European Steel-Using Sectors to Grow 6% in 2011, 3% in 2012

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--The European Union's steel-using sectors will see 6% output growth in 2011, according to the October report of the European Steel Association (Eurofer) (Brussels, Belgium). Despite weakening business sentiment , further mild growth in investments in machinery and equipment in the domestic E.U. market is forecast for 2012 .Export demand is seen remaining at a supportive level, despite the moderation of global GDP growth. A growth rate of slightly less than 3% is forecast.

Construction sector confidence in September fell to the lowest level since December 2010, signaling that construction companies are not expecting any near-term improvement in market conditions. On balance, says the report, output in 2011 will increase by almost 2.5%, primarily reflecting strong growth in the first quarter of the year relative to 2010 and despite uneven performance at the country level.

Construction output is projected to increase almost 3% in 2012, and the rebound in Poland, Germany, France and Sweden will continue, albeit at a slower place in the latter three countries. Residential and renovation activity will improve further, in contrast with publicly funded infrastructure and non-residential activity, implying that demand for constructional steel products will be fairly small. Overall construction output is projected to increase by almost 3% in 2012.

In the automotive sector, output growth is forecast to top 10% in 2011. Growth is positive in all E.U. countries with an automotive manufacturing base. Germany and all Central European countries will register double-digit growth this year.

Automotive output is seen easing off to around 3% in 2012. Activity will continue to increase in Central Europe at a faster pace than in Western Europe. Market fundamentals are expected to weaken further in 2012 while remaining slightly positive.

Investment in machinery and equipment in the E.U. is rising, but output growth in 2012 will be limited due to cooling investment and export growth, says Eurofer. Investment in the sector is forecast to grow 4% in 2011 and top 3% in 2012. Mechanical engineering output is forecast to rise by more than 9% in 2011, with the second half of the year showing 5% growth. In 2012, growth in the sector could be up to 3.5% with the first half of the year outpacing the second half.

Total steel tube production in the E.U. is forecast to grow nearly 9% in 2011 and cool down to about 2.5% in 2012. Oil Country Tubular Goods (OCTG) demand will be supported by higher activity in the Middle East and a sustained high level of activity in North America, assuming that oil prices remain close to their current levels. Solid pipeline project activity is forecast to keep global demand for large welded tubes at a satisfactory level in Eastern Europe, the Middle East and Asia.

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