EUROFER's October report on the Economic and Steel Market Outlook 2009-2011 shows that steel tube production in the EU has been hit hard by the recession.
Output in the second quarter decreased by more than 34% YoY, following a close to 30% drop in production in the first quarter of this year.
Extremely weak activity levels at the customer level of the tube producers and massive inventory reductions by customers in the distribution and processing chain resulted in an unprecedented drop in tube production in the first half of 2009. Against the background of the persisting weak business activity expected for basically all end user sectors of the steel tube industry in the EU, the short term market outlook for the tube industry is very subdued.
While the decline in tube output in the second half of 2009 could be slightly less deep than in first half, output is seen falling by 26% this year. The downward trend in production is seen easing in early 2010 and growth may turn positive again from the second sector onwards. A positive impulse could come from the stock cycle; some restocking by distributors and end users seems plausible.
However, without final demand improving as well, the restocking effect will be limited. The current outlook suggests that endues consumption could gradually strengthen from mid 10 onwards. By market segment the situation is differentiated. So far this year, global drilling and exploration activity has been relatively weak due to reduced levels of energy consumption in most economic regions. OCTG demand should improve during 2010 as the economic situation in developing Asia and in the US start to improve.
The outlook for large welded tube projects is seen remaining weak, mainly because of financing restrictions. Current projects will not be fully replaced by new ones. Small welded tube demand will not recover before mid 2010. All in all, output may rise modestly in 2010 supported by the stock cycle and shift into a higher gear once the business cycle picks up in 2011.
