Information from the Commission - Forward programme for steel for 2001 (Text with EEA relevance)
Date: 2001-03-03
Institutions: European Commission
Subjects: employment policy, industrial policy, iron and steel industry, production policy, steel

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FORWARD PROGRAMME FOR STEEL FOR 2001

(2001/C 71/03)

(Text with EEA relevance)

INTRODUCTION

Having entered a period of more marked and lasting growth in
mid-1999, the Community economy, following the excellent
GNP figures in 2000, should keep up this very positive trend
in 2001, even though the anticipated rate of growth is likely to
be more restrained.

According to the Commission’s autumn 2000 forecasts,
average growth in GDP in the EU is expected to be 3,4 % in
2000, the highest growth rate since 1989. This expansion is
internal demand, which the stability of
based on robust
long-term interest
rates has helped to reinforce, and on
world growth, which has made it possible to perform well in
exports.

The climate of confidence in business and among consumers,
which was at its height in the first half of 2000, remains very
strong despite the slight deterioration seen after the summer of
2000 in the wake of the steep rise in oil prices.

The Union’s economic prospects for 2001 are therefore highly
satisfactory and presage a fresh improvement
in industrial
activity, building on sound domestic consumption and a
the
promising
slowdown in the US economy does not fall below a growth
rate of about 2 %.

context, on condition that

international

The steel-using sectors posted excellent results in 2000 and are
set to maintain a very intense level of activity in 2001, which
will keep consumption at the record level of the previous year.

On the Community steel market, the temporary falling-off in
the period of
demand and prices in autumn 2000 after
destocking should give way to a gradual
in
these
anticipated
taking into account
reduction in imports and the continuing positive trend in
exports.

improvement
the

two factors,

The Community steel industry should therefore make the most
of the better market conditions and record good economic and
financial results. However, it must take care to strengthen its
competitive position and competitiveness further, so as to be
better placed to weather the impact of any future economic
downturns.

1. ECONOMIC SITUATION IN THE EUROPEAN UNION

Although average growth in the Union seems set to slow down
to a rate of 3,1 % in 2001,
remain very
favourable, since private consumption should rise by 2,8 %
and the growth in capital
investment should decline slightly
to 6,3 %, compared with 6,6 % in 2000. Lastly, investment in
the construction sector is expected to rise by 3,5 %.

the prospects

About 2,6 million jobs are likely to have been created in the
Union in 2000, representing a job-creation rate of 1,6 %, the
best result since 1990. This dynamic trend should continue in
2001, albeit at a slightly lower rate. According to forecasts, the
unemployment rate should fall from 8,4 % in 2000 to 7,8 % in
2001.

While the harmonised consumer price index rose by barely
1,1 % in the eurozone in 1999, it is expected to increase by
2,3 % in 2000. The steep rise in the prices of imports as a
result of higher oil prices and the depreciation of the euro are
the main causes of
inflation. Underlying
this rekindling of
inflation, on the other hand, seems much more moderate.
Inflation is forecast to level off at 2,2 % in the eurozone next
year.

Budget balances improved considerably in the Union, since
from a deficit of 0,7 % of GDP in 1999 to a
they went
surplus of 1,2 % in 2000,
largely as a result of the income
from the sale of mobile phone licences (UMTS). Next year
the budget surplus is expected to fall to only 0,2 % of GDP
in the Union. The good results in 2000 and 2001, apart from
the first extraordinary factor mentioned above, are largely due
to higher tax revenue than was forecast in the light of the trend
in various Member States towards a reduction in taxation.

The economic situation in the European Union is the most
favourable for 10 years as a result of both the solidity of the
fundamental internal factors and the increase in world demand.

2. REVIEW OF AND PROSPECTS IN THE STEEL MARKET

2.1. Crude steel production in the European Union

However, the growth in industrial production in the EU, having
peaked at 7,3 % in May 2000, should return to annual rates of
the order of 4 to 5 %, and consumer confidence, as demon-
strated in opinion polls, declined somewhat
in September,
although this decline did not continue in October. Thus,
although confidence in general remains close to its record
levels, these indicators give the impression that growth in the
Union probably peaked during the second quarter of 2000 and
that a slowdown in activity is on the way, particularly in view
of the oil bill, which is adversely affecting the economy.

Community steel production will have reached 155 million
tonnes for 1999, as a result of some ground gained in the
last quarter; consequently, production will be only 2,9 %
down on the absolute production record achieved in 1998.

those in the United Kingdom,

Since the beginning of 2000, monthly statistical surveys,
except
reveal a marked
improvement in the level of crude steel production, giving an
increase for the first six months of around 8 % over the same
period in 1999.

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However, the trend for the third and part of the fourth quarter
was far slower, with the growth in total Community steel
production for the first eleven months of 2000 down 5,4 %
on the same period in 1999.

Furthermore, in the main Member States, these statistics show
steel production up sharply during the same period in
Germany (+ 12 %), healthy increases in Italy (+ 7,5 %), France
(+ 5,5 %) and Spain (+ 7,5 %), but a fall of 8,5 % in the United
Kingdom.

Failing any clear signs that this trend is being reversed in the
for some possible
main steel-consuming industries, except
in
levelling-off
activity in the car industry, demand for steel should normally
remain steady during the months ahead, thus guaranteeing that
production stays at satisfactory levels.

in the construction sector and a slight

fall

However, it is not impossible that the need for adjustment to
the currently high stock levels throughout the economic chain
might lead to a slowdown in orders and, thus, to a gradual
weakening in steel production, although this ought to stabilise
at a very satisfactory level, at least in the short term.

It is therefore expected that the Union’s total steel production
for the whole of 2000 will exceed the 159 million tonnes
announced in the previous forecast (1) and could even reach
the record level of 163 million tonnes, which would be an
increase of 5,2 % over the level achieved in 1999.

The sustained bullish mood in the business sector within the
fuelled by the good economic prospects and a
Union,
continuing favourable international environment, suggest that
that
in steel
consumption in 2001.

there will be no significant developments

Hence, in anticipation of a certain shrinkage in imports, and
given an actual temporary weakening of demand partly as a
result of destocking, Community steel production in 2001
should be of the order of 162 million tonnes. This volume,
which is a mere 0,6 % down on the estimated record
production for 2000, would ensure that very high capacity
utilisation rates are maintained for that year.

This outlook should not, however, lead us to ignore the danger
of an unforeseeable reversal in recent trends, which may even
be
exacerbated by other particularly disruptive parallel
phenomena, as witnessed not so long ago, since there are
still certain misgivings regarding the extent of the economic
slowdown in the United States and the likelihood of changes in
international
trade flows as a result of US protectionist
measures.

Consequently, despite its excellent level of competitiveness, the
Community steel industry must remain vigilant, so as to be
able to react quickly to the slightest movements which are felt
directly or indirectly in the Community steel market and thus
to deal as effectively as possible with the adverse consequences.

Table 1 in the Annex (cid:145)Supply and demand for crude steel(cid:146)
in consumption,
summarises

the volumes of and trends

(1) OJ C 27, 29.1.2000.

foreign trade, stocks and Community production of steel
recent years and estimates the changes expected for 2001.

in

2.2. Outlook for 2001

The improvement in the international environment, which gave
a new impetus to the Community economy from the second
half of 1999 onwards, led to an appreciable increase in GDP
growth in the European Union during the first half of 2000.

Consumer optimism combined with renewed confidence in
industry (cid:151) except on the part of
its
reduced competitiveness due to the strong pound (cid:151) will
certainly have been at the root of both this performance and
the general economic upturn in the Union.

the UK because of

However, a number of internal and external factors did affect
the excellent state of
the
summer of 2000, bringing a slight falling-off in activity in
the manufacturing industry and temporarily halting investment
growth, thus causing a general slowdown in the economy at
the end of the year.

the Community economy after

It is plain to see, however, that the Union’s economic prospects
for 2001 are, as is suggested by the most recent short-term
economic surveys, altogether satisfactory both for business and
for consumers, whose level of confidence remains generally
high.

At recent meetings, even representatives of steel users showed a
degree of optimism, although this was mitigated by uncertainty
about the trend in energy prices in particular. To explain this,
they pointed to a capacity utilisation which was reaching its
limits and serious difficulties in recruiting skilled labour.

Representatives of the steel trade also voiced optimism about
the outlook for the Community economy in 2001 at these
meetings, even though in their eyes the surplus supply and
the increase in stocks might have a temporary bearing on
the trends in steel prices.

So, given relatively favourable economic conditions and a
better international climate, the main user sectors (some of
which are described in more detail below) should continue to
be very active in 2001, ensuring a high level of demand for
steel products.

Consequently, the year in question is likely to see continued
significant growth in the industries most geared to exports,
such as mechanical and electrical engineering and electronics,
where results in 2000 were, to say the very least, remarkable.
By contrast, the building sector should show signs of slowing
down or even levelling out, while activity in the car industry
should dip slightly.

From these sectoral trends we can therefore assume that the
apparent consumption of steel in 2001 should remain steady at
the previous year’s record level. This scenario still holds good if
the slowdown in the US economy does not cause growth to fall
below about 2 %.

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The Community steel industry would thus be in a position to
take greater advantage in future both of this excellent level of
consumption and of the opportunities offered by the inter-
national market. This is because imports, after their marked
should decrease slightly in 2001 (cid:151)
increase in 2000,
discouraged in particular by less attractive market conditions
(cid:151) and exports of Community steel products should continue
to grow.

Tables 2 and 2(a) in the Annex show indicators of activity in
the main steel-consuming industries for 2001. However, these
data, which have been supplied by the national representatives
of the sectors concerned, should be analysed with caution,
since opinions sometimes differ as to their validity.

2.2.1. Primary processing

The almost universal upturn at the end of 1999 in the various
branches of the primary processing industry was followed by a
rapid acceleration in activity during the first half of 2000.

The marked improvement in this sector over that period in all
the countries of the Union except the United Kingdom was the
result of the very strong growth in demand from the auto-
mobile industry and the construction and mechanical engin-
eering sectors, which were able to take advantage of
the
general economic upturn both within and outside the Union.

However, various signs of a slowdown seem to have become
more apparent
since the summer of 2000, owing to a
weakening of demand and the tendency for users to adjust
stocks. It is probable, therefore, that this trend will give way
to a temporary levelling-out until
the end of 2000, even
though the results will still be well above those of 1999.

The announcement of sustained economic growth into 2001
ought to guarantee a slight increase in demand for the products
resulting from these activities. Most users should maintain high
levels of production, and even the foreseeable slight reduction
in car manufacture and the slowdown announced in the
building sector are likely to be offset by better prospects for
exports in other sectors.

A. Seamless and welded steel tubes

After a very poor first half of 1999, owing to the literal
collapse of demand and strong pressure from imports, total
steel tube production in the Union gradually recovered, regis-
tering a fall of some 9 % at the end of the year.

the upward trend observed at

Indeed,
the end of 1999
continued apace during the first months of 2000 thanks to
increased activity in the oil
sector and more dynamic
exports, buoyed by the appreciation of the dollar against the
euro. As a result, Community steel tube production was up by
4,3 % at the end of the first half of 2000, even though imports
continued to grow at the same time.

Since the short-term outlook remains favourable, owing to the
same factors which were behind the improvement observed
since the end of 1999, there is likely to be some levelling-out

in tube production over the coming months, and this should
give an increase of 5 % for 2000 as a whole.

For 2001, barring any unforeseeable developments, there is
likely to be a very slight increase of, at most, 1,5 % in total
tube production, which would thus pass the 13 million tonne
mark, as oil prospecting is likely to continue to support the
current high level of demand.

For seamless tubes the spectacular 25 % drop in production in
1999 should be made up in the course of 2000, as the data for
the first half of this year already show a significant increase of
25,2 %. Oil prospecting, which did a great deal
to boost
demand for OCTG during this period, is likely to continue to
have a favourable impact on future development.

This factor, combined with the favourable trend in exports,
in an increase of around 21 % in
seems likely to result
Community tube production in 2000.

The continuing favourable development in the factors behind
the recent increase in activity in the seamless tubes sector
points to a new increase in production in 2001, which may
be of the order of 7 % up on 2000.

the 5 % increase in
For small welded tubes (< 406,4 mm)
production registered in 1999 was followed by a further
increase of 3,5 % during the first half of 2000.

However, during this half year, imports increased by a massive
44 %, paving the way for
speculative stock-building, as
consumption rose by only 7 %. This phenomenon is
therefore likely to have an adverse effect on trends in the
second half-year and could result in a 3 % drop in production
in 2000.

In 2001, in any event, there should be a fall in demand from
the car industry and the construction sector, which may result
in a drop in production of these tubes, estimated at 3 %, if the
Community market can be protected from a new wave of
imports.

The lack of any new major investment projects determined the
level of activity in the manufacture of wide welded tubes
in 1999, which was at the root of the 18 %
(> 406,4 mm)
drop in Community production. A new fall
in production
was recorded in the first half of 2000, although this could
lead to a levelling-out or even a slight upturn in production,
provided certain protectionist measures can be headed off. In
any event, even the low levels of oil
investment already
announced do not promise a positive trend in demand for
these tubes in 2001. Production should
and production of
the level of 2 million tonnes
therefore remain steady at
estimated for 2000.

B. The wire-drawing industry

The results of the wire-drawing industry for 1999 were in line
with expectations, showing an improvement in consumption of
products of the order of 5 %, which was mainly due to the
strong demand for welded wire mesh.

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The first half of 2000 saw activity pick up in this sector, where
consumption increased again by 6 %. However, this increase
was shared equally between welded wire mesh and drawn
wires, owing to the strong demand from the construction,
automobile and engineering sectors.

However, a certain levelling-off in demand has been evident
since the summer and looks set to continue; this could lead to
a more modest increase in consumption of drawn products for
2000, estimated at around 3 %.

For 2001, with lower levels of activity forecast in the auto-
mobile and building industries, which will be offset by a
industry,
more
consumption should remain steady or even fall slightly by
1 % at most.

export-oriented

engineering

dynamic,

The general drawing industry, whose activity is essentially
linked to car manufacture, did not achieve the results hoped
for in 1999; consumption increased only very slightly, by less
than 1 %.

From the beginning of 2000, the demand for drawn products
showed a marked upturn which led to an increase of roughly
7 % in apparent consumption during the first half-year. Given
the slowdown and even the slight decrease in activity in the car
apparent
industry
show a marked
consumption of
slowdown, growing by only 3 to 4 % at best for the whole
of 2000.

drawn bars

half-year,

expected

second

should

the

for

In view of the less favourable outlook for the car industry in
there is almost bound to be a shrinkage in the
2001,
consumption of drawn products of the order of 3 to 4 %;
consumption would then match the 1999 level, which was
regarded as altogether satisfactory.

C. Rolling and forming

Contrary to the expectations of the experts in this sector and in
the trade as a whole, the non-ECSC cold-rolling industry looks
likely to improve production in 2000 by around 10 % over the
1999 level and, in doing so, even exceed the former production
record achieved in 1998.

The demand for cold-rolled strip in the Community increased
very rapidly from the beginning of 2000, creating a knock-on
effect which caused sporadic difficulties of supply both for raw
materials and, indirectly, even for processed products.

In view of the current order book situation, which will enable
this industry to fully utilise its capacity up to June 2001, the
overall level of production for 2001 is likely to be at least on a
by with the level reached in 2000.

Hence, despite the inherent risks of a foreseeable increase in
stocks held by users, which may exacerbate any future negative
trends, the volume figures expected in 2001 should be more
than satisfactory.

However, because it is an intermediate sector, this industry is
continuing to see its profit margins cut by the rise in raw
materials prices, which cannot be passed on in full
to its
customers.

The wide-formed products industry has been enjoying an
extremely favourable economic situation since the middle of
1999, fuelled by the demand for sandwich panels, and as a
result has seen its total production grow by around 6 %.

The picking up of activity in this sector during 2000 should
lead on to an increase of around 8 % in production, despite the
slower growth in demand for corrugated sheet.

For 2001 there is no evidence at present to suggest any fall in
the consumption of wide-formed products, as activity in the
construction industry (cid:151) which is the main user of
these
products (cid:151) is likely to remain sustained, although slowing
down slightly.

Despite the continuing tendency to replace wide-formed steel
products by other materials, in general other uses are being
found for products from this sector and they are being used
more widely in the construction sector, so future prospects for
this activity remain good and ensure increased consumption of
galvanised sheet.

The activity of the long-formed products industry continued
unabated during the first half of 2000,
influenced by a
steady upward trend in demand since the second half of 1999.

Current order levels look certain to guarantee an increase in
overall production of
long-formed products of 5 % in 2000
compared to 1999, despite intermittent problems with the
supply of raw materials and galvanised sheet in particular.

the trade is

For 2001,
improvement
around 3 % in the output of formed products.

looking forward to an eventual
in demand and hence a fresh increase of

Even if activity in the construction sector were to slow down in
winter, manufacturers of formed products could easily direct
their production towards other outlets, such as the motor and
engineering industries.

2.2.2. Trends in the construction industry

After the slightly positive results of 1997 and 1998, overall
activity in the building industry shadowed, albeit with a
certain time-lag, the general economic trend and there was a
much more pronounced variation in production volume in
1999, which was put at over 2,5 %.

This more positive trend strengthened during the first half of
2000; as a result, even if the initial signs of a levelling-off
which appeared after
there
should be a fresh increase in construction volumes of nearly
3 % in 2000.

the summer are confirmed,

that

There is no doubt whatsoever
the general economic
prospects for the Union in 2001 are favourable. However, in
view of the current uncertainty about what action public auth-
orities will take in this area and of the gradual rise in interest
rates in a bid to stem inflation, there is likely to be a marked
slowdown in growth in this sector, which is put at 1,5 %.
Non-residential construction and renovation works look set
to continue driving this growth in 2001.

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encouraged by

As regards residential construction, the overall positive trend
looks to be mainly due to modernisation and maintenance
introduced by
work,
governments
the trend
towards a redistribution of tax surpluses could (cid:151) depending
on how this is done (cid:151) boost activity in this sector, with new
residential construction picking up in Germany and Italy in
particular.

in various countries. Nonetheless,

certain incentives

regards non-residential construction in 2001, private
As
investment should continue its positive course of previous
years, although this might be attenuated by the general
slowdown in the economy.

This sub-sector could nevertheless improve on the results
expected for 2001 if there were to be more intervention by
governments.

Looking at
the individual Member States, Germany should
make a stronger contribution to growth in this area in 2001,
followed by France, Italy and Spain.

It is rather more difficult to predict the trend in civil engin-
eering projects, which are highly dependent on investment by
national and local authorities, although there has been some
increase in such projects since 1999.

For 2001, the results from this sub-sector will depend on the
start-up of the major government projects which have been
announced and the general policy of governments on infra-
structure investments.

Nevertheless, this activity should remain positive on balance,
given the completion of ongoing projects and the firming up
of a number of new infrastructure projects in the pipeline.

2.2.3. Trends in the motor industry

The motor industry once again posted very positive results in
1999, with registrations of new vehicles up by 4,9 % on 1998’s
record level.

During the first months of 2000, vehicle registrations in the
EU continued their remarkable upward trend in response to the
very sustained levels of demand.

However, for a number of months now, the trend in regis-
trations of cars and light vehicles has been fluctuating
erratically, although the general trend is always downwards.
the net decrease in registrations of around 16 %
In fact,
observed in July was followed by a levelling-off
in August
and then further falls of 5 % in September, 4 % in October,
1 % in November and 8,2 % in December. As a result, for 2000
the overall drop in registrations was 2,2 %, despite the positive
results recorded in the first part of the year (+ 3,2 %).

This result should nevertheless be regarded as perfectly satis-
factory, since it is, after all, the second best performance ever
achieved by this sector.

The gradual deterioration in the very favourable economic
environment at
the beginning of 2000 is now having a
negative knock-on effect on consumer confidence, already
affected by rising petrol prices and interest
rates and,
additionally, by the more limited supply of new models on
the market. However, the negative impact of these factors is
likely to be only temporary and should be offset by the very
positive general economic prospects for the Union in the
medium term.

For 2001, therefore, motor vehicle sales in the Union can be
expected to remain relatively stable and may show a slight
downward trend of 1 to 2 %. In any event, such a development
is unlikely to lead to a return of pessimism in this sector, given
its performance in terms of production and its optimum utili-
sation of capacity. Moreover, the positive trend set in 1999 and
2000 for motor vehicle exports looks likely to continue with
an increase of 9 % in 2001, which will boost Community
production of new vehicles.

2.3. Outlook for imports and exports of steel products

2.3.1. European Union external trade statistics for steel

The European Union’s external trade statistics for steel which
were available when this forecast was produced cover the first
ten months of 2000. It is possible to compare them with the
Union’s international trade in steel during the same period in
1999; they also make it easier to estimate Community imports
and exports of steel
in terms of volume and trends for the
whole of 2000.

Generally speaking, these statistics reveal a marked increase in
steel imports of the order of 27 % and a parallel increase in
Community exports, although this is limited to 16 %.

While these data confirm the trend in exports outlined in the
previous forecast, they show a significant increase in imports
instead of the slight fall which had been expected.

Even though these are partial data, their analysis also shows
that the Union’s steel deficit is spreading, both in finished flat
and long products and in semi-finished products; this tends to
confirm a potential situation of overall structural deficit going
back to 1998.

As regards imports, the areas of Community trade which have
developed in particular during the period under review are
imports from China, Japan, certain Latin American countries
and Brazil in particular, and Russia.

However, it must be stressed that the disruption resulting from
protests against the steep rise in oil prices and the large stocks
of good-quality used cars have doubtless had an influence on
orders and deliveries and, hence, a major impact on these
figures.

As for Community steel exports, on the other hand, the general
increase of 16 % observed over the same period is essentially
due to a favourable trend in trade with the United States,
Canada, the CEECs and certain south-east Asian countries.

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There is no doubt that trade in steel at Community and world
in the climate
level has been helped by the improvement
following the previous crisis. However,
the very strong
demand within the Union for steel
imports and, above all,
the level of domestic prices have acted as a powerful
magnet; on the export side, the positive trend is mainly due
to the appreciation of the euro against the dollar.

In the final months of 2000, with the relative stabilisation of
prices and domestic demand, Community imports of steel
should have slowed down to reach around 24,5 million
tonnes by the end of
the year, which would mean an
increase of around 18 % on the 1999 level.

Community exports, on the other hand, should have increased
further to around 22 million tonnes at the end of 2000, aided
by the continuing favourable external environment and the
improvement
of
Community industry due to the low exchange rate of the euro.

competitiveness

international

the

in

For 2001, failing any marked deterioration in the international
climate resulting from an ill-considered increase in oil prices (cid:151)
which is possible, but unlikely (cid:151) Community trade in steel
should improve, showing a levelling-off or even a slight drop in
imports on the one hand, and a continuing positive trend in
exports on the other.

This basically favourable outlook should not tempt us to ignore
the negative impact of any recurrence of destabilising events,
which the Community market has already experienced and
which have seriously affected company results and, indirectly,
employment in the steel industry.

It should be emphasised that
the threat of greater protec-
tionism and the likelihood of a far more serious slowdown
than forecast in the US economy are negative factors which
adversely affect the equilibrium of the steel market and steel
prices.

2.3.2. The world economy in 2001

The world economy experienced a period of strong growth
during the first six months of 2000, followed by a gradual
slowdown as a result of the rise in oil prices, the increase in
short-term interest rates, and the less favourable stock-market
environment.

This situation is reflected in the confidence indicators, which
started declining in July in the USA, then in Japan and lastly in
certain European Union countries.

the economy of

Nevertheless,
the industrialised world is
expected to show a fairly significant growth of 4,3 % in
2000,
increase, estimated at
3,3 %, in 2001.

followed by a more modest

In the steel sector, apparent world consumption should exceed
750 million tonnes in 2000, which would be an increase of 5
to 6 % in relation to the previous year.

the general economic
For 2001, with the influence of
slowdown, apparent world steel consumption is set to rise by
no more than about 2 %, since in the United States and the
European Union steel consumption is expected to level out
somewhat, while more significant increases are expected in
South America and Asia.

As for trade in steel products, 2001 should see a slight change
in flows and in particular a marked reduction in imports to the
American market and a smaller decline in imports to the
Community market.

However,
the surplus supply from the exporting countries
which are desperately seeking external sales outlets would
to the stability of markets and steel prices
pose a threat
throughout the world.

2.3.2.1. The United States of America

The American economy is gradually cooling but
remains
buoyant, since the oil bill is not having too great an impact
on prices and gains in productivity are offsetting higher labour
costs. The soft landing which began in the second half of 2000
to be increasingly apparent, even if on the
now seems
employment
things, a
front we have seen, among other
reduction in unemployment, which has fallen below the 4 %
mark. In any event, United States GDP is expected to grow by
about 2,5 % in 2001, considerably less than the 5 % forecast for
2000. Only a massive loss of confidence could affect these
results.

In 2001, steel consumption in the United States should decline
by approximately 5 % in the wake of lower capital investment
and less intense activity in the construction and automobile
sectors. Thus,
the increase in domestic steel
production as a result of the commissioning of new capacities,
imports to the USA should decrease slightly.

in view of

2.3.2.2. Japan

The encouraging results in the first three quarters of 2000
the Japanese economy has well and
seem to indicate that
truly emerged from recession. The country’s GDP should thus
be about 2 % in 2000, mainly as a result of increased public
investment.

The prospects for 2001 remain positive, buoyed up by the need
to restructure companies which encourage private investment
and by the government’s new support plan intended to boost
the country’s economic activity, which is expected to grow by
about 2,5 %.

The growth prospects for this economy will, however, continue
to be affected by the risks inherent in the rise in energy costs,
the persistent weakness of the euro and the weakening of the
US economy.

Steel consumption in Japan, boosted by the economic upturn
and by increased activity in consumer
such as
construction, automobiles and capital goods, should increase
by approximately 2 % in 2001.

sectors

In any case, the basis of the industrialised countries’ economies
is still sufficiently sound, so that it is fair to assume that the
current slowdown will not last long.

Domestic steel production should also increase in 2001, but
any surpluses are likely to be exported more to the south-east
Asian markets.

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Official Journal of the European Communities

3.3.2001

2.3.2.3. Economic trends in China and south-east Asia

The average growth rate of the countries of south-east Asia,
estimated at approximately 7 % in 2000, should fall slightly in
2001 to around 6 %. In this context, there has been a striking
recovery in the Korean economy, which is expected to grow by
very nearly 8,5 % in 2000 and to be followed by a further rise
of 6,5 % in 2001.

Steel consumption in this region is set to rise by 3,5 % in 2000
to approximately 122 million tonnes, and steel production is
also expected to increase by about 2,5 % following the commis-
sioning of new capacities. However, in view of the expected
developments in 2001, with consumption still increasing at a
rate of 3,5 %, the steel deficit in this region is likely to exceed
20 million tonnes, despite a foreseeable further increase of 1 to
2 % in domestic production.

The economic climate in China is currently very favourable,
since the remarkable growth recorded in 1999 is expected to
be exceeded in 2000 and even 2001, with rates of the order of
8,3 % and 8,5 % respectively. During the first three quarters of
2000, the Chinese economy grew at a rate of 8,2 %, well in
excess of the target set by the local authorities (+ 7 %), under
the influence of increased investment activity, consumption, the
influx of capital and the overall economic improvement in the
Asian region.

In this favourable economic context, steel consumption should
increase by 5 % in 2000 and about 7 % in 2001. In view of the
steady increase in domestic production, China’s steel imports
could, however,
increasing
considerably in the past two years.

in 2001,

slightly

after

fall

2.3.2.4. The countries of Latin America

In the wake of a remarkable recovery in Brazil, the economies
of the countries of Latin America are expected to grow by an
average of about 4,3 % in 2000 and by the slightly higher rate
these favourable internal
of 4,5 % in 2001. As a result of
economic trends, steel consumption is set
to increase by
approximately 11 % in 2000 and by a further 6 % in 2001.
This will be solely due to the marked rise in steel consumption
in Brazil, since there is a downward trend in steel consumption
in Argentina. As regards international trade in steel, even with
the prospect of a slight increase in imports and a more marked
fall in exports, the steel surplus of this region is expected to be
approximately 8 million tonnes.

2.3.2.5. The economic climate in the CEECs and the republics of the

CIS

After something of a slowdown in 1998/1999, the economic
upturn which began to emerge in these countries in 1994 has
become more marked, since it is expected that average growth
in the CEECs will be 4,9 % in 2000, probably followed by a
further improvement, estimated at 4,1 %, in 2001. As for the
steel sector, about 25 % of domestic production, which is set to
increase by 4 % in 2000 and by a further 2 % in 2001, should
continue to be exported to the Community market, since only
a relatively slow increase in domestic consumption is expected.

In Russia, the economy has improved significantly since the
devaluation of
the rouble and is set to grow at a rate of
about 7 % in 2000, although this is expected to slow down

considerably to 4 % in 2001. Steel production increased by
13 % in 1999, and 2000 saw a continuation of this trend.
However, a slight decrease in Russia’s steel production in
2001 cannot be ruled out in view of a possible reduction in
the export market, which is in any case expected to take more
than half of domestic production.

2.4. Price trends

is inconceivable that actual

During the first six months of 2000, world production of
crude steel increased by over 11 % compared with the same
period the previous year. Despite the favourable economic
steel consumption
context,
it
therefore be
the same rate.
could have risen at
assumed that larger stocks of steel were accumulated during
levels of the economic chain. This would
this period at all
explain why the international market
in
particular,
in the prices of hot-rolled coils from Asia and
then in the United States and elsewhere.

saw a decline,

It must

There was a similar development on the Community market,
so that the increase in stocks, together with the arrival of
led to a certain amount of price
massive steel
tension, although the prices of some individual products did
fall back somewhat after summer 2000.

imports,

level

they reached on the
Compared with the highest
in May-June 2000, prices of hot-rolled
Community market
coils subsequently fell by about EUR 15 to 20 per tonne, or
8 to 10 %, and towards the end of the year they fell even
further without any sign of levelling off.

The need to adjust stocks is, furthermore, likely to remain a
risk factor for price stability in the future, especially if such a
trend were to become widespread just when there is a
temporary weakness in demand and an increase in imports,
although there seems to be no chance of this happening, at
least on the Community market, in the short term.

2.5. Trends by product

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

(cid:151) Hot-rolled coil:

Demand for hot-rolled coil remains very high on the
Community market, despite a plentiful supply situation.
After the summer, however, the growth in imports and
the accumulation of larger stocks, which are at the root
of
the imbalance between supply and demand, brought
about a reversal of the price trend, which was initially
downward but then levelled off. There seems to be no
likelihood of price tension during the first months of
2001, unless imports continue to rise and there is over-
abundant supply.

(cid:151) Cold-rolled sheet:

While there were certain supply difficulties
these
products during the first half of 2000, a better balance
between supply and demand seems to have been restored
since autumn 2000, mainly as a result of increased imports
attracted by high prices. The trend in the prices of cold-
rolled sheet on the Community market nevertheless
remains stable or is even tending to move upwards.

for

3.3.2001

EN

Official Journal of the European Communities

C 71/11

(cid:151) Coated sheet:

Demand for coated products from the two main consumer
sectors (cid:151) the automobile and construction industries (cid:151) is
still very high as we reach the end of 2000. There is still an
upward trend in prices, particularly for electro-galvanised
sheet and organically coated sheet. The level of imports and
the commissioning of new production capacities, especially
for galvanised sheet, could in any case influence the prices
of coated sheet in the short term if supply continues to
grow steeply.

(cid:151) Quarto plate:

have been subjected to pressure from imports, especially in
the second part of 2000. This pressure might increase in
future if the protectionist measures in the USA lead to an
increase in export flows to the Community market, where
consumption is expected to remain high.

(cid:151) Merchant bars:

Like the other
long products, merchant bars enjoyed
throughout 2000 the competitive advantage due to the
weakness of
to
other world markets, there has been an upward trend in
internal prices for more than 18 months.

the euro against

In contrast

the dollar.

the

scope

export,

The marked rise in the consumption of quarto plate during
2000 is due to an increase in orders from shipyards, from
the mechanical engineering sector, which is taking full
advantage of
and from the
for
construction sector. The quarto plate market did not
experience a drop in demand after summer 2000, and
internal prices have continued to move upwards, partly
because imports to the Community market have stabilised
and export prospects have improved slightly. During 2001
no significant changes are expected in these trends, since
capital investment in the gas and oil pipeline sector and the
activity of shipyards will in any case keep internal demand
buoyant.

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

(cid:151) Heavy sections and beams:

There has been a favourable trend in the consumption of
beams during 2000, and market prices have maintained
their positive trend until the end of the year. The stocks
of beams have increased but are in balance with the
conditions of
the Community market, where demand,
flagging.
especially for large beams, shows no signs of
The increase in the volume of imports has not yet had
too great an influence on internal prices, and exports to
American markets have remained attractive as a result of
the weak euro. These favourable conditions on the market
in beams look likely to continue in 2001.

(cid:151) Wire rod:

is

the American market

experiencing certain
While
difficulties, due in particular to the high level of imports,
the European market continues to prosper as regards both
rod intended for the construction industry and other rod
intended, in particular, for the mechanical engineering and
internal
automobile sectors. As a result of this situation,
prices have constantly moved upwards since spring 1999,
and this trend has, moreover, been consolidated this year.
The possible worsening of the protectionist climate could,
flows in the near future and
however, disrupt export
consequently influence the prices of
this product, even
on the Community market.

(cid:151) Concrete reinforcing bars:

concrete

reinforcing bars has

Demand for
increased
significantly in most EU countries during 2000 despite a
certain adjustment of stocks after the summer, resulting in
only a very short-lived slowdown in demand. Prices of
reinforcing bars, which were previously moving upwards,

2.6. The crude steel balance for 2001

With the prospect of more marked and lasting growth in the
Community economy, the first signs of which appeared during
1999, the climate of confidence has considerably improved in
the Union, particularly in view of favourable trends in the
external environment.

the forecasts for internal economic growth thus
For 2001,
remain wholly positive, so that
is fair to assume that,
it
among other things, there will be an increase in industrial
production spurred on by the urgent need to invest and to
reconstitute
continued buoyancy of
and by the
domestic and international demand.

stocks

The main steel-consuming sectors are thus expected to remain
very active, and this should guarantee that steel consumption
in the Union remains fairly high.

These expectations should therefore open the way to restoring
sound conditions on the Community steel market,
further
factors being an expected decrease in imports, which have
risen considerably in 2000, and the continuing upward trend
in exports, since the worsening situation on the steel market in
autumn 2000 should be short-lived.

these

positive

foreseeable

developments,

steel
Given
consumption in the Union in 2001 is expected to be 163
million tonnes, which is 0,6 % up on the 2000 figure, while
apparent steel consumption, with 162,5 million tonnes, should
be very much the same as in 2000. Thus, with the prospect of
a slightly negative balance in external trade (cid:151) albeit with
imports down by 4,2 % and exports up by 2,3 % (cid:151),
Community production should stabilise
at 162 million
tonnes, virtually the same as in 2000.

3. RAW MATERIALS

3.1. The scrap market

Scrap prices on the Community market declined in mid-year,
influenced probably by the weaker demand which followed the
slowdown in steel production. However,
in September this
downturn ceased and,
following a slight rise, scrap prices
stabilised in most European Union countries, including Spain.
This internal price stability appears to be due, on the one hand,
to some decline in imports from the Commonwealth of Inde-
pendent States and, on the other, to the rise in Community
exports, which remain competitive owing to the persistent
weakness of the euro.

C 71/12

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Official Journal of the European Communities

3.3.2001

In 2001, there are unlikely to be major changes in scrap supply
fluctuations linked to the
and prices, apart from the usual
seasonal effects of demand. However,
this is on condition
that the scrap export barriers put in place by some countries
do not lead to a reduced supply on the international market.

3.2. Iron ore

the summer,

After substantial increases over the first six months of 2000,
iron ore deliveries to the world market have fallen off since the
end of
following a gradual drop in demand.
However, this downturn is unlikely to last more than a few
months, since the reduction in consumption is likely to be very
short-lived. This is because the need to rebalance stocks has
recently led to a slowdown, then a drop in steel production in
the United States, Japan and Europe, causing the temporary fall
in demand for iron ore.

demand and on how easy it is for stainless steel producers to
obtain adequate supplies of scrap of this quality.

4. EMPLOYMENT

industry is

competitiveness

constant need to improve

in the
The
Community steel
exerting pressure on steel
companies to reorganise internally, to restructure and even to
group with other industries in order to take greater advantage
of the potential of the single market and the international
market.

In the wake of technological developments and globalisation,
the
there is still an ever-increasing trend on the part of
Community steel industry towards specialisation and the manu-
facture of higher quality products and products with higher
value added.

This period of downturn in the market is in no way cyclical,
however, since from spring 2001 the need to build up stocks
should fuel steel production, thereby boosting consumption of,
and consequently demand for, this raw material for the steel
industry.

Past restructuring programmes, which led to many job losses in
the sector, have changed not only companies’ structures but
also their working methods,
internal organisation and social
requirements and have led to a younger workforce in the
industry.

The larger number of mergers between iron-ore producers
could in future, by shifting the balance of power on the
market,
introduce a greater element of unpredictability into
price trends, which until now have reflected demand.

3.3. Tin, zinc and nickel

World tin production continued apace throughout 2000,
fuelled by higher world demand. In 2001 the slowdown in
tin consumption is unlikely to lead to significant price
variations since supply will be sufficient
to meet market
demand.

After increasing substantially during the first part of 2000, zinc
production fell off sharply during the summer holiday period,
although demand remained high. As a result zinc stocks shrank
considerably and are now at their lowest level since 1988.
Thus, despite the sharp rise in Chinese exports, zinc prices
rose constantly up to September, before recording a slight fall
thereafter. Since consumption is likely to remain at very high
levels even in 2001,
it is likely that zinc prices will rapidly
resume their upward trend.

Nickel prices reached unimaginable heights in 2000, even if
these alternated with brief downturns. This boom in nickel
prices can be attributed to the strong recovery in stainless
steel production and to the limited capacities and stocks
available to supply the market. However,
these prices fell
sharply from autumn 2000, although the market remains on
a sound footing, with good growth prospects in the stainless
steel sector.

Despite their volatility, nickel prices are encouraging the
creation of new capacities and are improving the general
supply of nickel. Consequently,
in 2001, price trends for
nickel will depend on the balance between supply and

All these changes (cid:151) which are part of the effort to increase the
competitiveness of the Community steel industry (cid:151) call for the
use of best practices, including in the social field. It is therefore
vital to maintain a very high level of skills in the workforce by
levels and particularly by
providing further training at all
extending such training to include new technologies and the
latest technologies offered by the advance of the information
society.

In this context of profound change in work organisation, it is
vital
to step up the social dialogue both inside companies
between management and labour and outside them between
local players.

As part of such increased dialogue, it is particularly important
to adopt best strategies aimed at protecting and increasing
permanent employment
to
in the steel
anticipate further developments expected in the sector.

industry in order

As regards the problem of dealing with the social consequences
of any further restructuring that becomes necessary, national
and Community programmes for granting aid under Article 56
of the ECSC Treaty are still applicable. Net job losses in the
Community steel industry arising from such restructuring are
estimated at 5 000 in 2001, even if the United Kingdom is
expected to remain by far the worst affected country in the
Union. However, for various reasons, and particularly since
some Member States are not taking part in the readaptation
policy, these job losses do not correspond to the true number
of workers eligible for ECSC support.

The appropriations earmarked in the draft ECSC operating
budget for traditional aid for retraining in the coal and steel
industries amount to EUR 80 000 000 for 2001. In view of
the forthcoming expiry of the ECSC Treaty, it has been decided
to use these funds to cover not only the expenditure for 2000
but also an initial tranche of the expenditure for 2001.

3.3.2001

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Official Journal of the European Communities

C 71/13

ANNEX

TABLE 1

Supply and demand for crude steel (1) (cid:151) EU-15

Apparent user consumption (a)

Change in merchant stocks (b)

Apparent consumption

Imports EU-15

Exports EU-15

Change in producer stocks

Outturn

(in millions tonnes)

Estimate

Forecast

1996

1997

1998

1999
(R1)

2000
(R2)

2001

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

2,0

160,0

21,4

20,0

1,0

154,4

1,0

155,4

20,7

19,3

1,0

162,0

1,5

163,5

24,0

22,0

1,5

163,0

(cid:150) 0,5

162,5

23,0

22,5

(cid:150) 0,0

Production

147,2

159,4

159,6

155,0

163,0

162,0

Factor for converting 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 merchant stocks in all countries except Germany, France, the
United Kingdom and Benelux, and changes in users’ steel stocks.

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

TABLE 2

Indicators of activity (cid:151) Community of 12 (1)

(not seasonally adjusted)

Manufacture of metal articles

Mechanical engineering

Electrical engineering

Motor vehicles

Other means of transport

Building/civil engineering

2001
(2000 = 100)

2000
(1999 = 100)

103,2

105,4

107,4

102,6

104,7

103,1

106,0

106,0

107,8

105,4

105,1

101,9

(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.

C 71/14

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Official Journal of the European Communities

3.3.2001

TABLE 2(a)

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

(activity indicators (2))

Sector

Germany

Manufacture of metal articles

Mechanical engineering

Electrical engineering

Motor vehicles

Other means of transport

Building/civil engineering

(1) Source: National steel users’ associations.
(2) Reference index: 2000 = 100.

2001

102,0

105,0

106,0

102,0

97,0

100,0

Member States

Italy

2001

105,3

106,8

107,6

101,2

111,7

100,0

United
Kingdom
2001

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

(cid:151)

France

2001

102,9

105,5

107,3

103,0

108,0

103,0

Spain

2001

103,0

107,0

108,0

104,0

107,0

106,0

Changes in the numbers employed in the steel industry (including apprentices)

TABLE 3

Member State

Number of employees (in ’000)

A

B

DK

D

GR

E

F

FIN

IRL

I

L

NL

P

S

UK

Reference month

Most recent month (1)

11,9 (May 1999)

11,7 (May 2000)

20,3 (December 1998)

19,6 (December 1999)

1,3 (June 1999)

77,5 (July 1999)

1,9 (July 1999)

1,1 (June 2000)

77,0 (July 2000)

2,1 (July 2000)

22,5 (December 1998)

22,0 (December 1998)

38,0 (December 1998)

37,6 (December 1999)

9,4 (July 1999)

8,5 (July 2000)

0,4 (December 1998)

0,4 (December 1999)

38,7 (April 1999)

38,6 (April 2000)

4,3 (December 1998)

4,2 (December 1999)

11,7 (May 1999)

1,7 (April 1999)

13,7 (July 1999)

11,6 (May 2000)

1,5 (April 2000)

13,8 (July 2000)

32,5 (December 1998)

28,9 (December 1999)

EU-15 (2)

285,8

278,6

Source: Eurostat.
(1) Most recent figures available.
(2) As the reference period is not the same for all countries, the data provided cover only one year.

Change
(%)

(cid:150) 1,7

(cid:150) 3,4

(cid:150) 15,4

(cid:150) 0,6

+ 10,5

(cid:150) 2,2

(cid:150) 1,1

(cid:150) 9,6

0,0

(cid:150) 0,3

(cid:150) 2,3

(cid:150) 0,9

(cid:150) 11,8

+ 0,7

(cid:150) 11,1

(cid:150) 2,5