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EUROFER - Update on Steel Tube Industry in EU in Q1 of 2019

Steel News - Published on Fri, 17 May 2019

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As expected, production activity in the EU steel tube industry continued its downward trend in the fourth quarter of 2018 due to weakening demand for large welded tubes from the energy sector, including pipeline operators and the offshore wind sector, and slower growth of demand for the other steel tube categories. In the fourth quarter of 2018, production activity in the steel tube industry fell by 3.7% YoY. The decline in output growth deepened in the second half of the year, more or less in line with the reduction in output registered in the first half of 2018. Most countries reported a year-on-year reduction in output; particularly sharp declines were registered in Italy, Spain, Sweden and the central European countries. In Germany, production stabilised at around the level seen the year earlier after sharp year-on-year declines over the first three quarters of 2018.

Steel tube industry activity in the fourth quarter of 2018 - In line with earlier expectations, production activity in the EU steel tube sector remained weak in the final quarter of 2018. Total output fell by almost 4% YoY. The key factor for the reduction in output is the current lack of demand from large pipeline projects. Order books have been depleted and as a consequence the production of large welded tubes is under severe pressure; this has had a negative impact on steel tube production activity in Germany in particular. In other customer segments of the EU tube industry business conditions have become more challenging than before. Demand for small and medium- sized welded tubes and seamless tubes is also facing headwinds due to slowing demand from sectors such as automotive, metal goods and mechanical engineering. Demand from the construction sector has held up relatively well, but foreign competition in this market segment is fierce.

EU steel tube output fell by 1.9% over the whole year 2018.

Steel tube industry forecast 2019-2020 - In 2019 and 2020, business conditions for the steel tube industry in the EU are expected to remain rather difficult. The outlook for demand for large welded tubes is expected to remain uncertain. There has still been no decision on the route of the Nord Stream 2 project through territorial waters. While work on the Nord Stream 2 pipeline is ongoing in Russia, Finland, Sweden and Germany, the route through Danish international waters is still waiting final approval by the Danish authorities. The amended Danish Continental Shelf Act entered into force with retroactive effect. The law gives the Danish authorities the right to veto infrastructure projects running through territorial waters; such a judgement has now been pending for 16 months. If, in due time, approval were to be granted, it remains to be seen to what extent EU-based large tube manufacturers will benefit. Demand from other smaller projects exists, but is not significant enough to provide a significant boost to production activity.

Meanwhile, demand from the other steel tube market segments is also facing more challenges than before. With the exception of the construction sector, demand from most downstream customers of medium-sized and small welded tubes as well as seamless tubes is expected to cool down as well. This will be particularly felt in 2019 owing to a fall in production activity in the automotive and metal goods sector. Moreover, import pressure on steel tube markets in the EU will remain high. Business conditions in 2020 are forecast to become somewhat more supportive to steel tube demand again.

Total steel tube output in the EU is expected to fall by 0.2% in 2019 before growing by 1% in 2020.

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Posted By : Sanju Moirangthem on Fri, 17 May 2019
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