STEEL: RUNNING INTO THE DOLDRUMS.

Summary:

The level of activity in the main consumer steel sectors showed signs of running out of steam at the end of 1998 and this trend is expected to continue in 1999. The slowdown will mean a gradual decline in the level of demand for steel on the EU market, where strong pressure from imports has already lead to weaker prices for most steel products. These findings are revealed in the European Commission's draft 1999 forward programme for steel.

Already evident in 1998, the impact the deteriorating international environment makes on the Community economy, will most likely be felt more keenly in 1999, according to the Commission. The Autumn economic forecasts for the EU point to a slowdown in activity. The growth in the level of GDP will be limited to 2.4% in 1999, half a point down on the 1998 Spring forecasts. Nonetheless, a firm level of increase in investment is to be expected (+4.6%), inflation should continue to be weak and the rate of employment should grow at a quicker pace than last year (1.2% against an estimated 0.8% in 1998). The average EU deficit should go from 2.3% in 1997 to 1.8% in 1998 and to 1.4% of GDP in 1999.

Crude steel production.

Community steel output has been on the decline since the second half of 1998. The increase for the whole of 1998 is put at 1,6% over 1997 (against +8% in 1997). In the second half of 1999, the EU's steel production is likely to be 80 million tonnes, down 5% on the first half of 1998. As a result of a slight improvement in market conditions in the second part of the year, total production in 1999 should be in the region of 158 million tonnes, down 2.5% on 1998. The Commission claims these production shortfalls will not create any major problems for businesses, as the utilisation rates for installations are expected to be satisfactory again in 1999. Nonetheless, the Commission repeats its call for operators to exercise caution, for the EU market and the world market are faced with certain problems for trade in steel, as a result of the Asian crisis, at a time when the signs of an economic slowdown and a drop in steel consumption are becoming more and more obvious in most geographical areas.

During the first half of 1999, activity in steel-consuming sectors should be lower than the pace recorded in the same period in 1998. Demand for steel should fall more sharply during the first half of the year, to stabilise at satisfactory levels during the last six months. Steel will continue to be...