Eurofer Downgrades 2024 Steel Consumption Forecast Amid Geopolitical Tensions and Market Challenges

Eurofer

The European steel industry faces ongoing turbulence as Eurofer, the European Steel Association, has downgraded its 2024 steel consumption forecast. Instead of the previously expected 1.4% recovery, Eurofer now predicts a 1.8% contraction in apparent steel consumption for the year. This revision follows a combination of escalating geopolitical tensions, rising energy costs, and the continuation of a downtrend observed in recent quarters.

Revised Forecasts and Industry Outlook

Eurofer has also adjusted its forecast for the output of steel-using sectors, now anticipating a decline of 2.7%, down from the previously expected 1.6%. Despite these declines, the forecast for 2024 is less severe compared to last year, when apparent steel consumption fell by 6%. Looking ahead to 2025, Eurofer projects a 3.8% recovery in apparent consumption and a 1.6% increase in output from steel-using sectors. However, this expected rebound comes after consecutive annual declines, indicating that it reflects more of a recovery from a period of stagnation rather than a genuine improvement in demand.

Sector-Specific Challenges

Several key sectors that typically drive steel demand in Europe are facing significant headwinds. The automotive industry, a major consumer of flat steel, is grappling with the aggressive pricing strategies of Chinese automakers, particularly in the electric vehicle (EV) sector. This competitive pressure has led Volkswagen, one of Europe’s largest car manufacturers, to announce the closure of at least three plants and lay off thousands of employees in Germany.

The challenges are not limited to the automotive sector. In the construction industry, a lack of investment, high production costs, and financing constraints are negatively impacting steel demand. Similarly, the white goods sector is also struggling with high production costs, which are expected to worsen once the carbon border adjustment mechanism (CBAM) comes into effect in 2026. While the CBAM will not fully cover downstream industries like white goods at first, its eventual extension is expected to raise steel prices within the EU, potentially affecting European white goods' competitiveness, particularly against imports from China.

Looking Ahead: Steel Consumption in 2025

Despite the setbacks in 2024, Eurofer remains cautiously optimistic about 2025, projecting a modest recovery. However, the road to recovery is complicated by external pressures, including geopolitical tensions and global market shifts. The full impact of the CBAM, combined with ongoing challenges in key industries like automotive and construction, will likely continue to shape the steel market in Europe over the coming years.