German steel industry sees no recovery this year

DUESSELDORF: Germany's steel sector should not get its hopes up following some positive data at the start of the year, with demand remaining weak and competition in global markets intensifying, a trade group said on Wednesday.

"I don't expect any major leaps," Hans Juergen Kerkhoff, president of the German steel association, told Reuters, adding he did not see any sustainable recovery across Europe either.

Austerity measures aimed at cutting budget deficits have hit economic growth across the European Union and are particularly painful for the steel industry because of the accompanying slowdown in demand for cars, appliances and new buildings.

Germany's steel sector, which accounts for about a quarter of Europe's crude steel production, has performed better than its counterparts in France, Italy or Spain, but is still expected to post only moderate growth this year.

"There is still uncertainty in the markets, just like there was in the second half of 2012, when both traders and processors were cautious," Kerkhoff said on the sidelines of a steel industry conference.

Customers have now started refilling depleted inventories, driving up output by 5 percent in January, the biggest monthly gain since September 2011. However, a 4 percent decline in new orders raised doubts that restocking would continue.

ThyssenKrupp, Germany's biggest steelmaker, this week warned that it was unlikely to return to growth until its next financial year, though a spokesman said on Wednesday its workers were no longer on shortened hours this month.

ThyssenKrupp had curbed the working hours of about 2,000 of its employees from last August, under a government-subsidised programme set up in the 2008-2009 recession to help companies bridge the downturn without widespread job cuts. It could return to shortened hours next month at short notice.

FLAT CONSUMPTION

Europe's steel sector overall has a tough year ahead, with EU steel demand, including inventory adjustments, seen down 0.7 percent this year before a 3 percent rise in 2014, European steel producers' lobby group Eurofer said.

"We were hoping to see a slow recovery year on year, but it is just not there," Arnaud Poupart-Lafarge, chief executive of ArcelorMittal's Long Carbon Europe business, told Reuters.

ArcelorMittal, the world's largest steelmaker, last week reported a $3.7 billion group loss for 2012 after writing down the value of its European steel business by several billion dollars.

Consultancy PwC estimates that European steel demand will grow at an annual rate of only 0.6 percent through 2025, well below a global average of 4.5 percent, according to a study published on Wednesday.

Poupart-Lafarge said that he expects consumption of long-steel products, such as bars used in high-rise buildings, bridges or railway tracks, to remain flat in Europe this year.

The EU is now working on a proposal to reinvigorate Europe's steel sector, which employs 360,000 people, with measures covering trade, raw materials and energy policy.

"We need more demand from the automotive, construction and mechanical engineering sectors ... Only if we see growth coming back will we produce more steel," Poupart-Lafarge said.

ArcelorMittal has already reduced production at its long-steel plants and idled several plants as demand went down 30 percent compared with pre-crisis levels.