1999,
Community steel imports look set to continue to fall due to
a temporary drop in demand for steel, mainly because of the
need for dealers and users to reduce stocks. This may lead to a
sharper drop in Community imports, which for 1999 as a
whole are expected to fall by about 15 % compared with the
very high level seen in 1998.

since the surplus stocks built up in 1998 should be reabsorbed
during the first half of 1999, the current tension on the inter-
national market should start to ease as of the second half of the
year. Steel prices, which have been affected by the substantial
drops in production during the past
few months, should
therefore gradually pick up again after the current period of
stabilisation.

This scenario does not take account of any worsening in the
situation with regard to protectionist measures which may
affect steel trade on the main markets such as that of the
EU. For exports, however, the prospects of
less pressure on
following a gradual recovery in certain
the world market
Asian economies and the strength of
the dollar on the
financial markets suggest that, even if there is not a genuine
upturn in Community steel exports in 1999, they should at
least stabilise at last year’s levels.

The Community steel market, which has become fragile due to
the lack of certainty on the international scene and is now
precarious because of
the crisis in certain
the duration of
parts of the world, does not at the present time offer any
guarantee of stability. The Commission therefore continues to
urge the parties concerned to adopt behaviour commensurate
with realities on this market in order to improve the prospects
as soon as possible and to guarantee long-term stability in the
interest of all operators. The Commission also confirms that it
is available to intervene in the event of unlawful practices and
behaviour inconsistent with the rules of international trade on
the part of all parties concerned. This is in order to safeguard
Community interests in the steel sector.

2.3.2. The world economy in 1999

The world economic growth forecast for 1999 has been revised
downwards several times due to the worsening of the inter-
national economic climate in 1998 following the spillover of
the Asian crisis to other regions, in particular Russia and Latin
America.

Nonetheless, the excellent levels of growth announced in the
USA, the improvement seen during the year in the Community
economy and the stabilising situation in Asia look set to limit
the slowdown in the world economy in 1999, with growth
expected to be around 2 % as compared with the 2,4 %
forecast for 1998.

In this situation, the USA, first and foremost, and the European
Union will probably continue to be the only stable centres of
growth in the world economy since Latin America is in a
recession, as is the CIS.

In the light of
these economic developments, world steel
consumption could fall by about 3 % this year. However,

Despite the sharp reduction in international steel trade this
year, mainly due to the higher degree of self-sufficiently in
some regions, there will still be risks of serious disturbances
to the most open markets if some export flows are redirected,
which may happen as a result of the protectionist environment.

2.3.2.1. The United States of America

The US economy has produced one surprise after another with
its long period of strong growth which is likely to seen an
average rise in GDP of about 3,9 % in 1998 and which
should exceed 6 % during the last quarter of the year.

During the first quarter of 1999, business in the USA increased
by a further 4 to 5 % and this trend looks likely to continue,
with inflation still under control and consumer confidence
remaining firm. Therefore,
even the slowdown expected
during the next few months will do nothing to change the
economy’s role as the major international centre of attraction,
with growth this year put at 2 to 2,5 %.

The rising trends in residential building construction and
motor vehicle sales in particular point to steel consumption
in the USA remaining this year at the high levels seen in 1998.
However,
the foreseeable rise in production now that new
capacity is coming into service combined with the need to
reduce stocks is likely, as a result of the sharp fall
in steel
imports, to reduce the exceptional trade deficit recorded in
1998, which will be helped by the USA’s worsening protec-
tionist climate.

2.3.2.2. Japan

The japanese economy, which was still in recession in 1998,
has seen its GDP fall by 2,5 %, but should stabilise gradually in
1999 following a series of measures by the government.
Despite the low level of private investment, public investment
and the fall in interest rates should therefore boost demand, in
particular
in the residential building sector. Futhermore,
industrial production is also benefiting from these measures
and is increasing, giving the prospect of a rise in steel
consumption during the second half of 1999. As a result,
steel production in Japan looks likely to stabilise following
the period of stock adjustment during the first half of the
year and the country’s steel exports should fall
in view of
the gradual upturn in domestic demand. The latest forecasts
do not, however, provide any hope of an improvement on the
1998 results for 1999 as a whole, at least not in the steel
sector.

21.7.1999

EN

Official Journal of the European Communities

C 206/13

2.3.2.3. The economies of China and South-East Asia

The first signs of recovery in the main economies of South-East
Asia appeared towards the end of 1998 and,
in 1999, the
average growth in this
region could be slightly positive
thanks to the good performance expected in manufacturing
industry in particular. Steel consumption in this
region
should increase by around 2 % in 1999,
in parallel with
domestic production. On the trade front, however, the steel
these countries will remain unchanged
shortage in all of
because of
the delay in making certain investments in the
steel industry. Developments in South Korea, which are very
favourable, are the key to the recovery now taking shape in
this area.

In China, the economy is doing well, with economic growth of
7,5 % in 1998 and expected growth of 6,5 % in 1999.
Investment and domestic consumption will probably continue
to be of fundamental importance for this economy and, during
the second half of the year, activity is expected to speed up in
the mechanical engineering sector as well as in the civilian and
industrial building sectors. Foreign trade, however, is likely to
continue to suffer from the competition exerted by other
countries with devalued currencies. Steel consumption in
China could therefore rise by about 4 % in 1999, suggesting
there will be a slight rise in imports, even taking account of the
foreseeable increase in production.

2.3.2.4. The countries of Latin America

The economies of the Latin American countries were severely
affected by the economic crisis in Asia and the financial crisis
in Russia, especially during the second half of 1998. The
devaluation of the Brazilian currency, which occurred when
the country’s economy was already declining, will this year
affect the business activities of the main trading partners in
this area. As a result,
in 1999 this region is likely to be
faced with a recession, despite the good level of recovery
expected in some countries such as Argentina, Chile and
Peru during the second half of the year. Steel consumption,
which is affected by the very high interest rates following the
devaluation of the Brazilian Real, has been falling in all of the
Latin American countries in 1999, as has domestic production.
Given these prospects, the positive foreign trade balance is in
this area looks likely to shrink given the difficulty of finding
outlets for the surplus on the international market.

2.3.2.5. Economic situation in the Central and Eastern European

countries and the Republics of the CIS

In most of the Central and Eastern European countries (CEEC),
the economic recovery which started in 1994 has remained
undiminished
pronounced
despite
slowdown in some countries of the region. Overall growth
will therefore be less than 1 %.

1998,

very

the

in

1,5 %. The economies of these countries should, however, be
able to further benefit during the second half of the year from
the improvement in the international situation, possibly leading
to a slight
rise in steel consumption which will benefit
domestic production.

In 1998, Russia has again being facing a severe recession after
the
the weak signs of recovery seen 1997 and,
country’s economy is expected to stay on a downward trend.

in 1999,

As it has spread, Russia’s financial crisis has affected the
economies of the other republics and put them on the same
downward slope.

Steel production in this region looks set to fall further in 1999,
in particular because of the difficulty of diposing of stocks
surplus to domestic requirements on the international market.

2.4. PRICE TRENDS

the

considerable

Following
shrinkage
consumption in 1998 due in particular
various regions,
international
they stopped falling at the beginning of 1999.

steel
in
the supply surplus and the disturbance to
though

trade caused steel prices to collapse,

in world
to the crises

On the world market, flat products lost 25 % to 40 % of their
value between the first quarter of 1998 and the beginning of
1999. Long products lost between 15 % and 35 % during the
same period.

However, this downward trend would appear to have come to
an end. For several months, prices have been either steady or
even rising slightly, depending on the products concerned,
especially those of concrete reinforcing bars and hot-rolled coil.

In the USA, the fall in steel prices has paralleled that in the EU.
However, thanks to the buoyancy of the US economy and to
trade measures which have been taken or announced (anti-
dumping and anti-subsidy procedures,
import quotas, etc.),
there has been a reversal in the general price trend since the
end of 1998. The US prices of most products are therefore now
about 15 to 20 % higher than those on the Community
market.

Economic growth in the CEEC could strengthen slighly in the
course of the year, but is unlikely to exceed an average rise of

In Japan and South Korea, the appreciation of the currencies
has to some extent improved the market prices. Nevertheless,
the prices in these countries are generally lower than in the EU,
though the difference is narrowing.

C 206/14

EN

Official Journal of the European Communities

21.7.1999

On the Community market, the lower pressure of imports and
the fall
in production have permitted a return to a better
balance between supply and demand. The unprecedented
price deterioration seen in 1998 thus at
last seems to be
over in the beginning of 1999. Steel prices have therefore
in
recently stabilised and increases can at
particular for hot-rolled coil and long light products, such as
wire rod, concrete reinforcing bars and merchant bars.

last be seen,

As for price changes in the months ahead, the trade measures
announced or launched by the USA will probably in time
achieve their goal of limiting imports to the US market. This
might result
in some exports being redirected towards the
the very
Community market and there is
recently restored but still fragile balance between supply and
demand will be upset. Taking a number of other factors into
account, however, it is nonetheless likely that the onset of the
trend of moderately rising price on the Community market will
be confirmed in the course of the year.

the risk that

2.5. TRENDS BY PRODUCTS

Flat products

(cid:151) Hot-rolled coil

The market for hot-rolled coil has improved considerably
following the difficulties seen in 1998. This improvement is
the result of the drop in imports due in particular to the
start of anti-dumping and anti-subsidy action, the rise in
the dollar to the euro which has boosted
the value of
in the stocks held by dealers and
exports and the fall
service centres. The improved balance between supply
therefore pushed prices up slightly
and demand has
during the
confirmed by
first quarter of 1999,
quotations during the second quarter.

as

(cid:151) Cold-rolled sheet

There is good demand for cold-rolled sheet, user and
merchant stocks have returned to acceptable levels and
imports have also fallen sharply. However, although these
factors should help to push up prices, these settled at an
all-time low in the first quarter of the year. This trend
could, however, be bucked during the second quarter
given
exports,
however, the situation remains difficult as price levels on
the world market are not profitable.

healthier market

situation.

For

the

effect on deliveries by Community producers. At the same
time, the supply from third countries is bringing strong
level of market prices,
pressure to bear on the general
which continued to fall during the first quarter of
the
year. Nonetheless,
there are two positive factors which
should help to raise prices during the next few months,
namely the continuing strength of demand from the
motor vehicle industry and the upward trend in the
prices of hot-rolled coil.

(cid:151) Quarto plate

The export market
for plate is currently under strong
pressure and trade action by the USA (anti-dumping
measures, import quotas, etc.) is tending to redirect inter-
national trade flows to other destinations. There is good
demand on the Community market, except in the large
welded tubes sector, which is still suffering from the
absence of an upturn in the oil industry. The anti-dumping
action brought by Community producers against certain
third countries, do, however, seem to have contributed to
in imports of heavy sheet onto the Community
the fall
market. This factor
together with the return to stock
levels more in line with consumption should therefore
enable the price trend to be reversed as from the second
quarter of the year.

Long products

(cid:151) Heavy sections and beams

Imports of these products increased considerably in 1998
and levels remain high, in particular in products from the
CEEC and South Korea. However, there is strong demand
on all of the Community markets and stocks have fallen
back to normal levels. The prices of beams can therefore be
expected to rise for deliveries starting in the second quarter.

For exports, the demand from Asia is weak and subject to
strong pressure on prices. Business
region is
therefore not very attractive to Community producers.
the foreign supply on the US market has
Moreover,
trade
gradually brought prices down and the threat of
action by the US authorities may well reduce access to
this market in the course of the year.

in this

(cid:151) Wire rod

(cid:151) Coated sheet

The crisis in South-East Asia is continuing to make itself
felt on the Community market,
in particular due to the
continuing surplus in supply compared with demand. The
strong growth in imports of coated sheet has had a direct

On the Community market, the good performance in the
motor vehicle sector (high-quality wire rod), a certain
amount of recovery in the building industry (wire rod for
welded mesh) and the return of stocks to normal mean that
prices can be expected to pick up to some extent
throughout the year. On the world market, on the other

21.7.1999

EN

Official Journal of the European Communities

C 206/15

hand, competition is stiff and prices are not always prof-
itable. The signs of economic recovery in South-East Asia
nevertheless suggest there will be less pressure from Korean
wire rod on the export market,
thereby reducing the
pressure on prices.

The gloomy state of the market at the beginning of the year
was followed first of all by a return to stability and then a
slight improvement back in April and the second half of the
year should see demand and prices continuing on their upward
trends.

(cid:151) Concrete reinforcing bars

This product is the first to have been able to reverse the
negative price trend seen in 1998, which it has been doing
since the beginning of the year. The buoyant demand in
most of the major Community markets and the recovery
which seems to be taking shape in the building and
construction industries
trend to
continue or even to quicken its pace over the next few
months.

should enable

this

Exports are, however, in a less healthy situation and prices
have deteriorated severely due to the competition from all
of the producer countries (CEEC, Russia, Turkey, South-East
Asia, etc).

(cid:151) Merchant bars

light

As with other
long products, stocks have fallen
considerably, consumption is picking up again and prices
are again starting to rise. The temporary rise in the rates for
few weeks will push up
scrap seen during the last
production costs, but should also help to bolster
the
upward trend in the prices for these products.

2.6. CRUDE STEEL BALANCE FOR THE SECOND HALF OF 1999
AND REVISION OF FORECASTS FOR 1999 AS A WHOLE

More than in 1998, the Community economy this year seems
destined to suffer from the negative impact of deterioration of
the international environment. The marked slowdown in
growth in the Community as a result of this outside factor
should, however, not last very long as a gradual improvement
in the economy is already expected during the second half of
the year under the effects of the foreseeable recovery in the
world economy.

The recovery of industrial activity which started to take shape
after the first few months of the year should be confirmed
during the course of the year, providing good prospects for a
rise in steel demand.

The consequences of stocks returning to normal and imports
falling combined with a gradual
increase in new orders are
therefore likely to improve the conditions on the Community
steel market, which was very depressed up to the end of the
first quarter of the year.

Any worsening in foreign protectionism could, however, cast a
encouraging prospects on the
few shadows over
the
Community steel market,
to which disruptive international
trade might be redirected.

On the basis of the trends announced in this programme, as
indicated in Table 1 (Crude steel supply and demand), real steel
consumption during the second half of 1999 could reach 78,5
million tonnes, an increase of 1,9 % on the figure for the same
period in 1998. Apparent consumption, with the same figure
of 78,5 million tonnes now that the period of stock reduction
is over, should show an increase of 3,2 %. Given the stabili-
sation of imports and the slight rise in exports compared with
the respective volumes for the second half of 1998, equilibrium
production is expected to be 78,5 million tonnes, an increase
of 4,5 % on Community steel production during the second
half of last year.

The improvements expected during the second half of the year
following a very mediocre first half of the year lead to the
forecast, for 1999 as a whole, that real consumpion will fall
by 1,4 % compared with the 1998 figure
to settle at
156 million tonnes. Given the slight fall
in stocks, apparent
steel consumption is likely to be 154 million tonnes, 4,5 %
lower than in 1998. In view of the drop of about 15 % in
imports and the slight rise in exports, equilibrium production
is estimated at 155 million tonnes, down by 2,9 % compared
with last year’s result.

3. RAW MATERIALS

3.1. THE SCRAP MARKET

The fall in world steel production following the deterioration in
the economic situation in various countries led to a general fall
in demand and scrapprices throughout 1998.

At the beginning of 1999, the prices of this raw material for
the steel industry recovered slightly on the US and Community
markets. The prospects for 1999 are for a gradual recovery, for
various reasons, in particular the increase in orders from Korea
and Turkey,
the new electric steelworks which have been
brought into service, notably in the USA, the fall in shipping
costs following the surge at the end of 1998 and the upturn in
the prices of steel products.

C 206/16

EN

Official Journal of the European Communities

21.7.1999

3.2.

IRON ORE

After four consecutive years of rising, the prices of mineral ore
fell in 1998 due to the reduction in demand as a result of the
Asian crisis, which has
severely affected the world steel
industry and caused steel prices to slump across the board.

After a rise of 0,7 % in 1998, world consumption of zinc could
see an increase of 2,2 % this year, taking it to 8,05 million
tonnes. In the Community, zinc consumption is not expected
to increase by more than about 1,7 % during 1999 as a whole.

in surplus at the beginning of
Steel supply, which was still
1999 given the relatively weak level of demand, has had a
tangible impact on world steel production, resulting in the
negotiations to reduce iron ore prices, which in 1999 will be
an average of 11 % lower than in 1998.

Steel demand should pick up again to some extent from the
second half of the year, however, and this should gradually
increase world steel production and iron ore consumption.
The prices of this raw material could then change slightly to
bring them in line with market conditions in the year 2000.

The pellets market has suffered as a result of the competition
from scrap and pig iron, the prices of which have plummeted.
The effects have been limited to the modest quantities of DRI
marketed since almost all of this raw material is consumed by
producers themselves. This situation has also not any effect on
the expansion of international capacity which, following the
addition of a further 10 million tonnes, exceeds 40 million
tonnes, with 5 million tonnes of new capacity due to be
coming into service in the course of the year.

3.3. FERRO-ALLOYS

Following the gradual deterioration in the market conditions
during the second half of 1998, the first half of the year has
been marked by a recovery in the demand for ferro-alloys and
this trend is expected to continue until the end of the year. In
the meantime, the reduction in market supply following the
production cutback has made it possible to stop the fall
in
prices, which have finally stabilised.

During the second half of the year, the market is expected to
enabling the
remain in a satisfactory state of balance,
assumption to be made that the price of ferro-alloys will be
stable or rising slightly.

3.4. TIN, ZINC AND NICKEL

In 1998, tin production increased by about 5 % compared with
1997, while apparent consumption oft this metal fell by 3 %.
Following a period of stability at the beginning of the year, the
second half of
the year is expected to see a slowdown in
exports from China which should provide a better balance
on the market and push up prices for the metal.

World production of this raw material, which rose by 2,2 % in
1998, could rise again by 2,1 % in 1999 to 8,2 % million
tonnes.

Following a period of weakness, zinc prices have picked up to
a rate of just over USD 1 000 per tonne, a figure which looks
set to remain stable until the end of the year.

For 1999 as a whole, the International Nickel Group puts the
world balance between nickel supply and demand at 1,04
million tonnes. World nickel production in 1999 should
therefore
for
consumption the same figure would represent an increase of
the increase in nickel
3 %. On the Community market,
consumption in 1999 should be higher
still at 412 000
tonnes, up 8 % on 1998.

rise by 2 % compared with 1998, while

the year because of

this metal have been picking up since the
The prices of
beginning of
the buoyant demand for
steel from Western countries, the continuous fall in stocks on
the LME and the announced production cuts. Nickel rates could
therefore stabilise between now and the end of the year.

4. EMPLOYMENT

the Community,

Throughout
situation is
changing all the time, in particular because of the continuing
pace of technological development and the need for companies
to remain competitive.

the employment

the steel

industry also demands more highly-
Therefore,
qualified workers capable of adapting to the higher level of
skills required. The efficient management of human resources
has thus become an essential factor for success in the steel
market, which is becoming increasingly globalised and
competitive. At the same time, the development of a forward-
looking strategy to anticipate coming changes isnow of prime
importance as a means to enable companies to adapt gradually.

in the steel

industry is
The trend as regards employment
therefore towards increasing specialisation,
in line with the
competitive advantage which the European Union generally
seems to have in the production of high-quality products.
However,
in industry resulting in automated
production techniques and the trend toward business concen-
trations along with the Asian crisis and the protectionist
measures taken in the US market are increasing the threats
to employment in the Community steel industry. In addition

the changes

21.7.1999

EN

Official Journal of the European Communities

C 206/17

to the jobs which have been shed, the widespread availability of
early retirement over a large number of years has clearly upset
the age pyramid in the Community steel industry and led to a
loss of skills among the workforce in companies. Since this
scheme has imposed very high costs on the Member States,
greater preference isnow being given to alternative schemes,
some of them new in kind, to minimise the social impact of
job cuts while at the same time reducing the loss of skills
within companies.

Net job losses in 1999 will be around 11 000, according to the
most recent estimates. This figure still reflects the difficulties in
the markets, even if it is not comparable with the number of
jobs shed during the years in which the steel industry faced
serious crisis. The Commission will continue to apply its social

policy to workers in the industry who are affected by restruc-
turing or closure and, except
for training, which may be
co-financed by the ESF, all other measures provided in
retraining under Article
bilateral agreements on aid for
56(2)(b) of
the
Treaty expires on 23 July 2002.

the ECSC Treaty will be maintained until

The 11 000 job losses, or thereabout, expected in 1999 do not,
however, represent the number of workers who will be eligible
for ECSC aid since some Member States have not signed up to
the restructuring policy and, in addition, the aid for retraining
in 1999 will also take account of job losses last year. The funds
in the ECSC’s amending budget for traditional aid for retraining
in the coal and steel industries amount to EUR 75 million.

ANNEX

Table 1

Crude steel supply and demand (1)

EU-15

Outturn

Estimate

Forecast

(million tonnes)

1995

1996

1997

first half of
1998

second half of
1998 (R1)

1998
(R1)

first half of
1999

second half of
1999

1999

Apparent user
consumption (a)

Change
stocks (b)

in merchant

Apparent consumption

Imports EU-15

Exports EU-15

Changes
stocks

in

producer

Production

142,6

139,4

149,8

1,3

145,6

16,5

21,6

(cid:150) 4,0

135,4

12,2

28,0

1,0

150,8

14,4

24,0

81,2

4,0

85,2

11,7

10,0

77,0

158,2

(cid:150) 1,0

76,0

9,6

9,7

3,0

161,2

21,3

19,7

5,0

4,0

(cid:150) 1,0

1,0

(cid:150) 1,0

0,0

155,7

147,2

159,4

84,5

75,1

159,6

77,5

(cid:150) 2,0

75,5

9,0

10,0

0,0

76,5

78,5

0,0

78,5

9,0

10,0

156,0

(cid:150) 2,0

154,0

18,0

20,0

(cid:150) 1,0

(cid:150) 1,0

78,5

155,0

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

(1) Conversion factor of finished products to crude steel: 1.11.

C 206/18

EN

Official Journal of the European Communities

21.7.1999

Table 2

Indicators of activity (cid:151) EU-12 (1)

(Not seasonally adjusted)

Sector

Periods

Second half of 1999
(Second half of 1998 = 100)

Second half of 1998
(Second half of 1997 = 100)

1999
(1998 = 100)

1998
(1997 = 100)

Manufacture of metal articles

Mechanical engineering

Electrical engineering

Motor vehicles

Other means of transport

Building/civil engineering

102,9

102,4

103,5

101,6

104,7

103,8

104,6

103,4

105,8

115,3

107,0

100,8

104,5

104,8

106,0

109,1

104,5

101,3

103,3

102,2

104,3

103,1

106,8

102,2

(1) 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-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.

Table 2(a)

Trends in the steel-consuming sectors in the main producer countries (1)

(Activity indicators (2))

Member States

Sector/indicator

Manufacture of metal articles

Mechanical engineering

Electrical engineering

Motor vehicles

Other means of transport

Building/civil engineering

Germany

France

Italy

United Kingdom

Spain

II/1999

1999

II/1999

1999

II/1999

1999

II/1999

1999

II/1999

1999

102,0

101,0

102,0

100,0

106,0

102,0

106,5

106,0

106,5

117,0

107,9

97,3

103,0

104,0

104,0

101,0

105,0

102,0

103,0

103,0

105,0

102,0

106,0

102,0

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

109,0

109,5

112,2

110,2

110,2

107,0

108,0

107,5

112,0

109,0

110,0

106,7

(1) Source: National steel users’ associations.
(2) For each country:

(cid:151) first column, activity indicator second half of 1999 (second half of 1998 = 100),
(cid:151) second column, activity indicator (1998 = 100).

21.7.1999

EN

Official Journal of the European Communities

C 206/19

Table 3

Changes in the numbers employed in the steel industry

(including apprentices)

Member State

Number of employees
(in ’000)

Austria

Belgium

Denmark

Germany

Greece

Spain

France

Finland

Ireland

Italy

Luxembourg

Netherlands

Portugal

Sweden

United Kingdom

EU-15 (2)

(Reference month)

(Most recent month) (1)

12,5 (December 1997)

12,2 (December 1998)

20,4 (December 1997)

20,3 (December 1998)

1,2 (December 1997)

1,2 (December 1998)

81,3 (December 1997)

79,7 (December 1998)

2,1 (January 1998)

2,0 (January 1999)

22,8 (December 1997)

22,5 (December 1998)

38,3 (December 1997)

38,0 (December 1998)

7,8 (December 1997)

0,4 (December 1996)

8,0 (December 1998)

0,4 (December 1997)

38,0 (December 1997)

38,4 (December 1998)

4,3 (November 1997)

4,2 (November 1998)

12,0 (December 1997)

11,9 (December 1998)

1,8 (December 1997)

1,8 (December 1998)

13,5 (January 1998)

13,3 (January 1999)

35,2 (December 1997)

32,5 (December 1998)

291,6 (1997)

286,4 (1998)

Source: Eurostat.
(1) Most recent figures available.
(2) As the reference period is not the same for all countries, this average is only indicative.

Change
(%)

(cid:150) 2,4

(cid:150) 0,5

0,0

(cid:150) 2,0

(cid:150) 4,8

(cid:150) 1,3

(cid:150) 0,8

2,6

0,0

1,1

(cid:150) 2,3

(cid:150) 0,8

(cid:150) 10,0

(cid:150) 1,5

(cid:150) 7,7

(cid:150) 1,8

Non-opposition to a notified concentration

(Case No IV/M.1493 (cid:151) United Technologies/Sundstrand)

(1999/C 206/05)

(Text with EEA relevance)

On 25 May 1999, the Commission decided not to oppose the above notified concentration and to declare
it compatible with the common market. This decision is based on Article 6(1)(b) of Council Regulation
(EEC) No 4064/89. The full text of the decision is only available in English and will be made public after it
is cleared of any business secrets it may contain. It will be available:
(cid:151) as a paper version through the sales offices of the Office for Official Publications of the European

Communities (see list on the last page),

(cid:151) in electronic form in the (cid:145)CEN(cid:146) version of the CELEX database, under document number 399M1493.
CELEX is the computerised documentation system of European Community law; for more information
concerning subscriptions please contact:
EUR-OP,
Information, Marketing and Public Relations (OP/4B),
2, rue Mercier,
L-2985 Luxembourg.
Tel. (352) 29 29-42455, fax (352) 29 29-42763.