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C 233/2 EN Official Journal of the European Communities 25.7.

98

FORWARD PROGRAMME FOR STEEL FOR THE SECOND HALF OF 1998 AND FOR 1998 AS A
WHOLE

(98/C 233/02)
(Text with EEA relevance)

INTRODUCTION 1. ECONOMIC SITUATION IN THE EUROPEAN
UNION

The strength of the economic recovery in the European
Union since 1997 has gradually pushed optimism in The spring 1998 forecasts confirm the strength of the
industry and among consumers to new heights. recovery, despite a less clement international climate
clouded by the crisis in Asia. The prospects for sustaining
this recovery remain good, with domestic demand
gradually taking over from exports as the driving force
Economic growth in the Community now seems to be for growth.
led more by internal factors, which have been gathering
momentum and compensating for the downturn in
export activity — a direct or indirect consequence of the
Economic growth in the EU, revised to 2,7Ø% for 1997,
crisis in Asia, with its as yet untold adverse effects.
proved slightly faster than forecast last autumn (2,6Ø%).

Industrial activity picked up appreciably over this period From the surveys conducted up until April 1998, most of
in response to growing demand, particularly inside the the confidence indicators point to a degree of continuity
Union. in the improvement observed since mid-1996 and have
hardly been dimmed by events in Asia.

The quickening pace of the economic recovery in the
Union gave a great boost to the steel market, where Order books have filled up, despite a slight weakenig of
conditions surely but steadily improved, in terms of both export orders, and production prospects remain good. As
volumes and prices. a result, confidence in industry and among consumers
returned to the heights attained before the short-lived
downturn in January 1998.
Up until now the Community steel industry has benefited
from the ensuing improvements in demand and prices.
However, the attractive prices, combined with the need Against the autumn 1997 forecast, GDP growth in the
to find outlets for the surplus supply released onto the European Union in 1998 has therefore been revised
world market by events in Asia, have triggered a sizeable downwards just slightly, by 0,2Ø%, to 2,8Ø%.
increase in steel imports onto the Community market,
particularly since the start of 1998, while export
prospects have shrunk.
The impact of the crisis in south-east Asia should be
partly offset by lower interest rates and falling prices for
materials, both, to some extent, the result of events in
The Commission therefore repeats its recommendation that part of the world.
to all concerned to exercise caution and adopt industrial
and business strategies in tune with reality and the
potential on the internal and international market. In Exports from the Community rose by 9,3Ø% in 1997 and
particular, the crisis in Asia and its impact on trade, the balance of foreign trade made a valuable
coupled with the dwindling sales prospects in regions contribution of some 0,4Ø% to growth in the EU. Never-
short of steel, demand responsible behaviour on the part theless this net contribution to growth should fade as
of operators to safeguard as long as possible the stability export growth is expected to slow to around 7Ø% in
of the Community steel market, hard won at the expense 1998, mainly in the wake of events in Asia.
of great sacrifices both in financial terms and jobs.

Growth in private consumption should rise from 2Ø% for
Although the prospects for the second half are not so the EU as a whole in 1997 to 2,6Ø% in both 1998 and
bright, results in 1998 are still expected to be slightly 1999, boosted by the lower savings ratio, modest
better than in 1997. increases in real pay and greater job creation.
25.7.98 EN Official Journal of the European Communities C 233/3

Private investment has been revised upwards in most This pushed steel production in the Union in 1997 to a
Member States, with a few exceptions. Consequently, the record 159,5 million tonnes, up 8Ø% on 1996 and even
investment forecasts for the EU as a whole are virtually slightly above the latest optimistic forecast of 158 million
unchanged. Equipment investment growth is expected to tonnesØ(Î).
rise from 4,4Ø in 1997 to 6,4Ø% in 1998 and 7,0Ø% in
1999.
The monthly figures for steel production in the
Community showed the pace picking up sharply once
again from January to March 1998 giving a growth rate
The downward revision of the growth forecast makes of almost 10Ø% once again for the first quarter
little difference to prospects on the labour market. compared with production in the corresponding quarter
Employment in the European Union grew by 0,4Ø% in in 1997.
1997 with further increases of 0,8Ø% expected in 1998
and 1,1Ø% in 1999, representing around 3,4 million new According to a rapid survey, steel production in April
jobs between 1997 and 1999. and May was only 2,3Ø% and 3,3Ø% higher than in April
and May 1997 respectively, curbing the cumulative
increase for the first four months of this year compared
with the corresponding period in 1997.
Due largely to demographic factors, the rise in
employment will not necessarily be matched by an equal
fall in unemployment. Average unemployment in the EU Consequently, to meet the still fast-growing domestic
fell from a peak of just under 11Ø% in 1996 to 10,7Ø% in demand and export commitments, steel production in the
1997 and is expected to fall further to 10,2Ø% in 1998 Union will very probably continue to develop favourably,
and 9,8Ø% in 1999. albeit at a slower rate, to end the first half at around
84 million tonnes.

However, the very significant increase in imports in the
The average inflation rate in the EU, measured by the
first half of the year and the weakening of demand
private comsumption deflator, was down from 2,6Ø% in
forcast in the second half of the year should take steel
1996 to 2,1Ø% in 1997 and should remain around 2Ø% in
production in the Community back slightly below levels
both 1998 and 1999. Compared with autumn 1997, the
in the second half of 1997 to end 1998 on 162 million
forecasts have been revised downwards by 0,3Ø% for
tonnes, very close to the last forecastØ(Î) and up 1,6Ø%
1998 and 0,1Ø% for 1999.
on production in 1997.

This steady, relatively long-lived increase in steel
The average public debt in the EU in 1997 proved lower production has brought with it more efficient and, in
than forecast, on 2,4Ø% of GDP, as a result of low some cases, optimum use of capacity and thus made an
interest rates and slightly faster growth whereas the increasing contribution to improving the operating
deficit/GDP ration was still 6,1Ø% in 1993 and 4,2Ø% in results of steelmakers in the Community.
1996. The average deficit in the EU should keep falling
to 1,9Ø% in 1998 and 1,6Ø% in 1999.
However, the Commission urges undertakings to
exercise caution when drawing up their production
programmes and encourages them to gear their
investment, research and innovation more to improving
product quality, protecting jobs and the environment and
keeping production costs under control, considering not
only the risks inherent in steel trade trends on the
Community and world markets, as a result of the crisis
2.ÙSTEEL MARKET SITUATION AND OUTLOOK in south-east Asia, but also the slowdown forecast in
steel consumption in the second half of 1998.

2.1.ÙCRUDE STEEL PRODUCTION IN THE The table 1, ‘Crude steel supply and demand’, gives
COMMUNITY figures and summarises recent trends in consumption,
foreign trade, production and stocks of steel in the
European Union and estimates the changes expected in
the second half of 1998 and for 1998 as a whole.
Crude steel production in the Community kept up high
growth rates throughout 1997, speeding up at the end of
the year to take production in December to 13Ø% up on
the December 1996 figure, which itself had been high. (Î)ÙOJ C 31, 29.1.1998.
C 233/4 EN Official Journal of the European Communities 25.7.98

2.2.ÙOUTLOOK FOR THE SECOND HALF OF 1998 AND However, in terms of volumes this combination of trends
FOR 1998 AS A WHOLE will not damage the 1998 results for the Community
steel industry which will undoubtedly be better than the
1997 figures.

The appreciably brighter general economic climate in the
European Union, initiated by an excellent international
situation and the stable dollar, has gradually restored Tables 2 and 2(a) show indicators of activity in the main
confidence among industry and consumers in the steel-consuming industries for the second half of 1998
Community, while the greater momentum built up by and for the year as a whole. The data were supplied by
international factors now seems set to counterbalance the the national representatives of the sectors concerned, but
curbing of exports. since their opinions do not always agree with the trends
identified, these figures should be treated with caution.

In this changing climate, the renewed optimism instilled
in the industry by the increased orders and continuing
2.2.1.ÙPrimary processing
improvements in capacity utilisation looks likely to stay
and the climate of consumer confidence is settling
around the high reached at the end of 1997 according to
the latest economic surveys. In 1997 all branches of primary processing will have
benefited more than expected from the steady
improvement in the economic climate in the European
Union, including the sectors where activity is tied closely
In recent meetings, although the Union’s steel producers to trends in the building industry.
considered conditions on the Community steel market
extremely favourable, they nevertheless stressed that the
growing supply from certain third countries could upset
the balance and have adverse repercussions on price Demand, and in many cases prices, on the Community
stability, all the more so because since early 1998 these market rose gradually throughout 1997 in all branches of
imports have been concentrated on specific markets this industry, which was also able to seize the ample
within the Union. opportunities for direct exports on the world market.

At the latest meetings, steel dealers expressed greater In early 1998 the markets for the various primary
reservations about market trends in the months ahead processing products continued to exceed even the most
since demand outstrips supply in some branches, while in optimistic expectations. A slowdown is, however,
others abundant supplies, particularly from certain third perceptible in various branches of this industry, where
countries, are putting heavy pressure on prices. constantly rising imports combined with stockbuilding
presage general stabilisation at best in the months ahead.

Nevertheless the notable surge in activity in the steel-
consuming industries (some of the principal ones are In any event, considering the 1997 performances, the
analysed more closely below) throughout 1997 and into stabilisation forecast in various branches in the second
the start of 1998 is further evidence of the strength of half of 1998 would still represent a very good level of
the economic recovery in the European Union. More activity, sure to maintain current capacity utilisation rates
specifically, there have been constant improvements in which are far higher than they were in 1996.
performance in the motor industry, growth rates have
long been high in mechanical and electrical engineering
and, somewhat more recently, the building industry in
turn seems to be back on the right track.

A.ÙSteel tubes
In the second half of 1998, however, the stage seems to
be set for some slowdown of activity in individual sectors
after the strong growth in 1997 and early 1998. This The marked improvement in steel tube manufacture in
could bring a slight contraction of demand for steel. This 1997 produced a net increase in production of around
weaker domestic demand could result in steel imports 10Ø% for all types of tube combined, although the figure
levelling off at the high 1997 levels, with further was slightly higher for seamless tubes (11,6Ø%) and
reductions in exports from the Community. slightly lower for small welded tubes (8,9Ø%).
25.7.98 EN Official Journal of the European Communities C 233/5

Coming after fairly poor results in 1996, the 1997 B.ÙThe wire-drawing industry
performance looks very strong, even though imports
onto the Community market grew to 11,2Ø% above 1996
levels in the case of seamless tubes and 15,8Ø% for small In 1997 activity in the wire-drawing industry gradually
welded tubes. Combined consumption of tubes of all caught up after a rather poor 1996, with across-
types in the European Union rose by only 2,1Ø% the-board increases both in demand, particularly from
however. This was due to the collapse in consumption of third countries, and in production. Sales of drawn
large welded tubes, intended mainly for the export products even exceeded the latest forecasts by 8Ø% in
market (down by 48Ø%), since consumption of seamless 1997, as export sales proved far higher than expected.
tubes and of small welded tubes rose by 6,9Ø% and
9,5Ø%Ùrespectively.

From the orders already taken, production can be
expected to rise by a further 3 to 4Ø% in the first half of
Exports of tubes from the Community, particularly of
1998, one reason being strong exports.
large welded tubes which are traditionally high, rose
again in 1997 by almost 34Ø% in volume terms, on top of
the excellent results achieved in 1996.
In the second half of 1998 activity in the Community
wire-drawing industry should weaken as a result of the
forecast downturn in external demand which will
In 1998 a further pick-up in activity is forecast in the
probably not be fully offset by the revival expected in the
seamless tubes sector in the first half of the year, led
building industry or by the sound general investment
principally by export sales to the oil and gas industries.
performance.

Against this, the small increase in domestic consumption,
due primarily to investment in the mechanical engin- However, the slowdown expected in this branch in the
eering industry, should be largely offset by imports, second half of 1998 should not damage the results for
some of which have been rising very strongly since the the year, which should show a net levelling-off or slight
start of 1998. increase in consumption of drawn wire, compared with
1997 levels, sustained by the steady recovery in demand
from the building industry and continuing strong
demand from the motor industry, which is still heading
The general economic conditions point to buoyant in the right direction. Even keeping up a pace
domestic demand in the second half of the year. comparable to 1997 in wire drawing can be considered
However, exports are expected to fall, particularly on highly satisfactory, to say the least.
the OCTG market, even without cutbacks in the oil
companies’ programmes. Despite the risks of knock-on
effects from the crisis in Asia, weldless tube production
could settle at 1997 levels, which, all in all, were highly After fairly poor results in 1996, activity in the general
satisfactory. drawing industry gained pace in 1997, spurred by a very
sharp increase in demand from carmakers in the
Community.

Imports, however, will continue to take around a quarter
of the Community market in this field.
Consequently, 1997 will have brought a tangible
recovery in this sector, with sales volumes unexpectedly
up by at least 10Ø% to take them back to the very high
The small welded tubes market should see a little growth 1995 figures.
in consumption during the first half of 1998 due to
firmer demand from the motor and building industries.
In the second half of the year, however, it cannot be
ruled out that the marked upward trend in imports could The first half of 1998 should push consumption of drawn
hit production of small welded tubes, particularly if products up further to an estimated 6Ø% above the
export sales level off. figures for the corresponding half of 1997, as demand
from the motor industry holds firm.

The situation for large welded tubes is particularly
healthy. Prospects are excellent, even in the medium However, a slight downturn in demand could follow in
term, given the orders taken already, most of them for the course of the second half of 1998. Taking the year as
the export market. The 1998 results for large welded a whole, in volume terms sales of drawn products will
tubes will therefore be better than the 1997 figures, in probably rise by a further 3Ø% or so compared with
terms of both production and exports. 1997, which itself was an excellent year.
C 233/6 EN Official Journal of the European Communities 25.7.98

C.ÙCold-rolling and forming principally to more sustained demand for formed sheet
for roofing for industrial buildings, despite the stronger
competition from alternative aluminium products more
In 1997 the cold-rolling industry returned its best results widely used to renovate asbestos cement structures.
for decades. Growth in this sector in 1997 unexpectedly
far exceeded the 5Ø% forecast to end at around 15Ø%
above the poor 1996 performance. Given the excellent results in 1997, keeping activity in
this branch in 1998 as a whole at a level comparable to
the previous year must, however, be considered satis-
factory, at least. In any event, the faster pace expected in
The greatest progress was made in Germany, Italy and
the building industry in the Union could stimulate
France, but highly positive trends were recorded in the
further demand for wide sections in the future.
United Kingdom and Spain too.

In the long-products forming sector too, trends in 1997
Demand for cold-rolled strip was even firmer in the first were far better then forecast. Sales volumes picked up
few months of this year, to the extent that 80Ø% of strongly in 1997 and largely made up for the 10Ø% drop
production for the entire year is already accounted for suffered in 1996.
by the orders taken in the first quarter.

In the first part of 1998 demand continued to improve,
The growing demand from the motor industry and although it has levelled off since the end of the first
makers of electrical and non-electrical machinery quarter. The forming industry depends heavily on trends
combined with the heavy demand for exports have in the building industry, in both renovation and new
breathed fresh optimism into the cold-rolling sector starts, and has been trying to diversify into other sectors
despite the competition from slit strips, particularly from heading in the right direction to find opportunities for
imports onto the Community market. lasting growth.

Stocks of cold-rolled strip held by producers and users in Nevertheless manufacturers of cold-formed products
the Community are low. By contrast, a substantial seem fairly optimistic about prospects for the second half
build-up of raw material reserves has been reported in of 1998 and consider the levelling-off of demand at the
the cold-rolling industry to meet the need to cater for very high levels achieved in the second half of 1997
the highly promising demand trends. highly positive, given that imports of long-formed
products are still negligible on the Community market.

Consequently, the situation in the cold-rolling sector will
remain excellent throughout the second half and for The trade regards equalling the 1997 results, in volume
1998 as a whole, with sales up by around 10Ø%, even and price terms, in 1998 as thoroughly acceptable,
compared with the remarkably good volumes in 1997. particularly in anticipation of a steady improvement in
the building industry, the leading consumer of long
sections.

The wide-products forming industry reaped the benefits
of the brighter economic climate in 1997, despite the
continuing weakness of activity in the building industry, 2.2.2.ÙSituation in the building industry in 1998
which is still by far the leading user of such products.
Last year consumption of wide sections, particularly of
sandwich panels, grew strongly and, taken as a whole, Although the economic recovery has been gaining
even surpassed the 5Ø% estimate made at the end of strength in every European Union country since 1997,
1997. with inflation remaining under control, interest rates
keeping low and employment prospects improving, the
combined effect has not yet made any clear impact on
In the first half of 1998 consumption of these products any activity in the building industry in the European
can still be expected to be 2 to 3Ø% up over the first half Union as a whole.
of 1997. However, the drying-up of new orders for
delivery more than three months ahead, particularly for
sandwich panels, suggests a small downturn in sales In 1997 the variation in production in the building
volumes in the second half. As a result, for 1998 as a industry in the Community as a whole was scarcely
whole a levelling-off or, at best, small increase in higher than in 1996 in volume terms despite far more
comsumption of wide sections can be expected, due marked growth in this sector in various Member States.
25.7.98 EN Official Journal of the European Communities C 233/7

Since the end of 1997 and the start of 1998, however, 2.2.3.ÙThe motor industry
the benefits of the economic recovery in the Community
are becoming more apparent in the building industry in
the vast majority of Member States, albeit with wide For years demand for motor vehicles in the European
variations from one country to another and lagging Union has been picking up, as illustrated by the
somewhat behind the improvement in economic substantial increases in registrations of new vehicles
conditions. For example, development prospects in the which rose by a combined total of around 20Ø% between
building industry in 1998 remain relatively bright in the 1994 and 1997, compared with the 1993 figures.
United Kingdom, Spain, Italy, the Netherlands,
Portugal, Sweden and Belgium in particular. In France
the industry is gradually making up the ground lost in Buoyed by the economic recovery, greater consumer
previous years but in Germany there is no sign of confidence, a less wait-and-see attitude on the part of
improvement yet and activity in this sector remains very households, incentives and other internal factors, the
sluggish, despite public investment, particularly in the motor vehicle market has made great strides, with regis-
railways. trations up 6,4Ø% in 1996 and again by 4,8Ø% in 1997,
albeit with wide variations in some Member States as
support schemes have been launched or have come to an
Nevertheless activity in this sector will intensify once end.
Member States have finished the clean-up of their
finances which has limited public investment and curbed
the recovery in the building industry in particular so far. Following these excellent results, the motor vehicle
market in the Community has remained on the up since
the start of 1998. However, the trend has been far more
In the case of house-building, the situation seems quite marked than in the past, with new registrations up by an
bright in the United Kingdom, fuelled by investments in average of 12,3Ø% in the first quarter, with spectacular
private housing. In Spain and Italy, the trend is also on increases in Germany, Italy, France, the United
the up, thanks to renovation programmes, while in Kingdom and Spain in particular. In April and May, the
France there are also signs of recovery in the multi- pace of new registrations slowed down slightly, giving a
storey housing sector. Community-wide increase of 8Ø% for the first five
months of 1998.

In Germany, by contrast, the tightening-up of taxation,
This performance is attributable to the combined effect
inter alia, by increasing the inheritance tax burden,
of the internal factors mentioned, plus the launch of
coming after a marked contraction in new housing starts
several new models on the market. However, the motor
in the west of the country, will militate against the
vehicle market in the Union should slow down tangibly
recovery expected in 1998.
in the months ahead, with registrations for the year as a
whole likely to be around 2Ø% higher than in 1997.
As for non-residential construction, the investments
planned will sustain the upward trend in this sector in Throughout this period the Community motor vehicle
the United Kingdom and Spain in 1998. In Italy, by industry has benefited greatly from the strong domestic
contrast, there will be a slight recession in this activity, demand and the excellent export opportunities. These
following the 10Ø% growth achieved in 1997 with the have enabled it to step up production rates but not,
help of tax relief, whereas in France the increase in however, to shorten delivery times for certain new
building permits granted will not be enough to avert a models.
slight downturn in construction. And there will be an
even greater recession in this industry in Germany, due
to falling investment in the new Länder and the large
This indicates intense activity throughout 1998 in this
unoccupied stock.
major steel-using industry.

In the case of civil engineering projects, after five
consecutive years of contraction, the tide has turned in
Italy, primarily due to public investment in the south of 2.3.ÙOUTLOOK FOR IMPORTS AND EXPORTS OF
STEEL PRODUCTS
the country. The situation is similar in Spain, after two
consecutive years of declining activity.
2.3.1.ÙEuropean Union external trade statistics for steel
The situation in this sector is gradually settling down in
France, still showing signs of slight recession in Germany The delays by some Member States in forwarding
and could deteriorate further in the United Kingdom if statistics on trade in steel between the European Union
the decision to construct the Channel Tunnel Rail Link and third countries have been partly reduced, but much
is delayed any longer. still needs to be done in this respect.
C 233/8 EN Official Journal of the European Communities 25.7.98

At the time of writing, the data available for the following the shift in some trade flows will adversely
European Union as a whole only fully covers 1997 and affect Community industry exports.
most of the first quarter of 1998. Estimates have
therefore been made for a large proportion of the
outstanding data for the first six months of 1998 and this Moreover, since the beginning of 1998, there has been a
may affect the accuracy of the forecast given that it is concentration, on the Italian market in particular, of
very unclear in particular whether certain trade flows substantial quantities of steel from various third
will be affected by the Asian crisis. countries, producing instability capable of spreading to
other Community markets.
The figures for 1997 as a whole show that the
Community’s steel imports increased overall by 17Ø%,
though more substantial rises were seen in imports The second half of 1998 should in principle see a
of long products (up 21Ø%) and semi-finished products slowing down in the rise of steel imports onto the
(up 19Ø%). Community market given that domestic demand is
forecast to fall and that prices are expected to level off
or even consolidate slightly. For 1998 as a whole, steel
As for origins, the main increases were from the Central imports into the Community are likely to be significantly
and Eastern European countries, the republics of the higher than in 1997.
former USSR, and the former Yugoslavia, amounting in
1997 to a total of 9,6 million tonnes, about 67Ø% of the
Community’s total steel imports, as against 7,3 million Steel exports from the Community, on the other hand,
tonnes, or 60Ø% of imports, in 1996. will continue to fall during the second half of 1998
because of the need to meet domestic demand and the
keener world market competition. For 1998 as a whole,
Community steel exports, however, fell by 15Ø% in 1997 these exports will therefore decline in net terms, though
compared with the excellent levels seen in 1996 due to remaining at very satisfactory levels.
increasing internal demand during the year, despite
attractive world prices.
Considering the expected growth in the international
steel trade and the forecast decrease in opportunities
A more detailed analysis of the data for 1997 as a whole, both inside and outside the European Union, in
however, shows that, taken together, Community steel particular following the entry into service of new
exports to the Central and Eastern European countries, capacity in regions short of steel, the Commission would
the CIS and the former Yugoslavia rose by 26Ø%, while again urge all parties concerned to be cautious, especially
exports to Asia fell by a good 31Ø%. Nevertheless, in terms of industrial and commercial strategies, to
although the increase in Community steel exports to the ensure that the healthy state of the Community market,
countries of the first region is only about 400Ø000 tonnes, which has been achieved gradually and, let it be said, at
the drop in exports to the latter region is expected to the cost of great sacrifices in financial terms and jobs,
have exceeded 2 million tonnes. can be maintained over time.

The crisis in south-east Asia should therefore in 1997
only have produced a fall in Community steel exports to The Commission, for its part, is prepared, where
this region since imports of steel from the Asian necessary, to use the existing commercial policy
countries fell by 21Ø%. instruments in order to ensure that the fairly healthy
state of the Community steel market is not adversely
affected by the actions of certain exporters to the EU
The impact on the Community market of the shift in the contrary to the rules of international trade.
world steel trade should therefore have been quite
modest in 1997.
2.3.2.ÙThe world economy in 1998
The trends outlined on the basis of the statistics available
even for the first three months of 1998 point to a 62Ø%
rise in steel imports into the Community market After peaking between the latter part of 1997 and the
compared with the same three months in 1997 and a early part of 1998, the word economy looks set to slow
further fall in Community exports. down gradually in the wake of the Asian crisis and the
slower growth in the USA, though the general upturn in
Europe partly makes up for this.
The upward trend in demand and the steady rise in the
level of Community prices attracted excess supply from
certain third countries, pushing up imports, while the The Community will therefore provide the main thrust
need to meet sustained internal demand and the changes behind world growth, even if the international
25.7.98 EN Official Journal of the European Communities C 233/9

environment is not as conducive as in 1996/97. The industries, since there are still no signs of an upturn in
USA, however, under growing direct and indirect investment and domestic consumption.
pressure from the Asian crisis, should see its economic
cycle slow down further, even if the crisis to some extent
helps curb inflation. Given the changes needed in various
Asian countries which are in recession, Asia is likely to In the steel sector, the weakness of domestic demand
see a considerable fall in its economic activity, despite and the reduced sales opportunities in the Asian region
the stability factor provided by the Chinese economy and could, despite the fall in steel production, undoubtedly
very slight growth in Japan. increase the Japanese steel on the world market.

In the world steel market, both demand and production
are expected to be slightly lower than in 1997. Much 2.3.2.3.ÙThe economies of China and south-east Asia
bigger changes are, however, expected in trade between
one geographical region and another due to the shift in
some trade flows following the Asian crisis and the Growth rates in south-east Asia should be considerably
bringing into operation of new capacity, in particular in lower in 1998, with more or less marked variations from
regions short of steel. one country to another. Painful but necessary changes
are being made to cope with the crisis.

2.3.2.1.ÙThe United States of America
In the steel sector, there should be a considerable fall in
consumption this year and a very slight rise in
The US economy should see a gradual fall in growth production. On the trade front, however, imports are
and, for 1998, its growth rate is expected to be 2,5Ø% as likely to fall considerably.
against 3,8Ø% in 1997.

Responding to control and modernisation by the
However, investment, vehicle production and building in government, the Chinese economy is still going through
general will remain strong and continue to play an a buoyant phase, even though the stability of the yuan is
important part in the growth expected this year. uncertain. Its growth of about 9Ø% in 1997 looks likely
to fall slightly in 1998 to 8Ø%, the mainstays still being
investment in building and capital goods. Steel
consumption in China is expected to rise again this year,
Steel comsumption therefore looks set to rise, though the along with production, so the country’s steel shortage
forecast increase in production, in particular now that will change very little.
new capacity has been brought into service, should
reduce the need for imports of steel products.

2.3.2.4.ÙThe economies of the countries of Latin America
There is also some likelihood that the strength of the
dollar, which is having a considerable impact on surplus
international supply seeking new outlets following the
events in Asia, will put further pressure on the USA’s All of the economies of Latin America are still
trade deficit with some countries at the expense of developing soundly, even though the Asian crisis should
Community steel exports to that market. cause exports to fall in one country or another. The
average growth of the countries in this region in 1998
will nevertheless be in the order of 3 to 4Ø%.

2.3.2.2.ÙEconomic situation in Japan
Steel consumption in these countries should rise by 3Ø%
in 1993 to about 28 million tonnes.
The Japanese economy is expected to see relatively low
growth of between 0,5 and 1Ø% again in 1998, which is
likely to further increase its trade surplus.
The events in Asia should lead to a decrease in steel
exports from the Latin American countries, while imports
should increase sharply, reducing the trade surplus of all
There is a clear loss of confidence over the country’s the countries in this region this year to about 8 million
economic prospects, except in broadly export-driven tonnes, 5Ø% down on 1997.
C 233/10 EN Official Journal of the European Communities 25.7.98

2.3.2.5.ÙSituation and prospects in the Central and Eastern market, even though it has been possible to repeat the
European countries and the republics of the CIS first quarter’s prices and in some cases even increase
them for deliveries during the second quarter. The
The economic climate of the Central and Eastern announced arrival of a more abundant supply at low
European countries is clearly improving considerably and prices as a direct and/or indirect result of the events in
the upturn which began in 1994 has, in terms of growth, Asia could well reverse the trend in the prices of flat
constantly boosted GNP since 1996. products in the months ahead.

For steel, the shrinkage in the local markets, given the The consumption of long products is increasing in the
broad surplus in steel production, has made it necessary European Union together with the rise in investment.
to look for markets abroad. This encouraging domestic situation does not, however,
make up for the losses caused by the fall in export
opportunities. As with flat products, there is still some
In the second half of 1998, even the forecast increase in pressure on prices, especially since scrap rates are already
domestic consumption will not be enough to absorb the falling. The slowdown in exports and the rising trend of
growth in production, and the loss of one or other imports and stocks are therefore not factors which will
foreign market may therefore lead to a larger proportion help prices to stabilise firmly in this sector. Furthermore,
of the surplus steel supply of the Central and Eastern some price decreases have already been seen for concrete
European countries being diverted to the Community. reinforcing bars and wire rod for wire mesh, while the
prices of other products are merely stabilising at the
The economic situation in Russia has been slowly moment.
improving since the introduction of the reforms and the
country’s growth is set to increase further in 1998, even
if the rate is not likely to exceed 1Ø%. 2.5.ÙTRENDS BY PRODUCT

For the steel industry, steel production in Russia is
expected to rise in 1998, after falling in 1997, and
Flat products
domestic consumption should grow by about 2Ø%.
—Ùhot-rolled coil
For trade in steel, Russian exports seem likely to fall
slightly in 1998 since the large quantities of semi-finished
products exported in 1997, in particular to the Asian Demand from the main consuming sectors is still satis-
countries, will be more difficult to place with other factory, stocks are at a normal level and deliveries are
buyers. stabilising on an upward trend. However, orders seem to
be falling slightly compared with the end of 1997 and the
early part of 1998 due to significantly higher imports
The economic situation in Ukraine still shows no signs of from third countries. This situation is probably the result
improving and, in 1997, GDP fell by 3Ø%. of a shift in some trade flows to European markets, but
it could put domestic price stability at risk if it worsens
during the next few months.
For steel, given the very low level of domestic demand
and the poorer outlook for exports, production is forcast
to fall in 1998. —Ùcold-rolled sheet

Business in the main consuming sectors such as the
2.4.ÙPRICE TRENDS motor industry and tube manufacture is very sustained
and demand for steel remains at a very good level.
Following the gradual rises seen since the last few Stocks are perceptibly rising, though without giving the
months of 1996, the prices of flat products are now slightest cause for concern at the moment. However, the
under a certain amount of pressure in most European sharp rise in imports, in particular to the Italian and
Union countries. Although domestic demand has held up Spanish markets, and the announcement of greater
well, the signs are increasingly clear that any changes in volumes on the entire Community market could push
the prices of these products will be rather sluggish during prices down during the second half of 1998.
the second half of 1998. Although little change in
imports from Asia can be discerned at the moment,
except for the concentration referred to in the Italian —Ùcoated sheet
market, the Community industry is still benefiting less
from export opportunities than in the past. Furthermore,
the significant rise in some low-cost imports will The situation for galvanised sheet has been exceptional
undoubtedly have an adverse effect on the flat products for a number of months due to high demand from the
25.7.98 EN Official Journal of the European Communities C 233/11

motor industry and increasingly from the building sector. and limited opportunities for export sales. The prices of
Despite new capacity recently having been put into concrete reinforcing bars are therefore falling again,
operation and the very high levels of use of production even though the rates for scrap are also falling at the
tools, the market supply of these products is still inad- same time.
equate.

—ÙMerchant bars
Electrogalvanised sheet is in much the same situation as
galvanised sheet, but the drop in exports to south-east
Asia and the forecast increase in imports could upset the
Thanks to a lower level of supply at the beginning of the
prices of these products during the second half of 1998.
year, these products are in a stable, balanced situation as
regards both stocks and prices. In general terms, the
increase in investment in the European Union is still a
—Ùquarto plate positive factor for the expected rise in demand for
merchant bars and prices during the second half of the
These products are currently profiting from a very year.
healthy situation on both the European market and the
world market. Strong demand, especially from the large
welded tubes sector, and the current stability of the
dollar continue to allow for a measure of optimism as 2.6.ÙCRUDE STEEL BALANCE FOR THE SECOND HALF
regards future changes in this field, at least until the end OF 1998 AND 1998 AS A WHOLE
of the year. This sound situation could nevertheless to
some extent be endangered by an increase in certain
imports from third countries. Exports, still very sustained again in 1997 despite the
events in Asia, have made a major contribution to the
growth of the Community economy, which is set to
benefit further still from better changes in various
Long products domestic factors.

—Ùheavy sections and beams The strength of the economic upturn in the European
Union, which has boosted business in the main steel-
consuming industries, pushed up Community
Thanks to the good weather throughout the winter, consumption during the first half of 1998 again quite
demand for these products was very high until the first significantly and this has largely made up for the slump
few months of the year. Nevertheless, merchant stocks in export orders.
are tending to build up and this, together with the
constant rise in imports, could push down the prices of
beams during the second half of the year.
The gradual improvement in the conditions on the
Community steel market since the end of 1996 has,
however, increased imports very significantly, especially
—Ùwire rod since the beginning of 1998, and this has to some extent
led to stockpiling by some users in particular.
The traditional worldwide flows of low-quality steel,
such as wire for welded mesh, are changing in some
ways, in particular as regards products from the Central Sectoral activities are forecast to stabilise to some extent
and Eastern European countries and Turkey. These during the second half of 1998, leading to a slight fall in
changes in trade indirectly affect the Community steel consumption as compared with the excellent levels
industry and supply on the European market is currently seen in the second half of 1997, so the performance for
in surplus, which is already depressing prices to some the year as a whole should be slightly down on the first
extent. For higher-grade steel, the situation is far better half of 1998.
thanks to sustained demand from the motor industry and
the mechanical engineering industry and the demand for
exports. The trends outlined therefore suggest that, for the
second half of 1998 (as indicated in tables), real steel
consumption will be 73 million tonnes, 2Ø% down on the
—ÙConcrete reinforcing bars corresponding period in 1997, while apparent
consumption should fall by about 0,6Ø% to 75 million
tonnes. With imports also expected to increase
The recently seen improvement in the balance on the significantly and steel exports to fall by about 11,8Ø%,
European market between supply and demand for equilibrium steel production is forecast to be 78 million
concrete reinforcing bars is currently impaired by the tonnes, a fall of 2,5Ø% on the figure for the second half
combination of a slowdown in demand, a rise in imports of 1997.
C 233/12 EN Official Journal of the European Communities 25.7.98

Given the changes seen during the first half of the year by increasing the quality of pellets and the production
and those expected during the second, real steel capacity and improving the routing of mining products.
consumption for 1998 as a whole is forecast to be 155
million tonnes and apparent consumption 158 million
tonnes, increases of 3,5Ø% and 4,8Ø% respectively on the
1997 levels. Community imports should rise again by 3.3.ÙFERRO-ALLOYS
25,9Ø% and exports fall again by 12,1Ø%. Steel
production in the Union is therefore estimated at The sustained demand for ferro-alloys seen during the
162Ùmillion tonnes, an increase of 1,6Ø% on 1997. second half of 1997 in the European Union stabilised
throughout the first half of 1998. However, a more
pronounced increase in supply over demand is putting
some pressure on prices, as has already been seen for
ferro-silicon and ferro-silico-manganese.

3. RAW MATERIALS
For the second half of 1998, the market trend in ferro-
alloys points to a relative balance between supply and
demand and prices are therefore not expected to vary
3.1.ÙTHE SCRAP MARKET widely.

The demand for scrap in Europe and the United States is
still relatively firm, particularly because of the increase in 3.4.ÙTIN, ZINC AND NICKEL
electrical steel production.
In 1997, tin production rose slightly compared with
Some unusual flows in the international trade in scrap, 1996, while apparent consumption of this metal remained
with considerable quantities concentrated in some virtually unchanged during this period.
markets, have nevertheless gradually produced a
temporary supply surplus, even in places where demand
The forecasts are for demand to remain strong for the
was very sustained. This is a direct or indirect result of
rest of the year, despite the Asian crisis, but thanks to a
the fall in demand for scrap from the Asian countries
healthy economic situation in Europe and North
and has caused the price of scrap to fall in nearly all
America.
parts of the world.

Since January, the price of this raw material for the steel
During the next few months, the international scrap
industry has risen by about 12Ø% and, this year, tin will
market is not expected to see any particular changes
be one of the few metals which sees its price increase.
since the supply of this raw material adapts quickly to
changes in demand. The trend in scrap prices is therefore
not forecast to change in the very short term. For 1998, world consumption of zinc, which will be
similar to the level in 1997, is forecast to rise very
slightly by 0,6Ø% to around 7,8 million tonnes, while its
performance on the Community market should be
3.2.ÙIRON ORE slightly better.

The substantial rise in the world steel production and the World production of zinc could see a rise of 3,3Ø% in
greater trend towards the use of pellets underlie the 1998. Nevertheless, following the record levels achieved
record level of iron ore production in 1997. Compared in 1997, a big fall in exports from the Eastern countries,
with 1996, the volumes of commercial trade in this raw in particular China, should help to reduce the surplus
material have therefore risen substantially. The extent of supply on the Western market.
this has been such that, for some time, the need to bring
supply into line with demand has led to delivery delays,
due especially to routing difficulties. Zinc prices, which have been somewhat volatile after
peaking in August 1997, are note expected to vary to any
great extent during the second half of 1998, and even a
During the first half of 1998, demand for iron ore was slight fall is not unlikely seeing that the supply on the
firm and prices rose slightly, even if a small fall is market is forecast to rise due to the trend towards stock
expected for the year as a whole due to the forecast fall reduction.
in consumption in some Asian countries.
The latest revised figures of the International Nickel
Nevertheless, given the growing needs for market Group point, for 1997, to an increase of 5,7Ø% in nickel
supplies, producers are continuing to try to adjust supply production and 7,2Ø% in consumption. The rise in
25.7.98 EN Official Journal of the European Communities C 233/13

consumption is due mainly to the sharp increase in the In the past, workforce adjustments have been made by
production of stainless steel. giving early retirement, which has enabled companies to
make deep, swift cuts in staff. However, less use is now
The fall in consumption in Asia should be made up for being made of such schemes.
by higher consumption in the USA and Europe and, up
to the end of 1998, the forecast is therefore for supply
and demand to be relatively balanced. Nickel prices will Over the years, early retirement, a relatively easy way of
continue to fall slightly until the end of the year, even taking workers out of the labour market, has proved
though exports from Russia are forecast to decrease. very costly. In addition, the companies’ age pyramid now
no longer allows the workforce to be quickly reduced by
retiring the oldest workers and so some Member States
will be resorting more frequently to alternative schemes.
4. EMPLOYMENT
Following France’s experience, some governments are
The steel industry is going through a sound period, therefore introducing new schemes such as ‘phased early
thanks to the healthy economy, and the effects of this retirement’ to enable companies to reduce the total
can also be seen on employment, where there have been number of working hours. This means that the
fewer job cuts than in the past. knowledge and skills of the older workers can be
retained without having to dismiss younger workers who
A recent forecast puts net job losses at around 8Ø000 in might not necessarily be able to find another job quickly
1998. This figure reflects the relative stability seen in at a time of high unemployment.
1997 and shows how much the market situation has
improved compared with the crisis years of 1992 to 1996,
when on average up to 26Ø000 workers a year lost their The Commission will continue to apply its social policy
jobs throughout the Union. to workers in the industry who continue to be affected
by restructuring or closures. Except for training and self-
employment schemes, which may be cofinanced by the
These cuts could nevertheless be higher still in Germany
ESF, all other measures provided for in bilateral
due to mergers and rationalisation, in Spain where the
agreements on aid for retraining under Article 56(2)(b)
most recent restructuring plan is coming to an end and
of the ECSC Treaty will therefore be maintained until
in the United Kingdom for a number of reasons.
the Treaty expires in 2002.
Company mergers and new technological applications
could therefore lead to further adjustments to the steel For 1998, the funds in the ECSC’s budget for traditional
industry workforce in the future, which will require new aid for retraining in the coal and steel industries amount
support schemes. to ECU 70 million.
C 233/14 EN Official Journal of the European Communities 25.7.98

Table 1
Crude steel supply and demandØ(Î)
EUR-15

(million tonnes)
Outturn Estimate Forecast
Second half First half
First half 1997 Second half
1995 1996 1997 1998 1998
1997 (R1) 1998
(R1) (R2)

Apparent user
consumption (a) 142,0 139,4 75,3 74,5 149,8 82,0 73,0 155,0

Change in merchant
stocks (b) +Ø3,0 –Ø4,0 0,0 +Ø1,0 +Ø1,0 +Ø1,0 +Ø2,0 +Ø3,0

Apparent consumption 145,0 135,4 75,3 75,5 150,8 83,0 75,0 158,0

Imports EUR-15 17,0 12,2 6,9 7,4 14,3 10,0 8,0 18,0

Exports EUR-15 22,7 28,0 12,0 11,9 23,9 10,5 10,5 21,0

Change in producer stocks +Ø5,0 –Ø4,0 –Ø1,0 0,0 –Ø1,0 +Ø0,5 +Ø0,5 +Ø1,0

Production 155,7 147,2 79,4 80,0 159,4 84,0 78,0 162,0

(Î)ÙÚConversion factor of finished products to crude steel: 1.11.
(R1) Figures revised on the basis of outturn.
(R2) Partially revised.
(a) This aggregate is close to actual consumption. It includes changes in consumer stocks and merchant stocks in all countries except Germany, France,
the United Kingdom and Benelux.
(b) Change in merchant stocks in Germany, France, the UK and Benelux.

Table 2
Indicators of activity — EUR-12Ø(Î)
(not seasonally adjusted)

Period Second half 1998 Second half 1997 1998 1997
Sector (second half 1997Ø=Ø100) (second half 1996Ø=Ø100) (1997Ø=Ø100) (1996Ø=Ø100)

Manufacture of metal articles 104,8 105,7 103,8 104,6

Mechanical engineering 104,1 106,6 105,9 105,1

Electrical engineering 103,8 107,1 104,7 105,7

Motor vehicles 104,0 108,4 105,1 106,8

Other means of transport 107,7 111,7 106,3 111,9

Building/civil engineering 101,2 99,6 100,8 100,1

(Î)ÙIn the absence of basic steel consumption data by sector for Austria, Finland and Sweden, these indicators refer only to expected development in the
Community of 12.
Indexed forecasts of the level of activity of the various steel-consuming sectors derived by weighting national data provided by the trade associations of
those industries. Some figures are partial estimates as the data for certain countries are not available.
Source: Commission data.
25.7.98 EN Official Journal of the European Communities C 233/15

Table 2(a)
Trends in the steel-consuming sectors in the main producer countriesØ(Î)
(Activity indicatorsØ(Ï))

Member State Germany France Italy United Kingdom Spain

Sector/indicator II/1998 1998 II/1998 1998 II/1998 1998 II/1998 1998 II/1998 1998

Manufacture of metal
articles 103,0 104,0 102,8 104,3 — — — — — 101,0

Mechanical engineering 105,0 106,0 101,9 104,8 — — — — — 111,5

Electrical engineering 104,3 105,0 101,9 102,8 — — — — — 110,2

Motor vehicles 104,9 105,0 102,8 104,7 — — — — — 105,0

Other means of transport 101,0 101,0 109,1 109,1 — — — — — 112,4

Building/civil engineering 100,0 99,5 101,0 101,0 — — — — — 103,1

(Î) Source: National steel users’ associations.
(Ï)ÙFor each country:
first column, activity indicator second half 1998 (second half 1997Ø=Ø100),
second column, activity indicator 1998 (1997Ø=Ø100).

Table 3
Changes in the numbers employed in the steel industry
(including apprentices)

Number of employees
(in ’000) Change
Member State (%)
(Reference month) (Most recent month)Ø(Î)

Austria 12,7 (December 1996) 12,5 (December 1997) –Ø1,6
Belgium 22,6 (December 1996) 20,4 (December 1997) –Ø9,7
Denmark 1,2 (December 1996) 1,2 (December 1997) 0,0
Germany 82,8 (February 1997) 80,6 (February 1998) –Ø2,7
Greece 2,0 (December 1996) 2,1 (December 1997) +Ø5,0
Spain 23,0 (December 1996) 22,8 (December 1997) –Ø0,9
France 38,1 (January 1997) 38,5 (January 1998) Ø1,0
Finland 7,3 (December 1996) 7,1 (December 1997) –Ø2,7
Ireland 0,4 (December 1996) 0,4 (December 1997) 0,0
Italy 37,5 (December 1996) 37,8 (December 1997) +Ø0,8
Luxembourg 4,9 (January 1997) 4,3 (January 1998) –Ø12,2
Netherlands 12,2 (December 1996) 12,1 (December 1997) –Ø0,8
Portugal 2,2 (December 1996) 2,0 (December 1997) –Ø9,1
Sweden 13,6 (December 1996) 13,6 (December 1997) Ø0,0
United Kingdom 36,5 (December 1996) 35,2 (December 1997) –Ø3,6
EUR-15Ø(Ï) 299,6 (December 1996) 291,1 (December 1997) –Ø2,8

Source: Eurostat.
(Î)ÙMost recent figures available.
(Ï)ÙAs the reference period is not the same for all countries, this average is only indicative.