Information from the Commission - Forward programme for steel for the year 2000 (Text with EEA relevance)
Date: 2000-01-29
Institutions: European Commission
Subjects: EU production, EU situation, economic forecasting, iron and steel industry, steel, supply and demand

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FORWARD PROGRAMME FOR STEEL FOR THE YEAR 2000

(2000/C 27/02)

(Text with EEA relevance)

INTRODUCTION

The economic upturn experienced by the European Union
since the autumn is likely to continue to gain momentum in
the year 2000.

Monetary conditions in the euro zone gave a substantial boost
to final demand. Inflation remained particularly low in the euro
zone, at 1,2 %, despite the increase in oil prices (doubling of
the price of a barrel of oil since January 1999) and the
reduction in the value of the euro relative to the US dollar
which makes imported products more expensive.

Buoyed by this increasingly favourable economic trend and
more sustained world growth as a result in particular of the
expected consolidation of the economic recovery in Asia, the
Community industry is likely to have to cope in the year 2000
with consistently strong internal demand and a vigorous catch-
ing-up process on the export front.

The foreseeable acceleration of industrial activity, in particular
in the main steel-using sectors, suggest that there will be an
increase in consumption of steel products in the course of the
year 2000, accompanied by an increase in demand from
outside the European Union, given a more stable and more
promising international environment.

These factors as a whole should therefore contribute to the
favourable development of the conditions on the Community
steel market in the year 2000, the first signs of which were
already visible towards mid-1999 in terms both of prices and
volumes.

Consequently, in the year 2000 the Community steel industry
should enjoy a healthier internal and international market
situation with substantial prospects of a recovery in the quanti-
tative and financial results necessary for increasingly efficient
business management.

While sharing the optimism of the operators, the Commission
nevertheless issues a renewed call for prudence in individual
strategies
the
Community steel market which still remains very open and
competitive.

to guarantee lasting stability for

in order

1. ECONOMIC SITUATION IN THE EUROPEAN UNION

In terms of economic growth 1999 should finish better than it
the year was marked by the
started. The first half of
consequences of the crisis in the emerging economies which
depressed the European Union’s external
trade. Business
leading to a stagnation in industrial
confidence was affected,
household
although
production
consumption remained strong and enabled these temporary
difficulties to be surmounted. In the second half of the year
economic activity picked up thanks to strong internal demand
and an upturn in external demand connected with the recovery
of world growth, in particular in Asia.

period,

during

the

the last

the fact

few years,

The downward trend in unemployment over the last few years
has not been especially adversely affected by the slowdown in
growth. This can be explained by the further growth in
employment over
the
external pressure has mainly affected the manufacturing
the
than 20 % of
for
sector which now accounts
working population, and the fact
the slowdown has
been regarded as temporary right from the start, which has
limited job-shedding. All in all, because of the losses in the first
half of the year, GDP growth in the EU is likely to be slightly
above 2 % in 1999 compared with 2,6 % in 1998. However,
the underlying quarterly profile picked up in the course of
1999.

less
that

that

The year 2000 should guarantee a continuation of this trend,
and the EU’s GDP growth should be around 3 % for the year as
a whole.
Increasingly strong internal demand should be
matched by a recovery in external demand consistent with
the recovery under way with regard to world growth and the
comparatively favourable position of the European economies.
Where the larger Member States are concerned, France, the
United Kingdom and Spain should experience rather more
sustained economic activity than Germany and Italy which,
in addition to the structural difficulties resulting from their
recent
than
averagely affected by the external pressure compared with the
other European Union countries. Unemployment
should
in the EU in 2000 while inflation should
continue to fall
increase slightly but still be well below 2 %. Public deficits
should continue to fall as a percentage of GDP in 2000.

seem to have been more

economic past,

2. STEEL MARKET SITUATION AND OUTLOOK

2.1. Crude steel production in the European Union

Community steel production in the first half of 1999 amounted
to only 78,3 million tonnes, a reduction of 7,4 % compared
with the level in the first half of 1998.

In the third quarter of 1999 steel production in the European
Union again fell slightly and then gradually levelled off. With
the stock adjustment period, which caused a
the end of
the beginning of
significant reduction in steel demand at
1999, and following a net
reduction in imports of steel
products into the European Union, there has been a gradual
in various economic factors, suggesting that
improvement
Community steel production is
likely to increase in the
months ahead.

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Even though cumulative production in the first nine months of
1999 fell significantly (by 6,1 %) compared with the level in the
same period 1998,
the trend has been reversed since the
beginning of the fourth quarter, giving a total steel production
figure of around 156 million tonnes at the end of 1999, i.e. a
figure slightly above that indicated in the previous forward
programme (1), corresponding to a 2,3 % reduction compared
with total production in 1998.

Enjoying the full benefit of this economic recovery, the main
steel-using sectors, especially the ones more exposed to world
competition, such as the mechanical and electrical engineering
industries, experienced a marked improvement in activity, in
particular in the second half of 1999. In the case of steel, these
developments resulted in an increasingly marked improvement
in demand and consequently a recovery in prices, albeit
varying according to the products concerned.

The improvement in conditions on the steel market in the
second half of 1999 looks likely to continue during the year
2000, reflecting a slight upturn in economic activity in general
in the European Union. This more favourable climate should
result in a significant increase in domestic steel production,
giving a possible figure of 89 million tonnes for the first half
of the year and 159 million tonnnes for the year 2000 as a
whole,
the
corresponding levels for 1999.

increases of 6 % and 1,9 % respectively over

During recent consultations, European Union steel producers
were satisfied both by the very favourable trend in demand
since the summer of 1999 and the reversal of
the price
trend in the course of the year. They nevertheless fear that
in the year 2000 the likely increase in certain disruptive
imports might
jeopardise the Community’s recovery phase,
the conditions for which, although markedly better than at
the beginning of 1999, are still tinged with uncertainty.

Consequently, steel production in the year 2000 could be close
to the record level of 1998, offering the prospect of a return to
excellent capacity utilisation rates.

However, it should be pointed out that the international steel
market situation is still under pressure from oversupply, which
represents a latent risk factor for promising markets such as
the European Union’s very open and competitive one.
Consequently,
there is every reason to be prudent when
drawing up production and supply programmes so as to
avoid a repetition of the damaging phenomenon encountered
the
so long ago of a temporary destabilisation of
not
Community
exceeding
demand to a very great extent.

steel market because of

supply

(cid:145)Crude steel

The table in Annex I
supply and demand(cid:146)
summarises the volumes and trends for European Union steel
consumption, external
trade, production and stocks, and
estimates the changes expected in the first half of the year
2000 and the year as a whole.

2.2. Outlook for the year 2000

stated in the previous programme,

As
the Community
economy experienced a fairly marked reversal of the trend in
the summer of 1999,
in particular as a result of a very
significant increase in external demand, prompting a notable
improvement in business confidence. The improvement in the
general economic climate in the course of 1999 was also a
consequence of the steady increase in the consumer confidence
indicator, with consumers showing greater optimism about
short-term growth prospects in the European Union.

Following the stock adjustment period at the beginning of
1999,
internal demand steadily increased, and there was a
the year
spectacular export boom in the second half of
following the upturn in world growth, in particular in certain
Asian countries.

(1) OJ C 24, 29.1.1999.

The European Union steel dealers, on the other land, while
satisfied with the results achieved in terms of volumes and
prices in the course of 1999, were more optimistic than the
producers about the market prospects for the year 2000. They
consider that the economic improvements expected at world
level and in the European Union can only be beneficial to steel
trading.

confidence

assumption of an improvement

On the
in world and
Community economic trends in the course of the year 2000,
business
guaranteeing
steel-using
sustained industrial activity. Consequently,
sectors should continue to be very active, at least during the
first six months of the year, offering a prospect of a significant
increase in steel consumption.

remain

should

high,

the

The construction sector and the mechanical and electrical
engineering industries should continue to experience growth
in the year 2000,
industry should,
few years,
following the extraordinary results of
achieve excellent figures despite the slight levelling-off that is
on the cards, while shipbuilding activity will continue to be at
a very low level because of inernational competition.

the motor vehicle

the last

These trends suggest that the demand for steel will be more
vigorous, especially in the first half of the year, albeit with the
risk of accentuation of the economic cycle as a result of the
building-up of stocks and speculative buying.

Nonetheless, even on the assumption of a slight reduction in
the second half of the year, the overall results for the year 2000
as a whole in terms of steel demand, consumption and prices
will be fairly good and in any case better than in 1999.

Tables 2 and 2a in the Annexes contain activity indicators for
the main steel-using sectors for the year 2000. However, the
indicators should be treated with caution since the basic data
were supllied by the sectors concerned and there is not
unanimous agreement on them.

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2.2.1. Primary processing

The need to adjust
determined activity
branches to a greater or lesser extent throughout 1999.

and the general
slowdown
various primary processing

stocks
in the

The contraction in demand and the reduction in prices at the
beginning of
the year, which exacerbated the mood of
pessimism prevailing in the various sectors at the time, have
however been replaced by a gradual recovery in the conditions
on the market for these branches’ products, gradually making
for a mood of optimism among most of the operators, with the
notable exception of steel tube manufacturers.

The recovery in demand following the normalisation of stocks,
the reduction in imports and the increase in prices were the
main factors making for an improvement in the economic
climate in all the branches except the tube sector which is
still faced with critical market conditions.

Since the European Union’s economic prospects for the year
2000 are more favourable, and on the assumption of an
improvement
in the international climate compared with
1999, activity in all the primary processing branches is quite
including in the steel tube manufacturing
likely to increase,
sector which has a significant amount of catching-up to do.

A. Steel tube manufacturing

Total production of steel tubes in the European Union fell by
some 12 % in the first six months of 1999, mainly because of
the slump in demand for seamless tubes and large welded
tubes. Exploration investment by the oil industry in particular
and the
the oil-related industry have been
considerably reduced despite the significant oil price increases,
with the result
that drilling-tube requirements have fallen
considerably.

activity of

As a result, the Community steel tube manufacturing industry
was faced not only with a reduction consumption during the
period in question but also substantial competition from tube
imports which increased by 2 %, following a 12 % increase in
1998.

Following the imposition of external measures, tube imports
into the European Union started to fall in the second half of
1999, but as there is no obvious sign of a recovery in demand
Community steel tube production in 1999 as a whole is likely
to be about 12 % down on the 1998 level.

However, it cannot be ruled out that a gradual resumption of
oil
industry activity as a result of an improving world
economic climate and more sustained oil prices, may in the
months ahead and certainly in the year 2000 boost
the
demand for tubes, thus making it possible to make better use
of the capacity available and limit jo losses in this sector.

Community production of seamless tubes fell by 33 % in the
first half of 1999 because of a slump in demand and substantial
competitive pressure from imports which accounted for 26,3 %
of the Community market as compared with 19,9 % in the first
half of 1998. Imports of these tubes into the European Union
have been falling since the second half of 1999, but the dearth
of investment in oil exploration in particular is significantly
affecting consumption, and there is little hope of a recovery
in Community production of seamless tubes which by the end
of 1999 is likely to have fallen by 25 to 30 % compared with
1998. On the assumption that the oil price rise will boost oil
exploration to some extent in the future, this should bring
about a gradual recovery in demand in the course of
the
year 2000, with the result that Community production could
increase by 5 to 10 %, thus enabling the very low capacity
utilisation rates to be increased.

In the case of small welded tubes (up to 406,4 mm in diameter)
activity was fairly stable at the beginning of 1999 but there are
signs of improvement as a result of fairly sustained demand
from the motor vehicle industry and the construction sector.
For 1999 as a whole Community production of these tubes
should increase by 3 % or more, taking into account a slight
reduction in imports. However, it seems unlikely that activity
will pick up in this area in the year 2000.

The increase in prices already observed throughout 1999,
mainly because of the increase in steel prices, may prompt a
recovery in imports on a Community market which in any case
is suffering from uncertain demand because of the slowdown
expected in the motor vehicle industry.

Where large welded tubes are concerned (over 406,4 mm in
the poor prospects mentioned in the previous
diameter)
programme peristed in the first half of 1999 owing to a lack
of new international projects in the oil sector. In the case of
these tubes, manufacturing activity in the European Union fell
by about 15 % in the first half of 1999, and this trend is likely
to continue. For the year as a whole production is expected to
fall by 20 to 25 %, with no prospect of an improvement in the
year 2000 since no large-scale internal or international project
is scheduled in the oil industry.

B. Drawing (wire and bars)

Activity in the Community wire-drawing sector
increased
overall by some 4 % in the first half of 1999 thanks to the
manufacture of welded steel mesh as production of drawn-
steel wire was on the poor side. In the second half of the
year the market situation for products from the wire-drawing
sector
there will be an
increase in production in 1999 as a whole of 4 to 5 %,
mainly as a result of the manufacture of welded steel mesh
and other derived products.

improved overall, suggesting that

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the
Imports of wire products, which increased slightly at
beginning of 1999, have
levelled off, while
Community exports of these products have remained at good
levels because of the strong dollar.

gradually

recovery of

in the
The gradual
European Union is no doubt responsible for the trend in this
sector in which production volumes should increase by about
5 % in compared with 1998.

the construction sector

For the year 2000, the growth prospects of the construction
sector sugget that there will be an increase in production of
wire products of around 3 %. However, the increase in raw
material prices may necessitate a downward adjustment
to
this estimate if import volumes increase.

However,
this did not make it possible to bring about a
significant increase in capacity utilisation rates which remain
between 60 and 70 % on average, among other things because
of the commissioning of new production equipment.

The Community bar-drawing industry, the activity of which
depends mainly on the motor vehicle manufacturing sector,
suffered an overall reduction in production of about 3 % in
the first half of 1999, gradually levelling off so that
total
production for 1999 can be estimated at 2 to 3 % below that
for 1998.

This result is not so bad when one considers that 1998 was a
particularly good year in terms of volumes especially.

The intermediate nature of this sector in between the steel
industry and the motor vehicle industry does, however,
create some difficulties for it as it as it has problems in
passing on fluctuations in raw material prices fully.

Given the slowdown expected in the motor vehicle manufac-
turing sector, the best that can be hoped for in the year 2000
is a levelling-off of activity in this sector.

C. Cold rolling and forming

Following a rather poor strat at the beginning of 1999, mainly
because of a general stock adjustment process, activity in the
cold-rolled strip industry picked up somewhat, ending the first
half of the year with a reduction in production of only 8 %.
The trend towards an improvement in market conditions for
cold-rolled strip gathered momentum in the second half of the
year, with the result that the overall volumes for 1999 are
likely to be not much less than the quite remarkable figures
achieved in 1998.

However, the forming sector has experienced major difficulties
because of
steel price fluctuations often jeopardising the
acquisition of new orders and therefore depressing their
activity.

The developments expected for the year 2000 suggest a return
to the 1998 levels, offering the prospect of full utilisation of
capacity. Despite the foreseeable reduction in activity in the
motor vehicle industry, both the construction sector (which
is gradually expanding)
engineering
sector (which is once again well on track) should boost
consumption of cold-rolled strip.

and the mechanical

Where the forming of wide products is concerned, there was a
slight increase in demand for corrugated sheet and sandwich
panels in the second half of 1999 after a rather sluggish first
six months.

Activity in this sector also seems to have been affected inter-
mittently by raw material shortages resulting in delays in
in
fluctuations
supplying the market. Likewise,
galvanised sheet prices jeopardised certain supply contracts.

significant

As far as the year 2000 is concerned, given that activity will
probably pick up in the construction sector, it is likely that
production volumes in the forming sector will increase by a
further 5 % or so provided that periodical raw material supply
dificulties do not slow down the rate of growth.

There was a reduction in activity in the sector of cold forming
of long products in the first quarter of 1999 because of the
need to reduce stocks, followed by a significant catching-up
process in the second and third quarters. Thus, despite a level-
ling-off of volumes in the fourth quarter, the result for 1999 as
a whole will no doubt be in line with last year’s results. The
outturn would have been even better
the Community
forming sector had not been faced with temporary shortages
of galvanised sheet, its raw material.

if

In 1999, activity in this sector was therefore healthier than in
other primary processing sectors. What is more, it seems likely
to achieve even better
results in the year 2000 on the
the Community economy picks up, and
assumption that
more specifically in view of
the excellent outlook in the
construction sector which is the main user of the forming
poducts in question.

2.2.2. Prospects for the construction sector

Following a short period of uncertainty at the beginning of
1999, overall construction sector activity in the European
Union is now again on an upward trend, offering the
prospect for the year as a whole of volumes 1 to 2 % higher
than in 1998. However, this would seem to be attributable to
performance in the sector
the United
Kingdom and Italy in particular, since overall construction
activity in Germany has
the
constant net downward trend in volumes in the eastern part
of the country.

remained stable because of

in Spain, France,

The gradual improvement in the general economic climate in
the European Union, together with a healthier public finance
situation and announcements of
the
prospects in the sector will probably be even better in the
year 2000 with a growth rate possibly in excess of 3 %
compared with 1999.

tax relief, mean that

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the figures in
Where residential construction is concerned,
1999 are likely to be slightly lower than in 1998 because of
the slump in new rented housing in Germany, although this
area of activity was particularly buoyant in France and Spain.
However, activity should pick up in the course of the year
2000 as the situation is likely to satbilise in Germany, more
substantial (albeit temporary) growth in the United Kingdom is
on the cards, and good results are expected again in Spain and
France.

In 1999, non-residential construction continued to be driven
by private-sector investment in Spain, the United Kingdom,
Italy and even Germany, while public-sector activity was
particularly healthy in Spain and Italy.

A consolidation of this activity in general is on the cards for
the year 2000, mainly as a result of public-sector investment in
most countries except Spain and Germany.

The slightly upward trend in civil engineering works observed
in 1998 does not seem to be continuing in 1999, despite the
remarkable rates of growth in Spain and Italy. Nevertheless, it
is quite possible that favourable economic factors and a struc-
turally better public finance situation will again kick-start this
activity, offering better growth prospects for the year 2000.

2.2.3. The motor vehicle market

a slight reduction in the demand for vehicles wich is likely to
level off in the year 2001.

Nevertheless, taking into account the levels achieved in recent
years, giving optimum capacity utilisation rates, even the fore-
seeble 2 % reduction in motor vehicle demand in the European
Union in the year 2000 should not significantly slow down
activity in this sector, especially in view of
the excellent
prospects for exporting new models of Community motor
vehicles to third country markets.

2.3. Outlook for imports and exports of steel products

2.3.1. European Union external trade statistics

The EU external trade statistics for steel available at the time of
wrtiting this forward programme cover the first seven months
of 1999 and are therefore closer to the period covered than in
the past.

Analysis of the statistics shows that, during the first half of
1999, despite a further increase of 24 % for long products,
Community imports of steel products fell by about 13 %
compared with the very high volumes seen during the same
period in 1998, while exports fell again by about 14 %.

Despite erratic movements in July, August and September
in Europe
which distrubed the motor
somewhat,
for 1999 new
is already possible to predict
record figures for the registration and production of new
vehicles in the European Union, following the period of unin-
terrupted growth of recent years.

vehicle market

it

Between January and October 1999, motor vehicle registrations
rose by 5,7 % compared with the same period of 1998, and
this trend should be more or less maintained until the end of
1999.

favourable factors

such as an
A combination of various
lower interest rates,
improvement
and manufacturers’
new models,
promotions
the good performances
recorded in this major steel-using sector over the last five years.

in household confidence,
incentive measures
responsible

are

for

A more detailed analysis shows in particular that steel improts
into the Community from the central and eastern European
countries
sharply, as did those from Taiwan,
South Korea and India, while imports of steel from Turkey
and Japan were still rising markedly.

(CEEC)

fell

For exports, however, the figures available show a sizeable fall
in sales volumes to the NAFTA area, and a sharp drop in sales
volumes to Turkey, while there was a substantial increase in
export volumes to the CECA.

in the international steel
Following the period of upheaval
trade in 1998, there is no doubt that the economic recovery
which has been taking shape in South-East Asia since the
beginning of 1999 has contributed to the relative fall in the
pressure of steel supply on the world and the Community
market in particular.

However, the gradual decline in activity in this sector as a
result of
the slowdown in domestic demand in particular,
reducing the increase in motor vehicle registrations in the
European Union in 1999 to 4 %, will not prevent the 1998
production record (16,2 million vehicles) from being beaten,
with the manufacture of over 16,5 million private cars and
light commercial vehicles.

The situation with regard to international
trade in steel
products is moreover expected to improve further during the
second half of 1999 and especially during the year 2000
thanks to a healthier economic climate in the EU, sound
growth in the US economy and a faster pace of economic
recovery in Asia.

However, it is not out of the question that in the course of the
year 2000 interest rates, uncertainty about oil prices and a
hiatus in the manufacture of new models might bring about

The developments foreseeable at the present time are expected
to leave EU steel imports and exports in a state of balance in
1999 and with a slight surplus in 2000.

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The most likely scenario is that steel imports into the EU will
be about 19 million tonnes in 1999 and will remain stable in
2000, while exports in 1999 will be around 19 million tonnes,
rising to about 20 million tonnes in 2000.

Despite the brighter prospects for the steel trade, the possible
risks of slippage due to the uncertainty of certain international
developments must be taken seriously given that the balance
on the Community market is still fragile.

The Commission therefore urges operators to help maintain a
stable Community market by taking account of the potential
opportunities and will be prepared to support them if this is
necessary and advisable.

2.3.2. The world economy in 2000

Since 1999, the world economy appears to be on an accel-
erated growth curve due to the rapid recovery of the Asian
economies in particular following the financial turbulence of
the last few years which affected the emerging countries.

In the year 2000, therefore, the world economy looks set to
develop at a faster pace, with growth of around 3,5 %
compared with less then 3 % in 1999.

The economic performance expected in the year 2000 is likely
to come from expansion of the recovery in Japan following the
increased growth in the
upturn which appeared in 1999,
Community market and improvement
in the US economy,
where the slowdown becoming visible does not show any
genuine signs of weakening.

The boosted confidence on the part of the emerging economies
is expected to lead to a rise in world steel consuption of about
2 % in 2000, which should be accompanied by increased
production on a comparable scale.

trade,

In international steel
the improvements which were
already becoming apparent in 1999 should be confirmed in
2000, thus helping to restore a calmer climate following the
recent period of upheaval in world steel trade.

The prevailing protectionism should therefore start to decline
to some extent, even if
trade being
disturbed given the likelihood of surplus supply being redi-
rected by some countries in order to find outlets.

there is still risk of

In the United States of America, the economy has
2.3.2.1.
continued to forge ahead and growth in 1999 should be about
4 % given the exceptionally high levels of consumer spending
and of manufacturing in particular. In 2000, the soft landing
hinted at in the past could now well come about, although
growth of 2,8 % is nevertheless expected.

In the steel market, domestic demand is expected to remain
sustained during the year 2000. However, the new capacity
coming into service is likely to reduce the need for imports.
Furthermore, a reduced presence af Asian steel on the US
market would facilitate the return to a more traditional
source of foreign supply.

last been indicating that

Since the beginning of 1999, the Japanese economy
2.3.2.2.
is on the path towards
has at
sustainable recovery, suggesting there might be growth of
about 1 % in 1999.

it

Although the recovery is vulnerable due to the weakness of
private consumption and investment, growth in Japan in the
year 2000 does nonetheless look likely to be around 2 %,
buoyed by the injection of public funds into the economy
and a certain increase in confidence on the part of manufac-
turers and consumers.

In the steel sector, consumption looks set to increase by 1,5 %
in 2000 and production should remain on an upward trend
since the foreseeable fall
in exports to the United States of
America is likely to be offset by the need for supplies on the
part of other Asian countries.

2.3.2.3. The economies of China and South-East Asia

The growth of about 3 % in all of the economies of South-East
Asia in 1999 is likely to be followed by the same increase in
2000. The improved performance in these economies can be
attributed to Korea, where the growth of around 5,5 % in 1999
should increase to 6,4 % in 2000.

Notwithstanding the government’s measures to modernise and
control the economy, growth in China should be in excess of
6 % and the same in the year 2000.

As to trade in steel, while domestic production is expected to
rise now that new installations have been started up,
this
geographical region looks set
to see a shortfall again of
about 30 million tonnes in 2000.

2.3.2.4. The countries of Latin America

forecasts for the economies of

the Latin
The most recent
American countries point
to an increase in growth which
might exceed 3,5 % in 2000, as compared with the rise of
2,7 % estimated for 1999. In this context, attention should be
drawn to the sharp improvement in the Brazilian economy,
where the drop of 4 % expected in 1999 has been substantially
revised upwards to a level close to stability, with growth of 4 %
expected in that country in the year 2000.

Steel consumption in the region looks set to increase in 2000,
although the foreseeable rise in domestic production will
probably help to maintain a surplus supply which will be
bound for international markets.

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2.3.2.5. Economic situation in the central and eastern European

countries and the Republics of the CIS

Following the very good results in the economies of the CEEC
in the last few years, the slowdown seen in 1999 is expected to
in the international
be short-lived given the improvement
climate expected in the year 2000. In the case of Russia, the
latest forecasts geve hope that the year 2000 will see greater
economic stability than in the past.

In the steel sector, the fall in exports will probably continue to
have a negative impact on steel production in these countries
again in 2000, while consumption could show a slight
improvement, which at all events would be more marked in
the CEEC.

2.4. Price trends

Following the unprecedented collapse which began in the
spring of 1998, steel prices in the European Union stabilised
at the beginning of 1999, reversing the trend across the board
as from the second quarter of the year.

Supported by strong demand from the civilian construction
sector in general, the prices of long light products (concrete
reinforcing bars and merchant bars) have been picking up
throughout
the year, by about 20 % between the first and
fourth quarters. The prices of beams and wire rod have been
following the same trend, but more moderately and somewhat
later.

For flat products, however, the price trend was not reversed
until the third quarter. The return to a rise in prices has in fact
been quite marked for hot-rolled coils, which were severely
affected when prices collapsed in 1998 following the very
sharp rise in imports. Compared with the beginning of 1999,
therefore, the prices of coils have risen by some 20 %, but have
nonetheless not returned to the levels seen at the beginning of
1998.

For other flat products, after prices generally stabilised during
the first half of 1999 at the particularly low level reached
between the end of 1998 and the beginning of 1999, the
trend could not be reversed until around the autumn.

The increased demand for galvanised sheet on the part of the
motor vehicle industry and the construction industry has
gradually led to a shortage of supply, which is the cause of
the rapid rise in the prices of these products. The prices of
cold-rolled sheet are now affected in the same way.

On the export markets, the prices of products other than hot-
rolled coil, which have risen in line with the Community
market, have stabilised at a very low level and there is no
sign yet of any real reversal in the trend. As there is still too
much supply on the world market, there is unlikely to be any
major improvement in world prices in the short term.

2.5. Trends by products

F l a t p r o d u c t s

(cid:151) Hot-rolled coil

The market for hot-rolled coil has improved substantially
during the last few months and the current situation is very
good. Stocks are normal, but falling, and there is quite
strong demand from the traditional sectors such as the
motor vehicle
and the
building industry. Compared with the peaks reached in
1998,
imports have fallen, but are still well above the
1997 levels.

tube manufacturers

industry,

Exports are still quite weak in view of the strong pressure
on the world market.

(cid:151) Cold-rolled sheet

is

satisfactory. The
Consumption of cold-rolled sheet
Community market is sound,
in particular thanks to the
demand from the motor vehicle industry and electric
household appliance manufacturers. The stocks held by
dealers and users have returned to normal, as a result of
which, as with coil,
the prices for hot-rolled coil have
stiffened.

(cid:151) Coated sheet

Since the middle of 1999, the market for coated sheet has
started to show signs of major change, with demand
picking up and prices rising rapidly in its wake. This is
due to the sustained performance in the motor vehicle
industry and now also in the construction industry,
which is progressing satisfactorily. Delivery times are leng-
thening and speculative buying might therefore once again
create a situation of excessive stocks, especially since
imports from Asia are continuing to rise.

(cid:151) Quarto plate

As to the forecast for the year 2000, the rise in demand should
enable this upward trend to continue and prices to return to
levels comparable to those seen at the beginning of 1998. If
this trend can be maintained, it should be possible to achieve
the necessary balance in most of the Community steel indus-
tries, the only factor which might upset this being a possible
return to massive steel imports onto the Community market.

Among flat products, only quarto plate is not seeing any
improvement either in demand or prices. The lack of
export orders for large welded tubes and the low level of
orders from shipyards are the main causes. Furthermore,
the relatively high level of stocks held by dealers are
continuing to exert pressure on the market, preventing
any development in this sector.

29.1.2000

EN

Official Journal of the European Communities

C 27/9

L o n g p r o d u c t s

(cid:151) Heavy sections and beams

Since mid-1999, the demand for and prices of beams have
gradually improved given the low level of stocks and the
firm recovery in the construction industry. The trend looks
set to continue through the year 2000 in view of the fore-
seeable rise in both domestic and international demand.

(cid:151) Wire rod

The recovery in the construction industry in 1999 is
in reversing and
the key element
expected to be
improving the trend with regard to the volumes and
prices of wire rod for welded mesh.

The slower improvement as regards wire rod for drawing
was due to the increase once again in demand in the
mechanical engineering sector after the summer of 1999.

In view of the growth forecast for the year 2000, this
positive trend is not likely to change, unless there is distur-
bance, which could come from imports flows.

(cid:151) Concrete reinforcing bars

Like other long products, concrete reinforcing bars have
benefited from the upturn in the construction industry.
Disregarding the expected, normal slowdown during the
winter, the trend will remain positive in the year 2000,
especially as imports onto the Community market are
likely to shrink given that internationl demad is expected
to rise.

(cid:151) Merchant bars

The situation and the prospects in the market for merchant
bars are quite comparable to those for other long products.
It should therefore be possible to return rapidly to the price
levels seen at the beginning of 1998 and perhaps even to
surpass them during the year 2000.

Conditions on the Community steel market are therefore
expected to improve since, with domestic and international
demand rising and despite imports stabilising at a high level,
exports of steel products from the Community are likely to
increase sharply.

this background,

Against
steel consumption in the
real
Community during the first half of the year 2000 should be
82 million tonnes, up 1,6 % on the same period in 1999, while
apparent consumption should stabilise at 83 million tonnes.
Given a slight fall in imports and a sizeable rise in exports,
Community steel production is therefore expected to be 83,5
million tonnes, an increase of 6,6 % compared with the first
half of 1999.

the year,

With a forecast of gradual stabilisation or possibly a slight
weakening in trends during the first half of
the
estimate for the year 2000 as a whole is that real steel
consumption will be 159 million tonnes and apparent
consumption 158 million tonnes,
increases of 1,3 % and
1,9 % respectively on the figures for 1999. With a 5,3 % rise
in export volumes and stabilisation of steel
imports, equi-
librium production should therefore be 159 million tonnes, a
rise of 1,9 % on the previous year.

3. RAW MATERIALS

3.1. The scrap market

scrap started to fall once

After a short-lived recovery at the beginning of 1999, the
again, given the
prices of
downward trend of demand following the shrinkage in world
steel production. Prices on the Community market have
futhermore
since 1998 as
domestic demand is still weak.

fallen to their

lowest

level

From the second half of 1999 onwards and in particular since
November, the prices of scrap have been rising more and more
markedly. This is due to the growth in world and Community
demand and the impact of the export restrictions applied or
announced by certain countries. This trend is likely to be
confirmed in 2000, in line with the development of the steel
market.

2.6. Crude steel balance for the year 2000

3.2. Iron ore

The recovery in the Community economy which has been
visible since the second half of 1999 looks set to continue in
future, providing excellent prospects for growth in the year
2000.

in the economic conditions within the
This improvement
Community together with the foreseeable strengthening of
the world economy,
recovery
expected in Asia, should lead to much higher investment and
domestic and external demand for goods and services, from
which Community industry should be able to benefit further.

in particular due

to the

For the steel-consuming sectors, these expectations will mean a
very high level of business, with steel consumption guaranteed
to be higher than the record level attained in 1998.

The sharp drop in demand from the Asian countries was the
main reason why export volumes and the prices of iron ore fell
on the world market in 1998. Dealings in this raw material
shrank further during the first half of 1999 following a fall in
demand in the United States of America and Europe and the
trend towards the stabilisation of demand in Japan, Korea and
China. During that period, the prices of iron ore fell to their
lowest
level since 1995 and the situation has led mining
companies to delay investment in new capacity.

The volumes of exports of iron ore on the world market were
nevertheless rising satisfactorily during the third quarter and
expanded even further during the fourth quarter of 1999
following a sudden increase in demand from South-East Asia
in particular.

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Official Journal of the European Communities

29.1.2000

For the year 2000, the expected improvement in world steel
production is therefore likely to have a favourable impact on
demand for iron ore, helping it to stabilise, if not to reverse the
price trend for this raw material.

3.3. Ferro-alloys

The recovery in demand for ferro-alloys in 1999 has helped to
stabilise and sometimes even to slightly boost prices. The
pressure of supply on the market is at all events a risk factor
as far as maintaining the stability is concerned.

During the first half of 2000, the increase in the growth of
steel production should nevertheless help to return to more
consistency overall
in the ferro-alloys market, even if there
are erratic price movements now and then.

3.4. Tin, zinc and nickel

In the first half of 1999, world tin production increased by
only 0,5 %, compared with the same period in 1998, while
consumption rose by 5 %. For 1999 as a whole, the metal
should nevertheless return to a situation of market balance.
During the first half of 2000,
the expected growth in
demand should however not cause rates to rise significantly
given the foreseeable rise in exports from China.

4. EMPLOYMENT

The trend towards
specialisation in the Community steel
industry is set to continue. This together with technological
development
therefore
probably continue to lead to widespread job shedding in
future in Community steel companies, especially of the least
specialised jobs.

organisational

change will

and

the overall process of
These changes, which are part of
boosting the competitiveness of
the industry, are imposing
more and more new demands. In order to adapt skills to the
new needs brought about by these changes,
it is therefore
necessary to develop the continuous training of steel workers
and to encourage the dissemination of good practice.

The restructuring plans of the companies, whether public or
private, which have led to the regroupering of producers and
have therefore helped to improve their competitiveness, are
making it possible to take fuller advantageof the single market.

From the industrial and commercial angle, the benefits of these
processes seem undeniable and efforts in those directions are
continuing but, it has to be said, it does all have an adverse
effect on employment in the industry.

the

however,

Community market,

After a rise of 1,5 % in 1998, world consumption of zinc could
see an increase of 3,9 % in 1999, taking it to 8,2 million
tonnes. On
zinc
consumption is expected to rise by only 0,8 % in 1999, but
by 2,7 % in 2000. World production of
this raw material
should increase by 2,5 % in 1999 and a further 4,9 % in
2000 to reach 8,6 million tonnes, following the rise of 2,7 %
seen in 1998. With the recovery of demand and a fall in stocks,
zinc prices picked up somewhat in 1999. For the first half of
the year 2000, demand for this metal looks set to remain on
an upward trend, but this will only slightly affect prices given
the expected rise in production.

For the year 2000, the International Nickel Group believes
nickel consumption will exceed production,
leading to a
shortage of about 37 000 tonnes. World production of this
metal in 1999 is estimated at 1,033 million tonnes, the same
as in 1998, while consumption should increase to about 1,070
million tonnes, up 6,5 % on 1998. Due to the growing demand
from manufacturers of stainless steel, nickel prices have risen
by more than 80 % since the beginning of 1999 to their
highest level for more than two years. Given the increasingly
firmer demand and the downward trend of stocks on the LME,
nickel rates are likely to keep rising during the first half of
2000.

respect,

the parties

concerned are

In this
that
management of the social consequences of industrial change
calls for more extensive dialogue, both between management
and labour within companies and outside of companies, to
anticipate the changes and to put in place a strategy which
will provide better job protection.

aware

Net job losses in the Community steel
industry in the year
2000 are estimated at around 9 000. The Commission will
continue to apply its social policy to workers in the industry
who are affected by restructuring or closure. The measures
provided in bilateral agreements on aid for retraining under
Article 56(2)(b), except aid for training and self-employment
which may be co-financed by the ESF, will be maintaind until
the Treaty expires on 23 July 2002.

The job losses do not, however, represent
the number of
workers who will be eligible for ECSC aid for various
reasons, in particular the fact that some Member States have
not signed up to the restructuring policy.

For the year 2000, the funds in the ECSC’s budget for tradi-
tional aid for retraining in the coal and steel industries amount
to EUR 61 million.

29.1.2000

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Official Journal of the European Communities

C 27/11

ANNEX

TABLE 1

Crude steel supply and demand (1) (cid:151) EU-15

(million tonnes)

Outturn

Estimate

Forecast

1996

1997

1998

1st half of
1999
(R1)

2nd half of
1999
(R2)

1999
(R2)

1st half of
2000

2000

139,5

(cid:150) 4,0

135,5

12,2

27,9

(cid:150) 4,0

149,8

+ 1,0

150,8

14,4

24,0

(cid:150) 1,0

158,0

+ 3,0

161,0

21,4

20,0

0,0

80,7

(cid:150) 2,0

78,7

10,1

8,7

+ 1,0

76,3

0,0

76,3

8,9

10,3

0,0

157,0

(cid:150) 2,0

155,0

19,0

19,0

+ 1,0

147,2

159,4

159,6

78,3

77,7

156,0

82,0

+ 1,0

83,0

9,5

10,0

0,0

83,5

159,0

(cid:150) 1,0

158,0

19,0

20,0

0,0

159,0

Apparent user consumption (a)

Change in merchant stocks (b)

Apparent consumption

Imports EU-15

Exports EU-15

Changes in producer stocks

Production

Conversion factor of finished products to crude steel: 1,11.

(1)
(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.

TABLE 2

Activity indicators (cid:151) EU-12 (1)

(Not seasonally adjusted)

Sectors

1st half of 2000
1/99 = 100

1st half of 1999
1/98 = 100

2000
1999 = 100

1999
1998 = 100

Manufacture of metal articles

Mechanical engineering

Electrical engineering

Motor vehicles

Other means of transport

Building/civil engineering

102,1

104,0

104,9

101,9

100,5

102,7

100,9

99,5

102,0

105,7

100,9

102,2

101,0

100,5

101,7

101,7

99,5

102,8

102,7

104,4

104,0

100,8

102,3

102,8

(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.

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Official Journal of the European Communities

29.1.2000

TABLE 2(a)

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

(Activity indicators (2))

Sectors

Germany

Manufacture of metal articles

Mechanical engineering

Electrical engineering

Motor vehicles

Other means of transport

Building/civil engineering

(1) Source: National steel users’s associations.
(2) Reference index: 1999 = 100.

2000

102,0

103,0

104,0

100,0

101,0

101,1

France

2000

103,0

104,5

104,0

102,0

107,0

103,0

Member States

Italy

2000

104,8

106,3

102,9

98,3

104,1

(cid:151)

United Kingdom

2000

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

Spain

2000

101,0

107,5

109,0

104,0

105,0

107,0

TABLE 3

Changes in the number employed in the steel industry

(including apprentices)

Member State

Number of employees
(in ’000)

(Reference month)

(Most recent month) (1)

Austria

Belgium

Denmark

Germany

Greece

Spain

France

Finland

Ireland

Italy

Luxembourg

Netherlands

Portugal

Sweden

United Kingdom

EU-15 (2)

Source: Eurostat.

12,2 (July 1998)

21,0 (January 1998)

1,2 (April 1998)

80,1 (August 1998)

2,0 (July 1998)

23,0 (July 1998)

38,4 (June 1998)

11,9 (July 1999)

20,2 (January 1999)

1,2 (April 1999)

77,5 (August 1999)

1,9 (July 1999)

21,9 (July 1999)

38,0 (June 1999)

8,2 (August 1998)

7,7 (August 1999)

0,4 (December 1997)

0,4 (December 1998)

38,5 (June 1998)

4,3 (August 1998)

12,0 (April 1998)

1,9 (March 1998)

14,6 (June 1998)

33,9 (May 1998)

38,9 (June 1999)

4,1 (August 1999)

11,8 (April 1999)

1,7 (March 1999)

13,9 (June 1999)

30,6 (May 1999)

291,1 (December 1997)

286,4 (December 1998)

(1) Most recent figures available.
(2) As the reference period is not the same for all countries, the figures given cover a period of one year.

Change
(%)

(cid:150) 2,5

(cid:150) 3,8

0,0

(cid:150) 3,2

(cid:150) 5,0

(cid:150) 4,8

(cid:150) 1,0

(cid:150) 6,1

0,0

+ 1,0

(cid:150) 4,7

(cid:150) 1,7

(cid:150) 10,5

(cid:150) 4,8

(cid:150) 9,7

(cid:150) 1,6