Information from the Commission - Forward programme for steel for the second half of 1999 and for the year as a whole (Text with EEA relevance)
21. 7. 1999 EN Official Journal of the European Communities C 206/7 FORWARD PROGRAMME FOR STEEL FOR THE SECOND HALF OF 1999 AND FOR THE YEAR AS A WHOLE (1999/C 206/04) (Text with EEA relevance) INTRODUCTION a reduction of 0,8 percentage points compared with last year’s figures. The deterioration of the international climate underlying the marked slowing down of the economy in the European Union forecast for 1999 seems likely to level off in the course of the year. The downturn in economic growth in the Community might therefore be confined to the first half of the year, with a slight upturn on the horizon in the second half of the year offering better prospects for industrial activity in particular. These downward adjustments are attributable to various factors connected with the rather poor international climate which is to some extent by a better economic nevertheless offset performance than expected in the United States. The weakening of the economy in the first half of the year, aggravated by the general propensity to absorb stocks may therefore be followed by increased industrial activity, in particular in the steel-using sectors. Accordingly, the fore- seeable improvement in demand in the short term, combined with reduced demand as a result of level of production, the return of stocks to normal, and less pressure from imports, should help to create conditions on the Community steel market which will bring about the higher level of prices that is needed. the lower the economic fundamentals within the European However, Union remain solid, with no inflationary pressure, very low interest rates and a high level of consumer confidence. Consequently, the signs of a gradual stabilisation of the inter- national climate suggest that the downturn in the Community’s economic growth will be short-lived and that there could be a slight upturn towards the second half of 1999. in difficulties encountered exporting Nevertheless, the to third countries, and the risks of a Community steel deflection of international supply flows as a result of an increase of protectionist measures, make for a degree of uncer- tainty as to whether the Union’s steel market can stabilise on a is in the interest of all lasting basis. Community steel market operators to keep a close watch on developments. In this context, it 1. ECONOMIC SITUATION IN THE EUROPEAN UNION The spring 1999 economic forecasts confirm the GDP growth rates for the Union and the euro zone for 1998 of 2,9 % and 3 % respectively, as predicted in the previous forecasts last autumn. Where the individual demand components are concerned, exports and equipment investment are likely to suffer more in the consumption and in 1999, while construction sector are likely to be steadier. Nevertheless, in 1999 investment growth in general should amound to 3,7 % compared with 4,9 % in 1998, and the growth in private consumption should level off at 2,6 %. investment Inflation, which has been steadily falling since 1991 and was down to 1,5 % in 1998, should be further reduced in 1999, possibly falling to 1,3 %, which would be a historic low for recent decades. Employment increased by 1,1 % in 1998, the highest rate of increase since 1990, and should increase still further in 1999 although less rapidly because of the slowing down of growth. These growth rates are attributable to the buoyancy of internal demand although, as a result of the deteriorating international climate, the Community economy slowed down somewhat in the second half of 1998, a reduction in exports having affected industrial production and investment. Moreover, the temporary nature of the downturn in production predicted for 1999 should not bring about major job losses, and there should be a reduction of 0,4 percentage points in the rate of unemployment, falling to 9,6 % of the working popu- lation compared with 10 % in 1998. For 1999 the latest forecasts indicate a slower rate of growth for the Community economy compared with the autumn 1998 forecasts. Accordingly, it is expected that the GDP growth rates for the European Union and the euro zone will fall to 2,1 % and 2,2 % respectively, downward adjustment of 0,3 and 0,4 percentage points respectively and corresponding to a The major progress achieved in recent years with regard to budgetary consolidation has made it possible to reduce the European Union’s average public deficit from 6,1 % of GDP in 1993 to 2,3 % in 1997 and 1,5 % in 1998. The Union’s average deficit should still be 1,5 % in 1999 despite slower growth and less far-reaching budgetary adjustments. C 206/8 EN Official Journal of the European Communities 21. 7. 1999 2. STEEL MARKET SITUATION AND OUTLOOK 2. 1. CRUDE STEEL PRODUCTION IN THE EUROPEAN UNION Community steel production started to plummet in August 1998 following a fairly lengthy period of significant month- on-month increases. This downward spiral culminated in cancelling out over the year as a whole the average increase of about 7 % recorded mid-year. The very significant deterioration in market conditions in the second half of the year and the fall in stocks resulted in major reductions in steel production of 10 % and 20 % in November and December total respectively, with the production for 1998 levelled off at around the 1997 figure (+ 0,1 %) at 159,6 million tonnes, 1,5 % down on the estimate in the previous programme (1). result that In the first three months of 1999 Community steel production continued to shrink significantly and the cumulative reduction in the first quarter compared with the corresponding quarter of 1998 was nearly 10 %. In April and May production again fell significantly, with the result that even allowing for a slowing down in this downwad the year for trend it production will amount to around 76,5 million tonnes, a 9,7 % reduction compared with the first half of 1998. is estimated that the first half of However, it is likely that following a period of reduction of stocks and with lower import volumes compared with 1998 Community production will increase in the second half of 1999. Consequently, the combined effect of these factors and the more vigorous demand that is foreseeable from the user sectors should result in a level of production of 78,5 million tonnes in the second half of the year, an increase of around 4,5 % compared with the last six months of 1998. Steel production in the Union for the year as a whole should therefore amount i. e. 2,6 % down on the previous year and 1 % less than the previous estimate (1). The increase in production in the second half of 1999 should therefore result in better utilisation of capacity. to around 155 million tonnes, to suffer from the very adverse effects of However, caution is still required, since the world market continues the upheavals caused by oversupply from certain geographical the inter- areas, although the effects of national market on the Union’s trade in steel should be less significant than in 1998. the disturbance of (1) OJ C 24, 29. 1. 1999. supply and demandí The table in Annex 1 Crude steel summarises the volumes and trends for EU steel consumption, external trade, production and stocks and estimates the changes expected in the second half of 1999 and the year as a whole. 2. 2. OUTLOOK FOR THE SECOND HALF OF 1999 AND FOR THE YEAR AS A WHOLE The significant slowdown in the Community economy in 1999, attributable to the international economic crisis which has industrial production and investment, should affected trade, is be short-lived and a recovery, albeit a modest one, expected for the second half of the year. Against this background, the end of a lengthy period of a general widespread reduction of stocks combined with an improvement in the external climate should gradually restore industrial confidence. This would help to improve overall demand somewhat as a result of an upturn in inter-industry orders and the growth of household consumption. In addition, the steady improvement on the Asian markets in particular, the good levels of external order flows and the strength of the American dollar could promote a slight recovery in exports in the course of the year unless there is renewed external protectionism. in the The improvement therefore suggests that observed in April increase in economic activity in the course of gradual second half of 1999 given a favourable consumer climate. indicator there will be a the confidence industrial In this context, industrial activity should gradually intensify, in particular in the main steel-using sectors where the demand for steel was adversely affected until the beginning of 1999 by the need to reduce stocks. At recent meetings, however, the steel producers expressed in their concerns not so much about the significant apparent steel consumption but more with regard to imports and protectionist measures taken or planned by certain third countries. They fear a possible deflection of export flows to the Community market which will prevent the necessary increase in internal steel prices. fall The steel dealers, on the other hand, were moderately opti- mistic at those meetings since they are favourably disposed towards the developments on the Community steel market from which in fact imports would seem to have either already disappeared entirely or be likely to do so rapidly. áexoticí 21. 7. 1999 EN Official Journal of the European Communities C 206/9 the gradual upturn in activity in the main Consequently, steel-using sectors (some of which are the subject of specific analyses in this programme) suggests an improvement in consumption of steel products during the second half of 1999. Even despite certain export difficulties, the motor domestic to enjoy industry will demand. The electrical engineering and electronics industries should stay on track. As the mechanical engineering industry is more affected by export difficulties, activity will be more sluggish in that sector, while the construction sector will strengthen its long-term growth performance. considerable continue are prospects undoubtedly forecast has the market situation for these products The worsening of announced in the previous therefore been confirmed, although it should be put into the perspective to some extent because of the excellent initial situation. Moreover, there gradual good improvement in activity in these branches of industry, with the tubes sector, given the recuction in the exception of import volumes, the destocking process and the end of especially the good progress being made in the user sectors, heralding a recovery in demand in the months ahead. Accordingly, for 1999 as a whole, with the exception of the tuibes sector which is in a very poor situation, the results for these branches of industry should be only slightly down on 1998. of a This intensification of activity in the second half of 1999 should enable a considerable amount of catching-up to take place following the considerable fall in demand in the first half of the year, in particular because of destocking, possibly culminating for 1999 as a whole in steel consumption results slightly below the figures for 1998. The end of the destocking process should therefore be reflected in more vigorous steel demand in the second half of 1999 from which the domestic industry should be able to derive greater benefit. The steel market situation should therefore improve somewhat in the course of the year, helping to push up steel prices gradually in order to guarantee the return on the capital invested in the sector. A. Steel tubes the year. Accordingly, As indicated in the previous programme, the excellent results in terms of steel tube sales volumes in the first half of 1998 were virtually wiped out by the slump in the market for these total prodcts in the second half of production of steel tubes in the Union would seem to have increased in 1998 by only about 1,9 %, attributable solely to a significant increase in the production of large welded tubes based on existing export commitments which have not since been renewed. In the first half of 1999 therefore the continued heavy pressure of imports and especially very low-priced imports combined with the poor situation in the oil and gas the reduction in stocks sector and the adverse effects of to the considerably influenced tube-manufacturing activity, point of entailing a further reduction in the capacity utilisation rates which were already very low in this sector, resulting in part-time working. Tables 2 and 2a in the Annexes contain activity indicators for the main steel-using sectors for the second half of 1999 and for these indicators should be the year as a whole. However, treated with caution since the basic data were supplied by the sectors concerned and there is not unanimous agreement on them. The present situation in the Community tube-manufacturing industry may be described as dramatic, since there is no sign of a reversal fo the trend in the market for these products in the short term. 2. 2. 1. Primary processing the products in question, on account of Activity in primary processing as a whole slowed down considerably following the break (in the second half of 1998) in the economic upturn in evidence since the beginning of the year. Since the early months of 1999 there has been a continuation of the downward trends in the demand for and the prices of the combined effects of destocking and the general economic slowdown in the European Union in particular. While the lengthy period of main user sectors continued during that downturn to record good results as in particular, the considerable contraction in the demand for and the prices of the products manufactured by the primary processing industries culminated in growing pessimism in these industries, in particular as regards the steel tube manufacturers. regards volumes In the seamless tubes sector, the constant fall in demand since the second half of 1998 as a result of the cancellation of orders, the lack of new oil company projects and the trend towards a reduction in OCTG stocks continued until the first half of 1999 without giving any signs of stabilising. For the second half of the year the best that Community producers are expecting is a more stable market situation, but the 25 % reduction in production estimated for 1999 looks unavoidable. In the case of small welded tubes (up to 406,4 mm in diameter) market conditions have also worsened since the end of 1998 but the good prospects in the main user sectors, the return of stocks to normal and the reduction in imports suggest that improvement in activity in the course there will be gradual of 1999 which may limit the fall in production to around only 2 % for the year as a whole. C 206/10 EN Official Journal of the European Communities 21. 7. 1999 However, the prospects are very poor as regards large welded tubes (over 406,4 mm in diameter), since although in 1998 it was possible to maintain a certain level of activity as a result of existing exports contracts, in 1999 the lack of new inter- national investment projects is likely to give rise to a net there is widespread reduction in production. Accordingly, part-time working in this industry to delay the impending end of the few contracts in progress and to avoid the current situation resulting in the complete closure of works. However, since the economic cycle in this sector, as for the steel-making industry proper, has been affected by stock trends, since the end of 1998 there has been a net reduction in new orders in this sector. However, this can only be a temporary effect of the need to return stocks to normal, since the motor industry, the rolling sector’s main customer, is still vry busy. Nevertheless, given the considerable falling-off in orders in recent months, it is not out of the question that the volume of sales in this sector in 1999 will be 10 % down on 1998, i. e. a return to the 1996 levels. B. Drawing (wire and bars) The volume of sale of products from the wire-drawing sector increased overall by 3 % in 1998 despite their considerable reduction in the second half of the year. Where external trade in these products is concerned, there was a significant increase in imports to the EU market even though Community exports of drawn wire increased in excellent fashion. The falling-off in activity observed from the second half of 1998 continued in the first quarter of 1999, in particular as a result of the widespread reduction surplus stocks. However, there are signs of an improvement in market conditions in the second half of the year, enabling it to be estimated that for 1999 as a whole the fall in volume will be limited to 2 % since activity in this sector should remain on track in the months ahead given the expected decline in the prospects in the user sectors, imports and the foreseeable increase in exports due to the increase in the value of the dollar and the sustained growth of the American economy. Where the bar-drawing industry is concerned, the overall outcome for 1999 will be an increase in the volume of sales of 7 to 8 %, in particular as a result of the strength of demand from carmakers. EU steel trade in this area has increased considerably, with a 20 % rise in imports and a comparable trend in Community exports. The 8 to 10 % reduction in volume observed since the beginning of 1999 seems to be to the tendency attributable, as with drawn wire products, for stocks to return to normal rather than to an actual reduction in consumption. A recovery in demand is expected in the second half of 1999 since, even if activity in the motor industry stabilises, the end of destocking by users should make it possible to achieve levels of deliveries in excess of those for the second half of 1998. C. Cold rolling and forming Although less spectacular than the last forecast, the results for the cold-rolled strip industry in 1998 were quite remarkable, and the industry regards 1998 as the best year in absolute terms in the post-war period, with a volume of sales which, although in the final analysis only amounting to 3 %, made it possible to achieve unprecedented profitability. forcing it The downturn has therefore plunged the rolling industry into a to reduce production by mood of pessimism, resorting to part-time working, at a time when the competition from imports and alternative products on the Community market is clearly preventing an increase in prices. The rolling industry is not hiding its scepticism about any improvement in prospects in the very short term. Where the forming of wide products is concerned, activity overall was stable in 1998, with however a slight improvement in the manufacture of corrugated sheet used in improvement work on certain types of buildings. As in other sectors of the primary processing industry the demand for and prices of both sandwich panels and corrugated stheet have steadily deteriorated since mid-1998. However, the causes of these downward trends are attributable not only to imports but also to the reduction in stocks and a return, for certain applications, to the use of alternative less expensive products. The demand for this type of sections also shrank at the beginning of 1999. Nevertheless, with the slow upward trend in the construction sector to be expected that for 1999 as a whole there will be a consolidation of the results recorded in 1998 for this sector, which would therefore continue to utilise its capacity to the extent of only 60 %. in Europe, is it Unlike the other primary processing sub-sectors, in 1998 the forming of long products experienced a trend that was more favourable than expected, with an increase in deliveries of around 15 %. This to have been due to a much weaker recovery in the last two years and the less significant influence of the economic cycle on developments in the sector. seems The downward trend in demand that started towards the end of 1998 continued more markedly until the beginning of 1999. However, the slowing down of activity in this sector should be confined to the first half of 1999 with the result that the volume of sales for the year as whole will be only 2 to 3 % lower than in 1998. The fragmentation of the sector continues to encourage mergers, enabling large entities to target the inter- national market more effectively. The small entities in this sector should, on the other hand, aim at greater specialisation to maintain their viability, given the low level of utilisation of capacity. 21. 7. 1999 EN Official Journal of the European Communities C 206/11 2. 2. 2. Prospects for the construction sector The recovery in the construction sector is continuing, following several years of decline. Overall activity in the construction sector in the EU increased by around 2 % in 1998, and further growth in this sector is expected for 1999. The signs are that in 1999 there will be an upturn in this sector in all the EU countries the construction industry finally seems to have come out of the is recession, although the oversupply in the new Länder delaying the recovery somewhat. except Denmark. In Germany too Where residential building is concerned, most of the countries are likely to experience an upturn, as a result of the increase in household incomes and the fall in interest rates, except in the case of Denmark where there is a fall in private housing. New housing starts should be particularly encouraging in France, the the Netherlands, Belgium, Sweden and United Kingdom, Germany. led by private-sector Non-residential construction should continue to improve in 1999, since public-sector investments are unlikely to do better than achieve stability following four years of downturn, despite the good prospects for public-sector activity in Spain, Italy, the Netherlands and Sweden. activity Civil engineering works increased slightly in 1999, given the Italy, good results achieved in terms of volume by Spain, France, the Netherlands and Sweden, and the upturn should blossom in 1999 as a result of the excellent prospects for this activity in those countries and a marked improvement in the situation in Germany in particular. 2. 2. 3. The motor vehicle market The results achieved in 1998 with regard to the registration of motor vehicles in the Union were much better than expected, with a 7 % increase in volumes compared with 1997. This is much higher than the 4 % increase expected which would have placed the motor vehicle market on the average upward trend observed in the last five years. 1999 since the fall in registrations that is foreseeable at present for the currenct year will be only 2 % or thereabouts compared with the 4 % reduction estimated earlier. This revision is justified by good economic prospects in Spain, heralding an additional year of considerable growth in registrations, and the less marked reduction in car registrations in Italy despite the end of the incentive measures. Where motor vehicle production is concerned, the Community industry recorded an increase of around 8 % in 1998, exceeding the record in absolute terms of 16 million units manufactured (private cars and light commercial vehicles). For 1999 as a whole, taking into account the sound level of exports on the one hand and the lower reduction in regis- trations expected on the various EU markets on the other, total production of private cars and light commercial vehicles by the domestic industry should be about 2,5 % down on 1998, which still represents over 15,5 million units manu- factured. 2. 3. OUTLOOK FOR IMPORTS AND EXPORTS OF STEEL PRODUCTS 2. 3. 1. European Union external trade statistics for steel The figures available in this field at the time of writing this programme are more up-to-date than in the past and cover 1998 as a whole for all the European Union countries, though some countries have provided more recent figures which also cover the first few months of 1999. An analysis of the external trade statistics shows an increase of about 46 % in Community steel imports in 1998 as compared with 1997, while Community exports fell by around 20 % during the same period. Imports slowed down considerably during the last few months of 1998 compared with the very sharp rise seen during the first half of the year, generating much more marked trends. These figures nevertheless confirm the spectacular rise in imports onto the Community market in 1998, in particular in steel products from Asia, with volumes amounting to almost 4 million tonnes in crude steel equivalent, about eight times more than in 1997. The general underestimation of EU markets, attributable to suprisingly and unexpectedly vigorous internal demand, new models and lower prices, indicates to what extent the motor vehicles trend compared with the lethargy affecting most other sectors since autumn 1998. sector had experienced a quite different The EU’s external trade statistics for exports in 1998, on the other hand, point in overall terms to a constant downward trend throughout the year characterised by a fall of 59 % in exports to Asia, but a rise in Community exports to the Central and Eastern European countries (CEEC). In the first five months of 1999 registrations of new vehicles continued to increase at a very sustained rate, with a cumu- lative average increase of 7,6 % at the end of May, with peaks of 22 % in Spain and 12 % in France. Accordingly, even a gradual in the months ahead followed by a slight change in the trend subsequently will not prevent very satisfactory results from being achieved in slowing-down in car registrations in steel The Community market therefore went through a period of profound upheaval trade with third countries in 1998, not only causing Community prices to collapse, but also upsetting the EU’s foreign trade balance, which is tradi- tionally in surplus but is for the first time negative by about 1,5 million tonnes. C 206/12 EN Official Journal of the European Communities 21. 7. 1999 The first indications are that, during the first half of 1999, Community steel imports look set to continue to fall due to a temporary drop in demand for steel, mainly because of the need for dealers and users to reduce stocks. This may lead to a sharper drop in Community imports, which for 1999 as a whole are expected to fall by about 15 % compared with the very high level seen in 1998. since the surplus stocks built up in 1998 should be reabsorbed during the first half of 1999, the current tension on the inter- national market should start to ease as of the second half of the year. Steel prices, which have been affected by the substantial drops in production during the past few months, should therefore gradually pick up again after the current period of stabilisation. This scenario does not take account of any worsening in the situation with regard to protectionist measures which may affect steel trade on the main markets such as that of the EU. For exports, however, the prospects of less pressure on following a gradual recovery in certain the world market Asian economies and the strength of the dollar on the financial markets suggest that, even if there is not a genuine upturn in Community steel exports in 1999, they should at least stabilise at last year’s levels. The Community steel market, which has become fragile due to the lack of certainty on the international scene and is now precarious because of the crisis in certain the duration of parts of the world, does not at the present time offer any guarantee of stability. The Commission therefore continues to urge the parties concerned to adopt behaviour commensurate with realities on this market in order to improve the prospects as soon as possible and to guarantee long-term stability in the interest of all operators. The Commission also confirms that it is available to intervene in the event of unlawful practices and behaviour inconsistent with the rules of international trade on the part of all parties concerned. This is in order to safeguard Community interests in the steel sector. 2. 3. 2. The world economy in 1999 The world economic growth forecast for 1999 has been revised downwards several times due to the worsening of the inter- national economic climate in 1998 following the spillover of the Asian crisis to other regions, in particular Russia and Latin America. Nonetheless, the excellent levels of growth announced in the USA, the improvement seen during the year in the Community economy and the stabilising situation in Asia look set to limit the slowdown in the world economy in 1999, with growth expected to be around 2 % as compared with the 2,4 % forecast for 1998. In this situation, the USA, first and foremost, and the European Union will probably continue to be the only stable centres of growth in the world economy since Latin America is in a recession, as is the CIS. In the light of these economic developments, world steel consumption could fall by about 3 % this year. However, Despite the sharp reduction in international steel trade this year, mainly due to the higher degree of self-sufficiently in some regions, there will still be risks of serious disturbances to the most open markets if some export flows are redirected, which may happen as a result of the protectionist environment. 2. 3. 2. 1. The United States of America The US economy has produced one surprise after another with its long period of strong growth which is likely to seen an average rise in GDP of about 3,9 % in 1998 and which should exceed 6 % during the last quarter of the year. During the first quarter of 1999, business in the USA increased by a further 4 to 5 % and this trend looks likely to continue, with inflation still under control and consumer confidence remaining firm. Therefore, even the slowdown expected during the next few months will do nothing to change the economy’s role as the major international centre of attraction, with growth this year put at 2 to 2,5 %. The rising trends in residential building construction and motor vehicle sales in particular point to steel consumption in the USA remaining this year at the high levels seen in 1998. However, the foreseeable rise in production now that new capacity is coming into service combined with the need to reduce stocks is likely, as a result of the sharp fall in steel imports, to reduce the exceptional trade deficit recorded in 1998, which will be helped by the USA’s worsening protec- tionist climate. 2. 3. 2. 2. Japan The japanese economy, which was still in recession in 1998, has seen its GDP fall by 2,5 %, but should stabilise gradually in 1999 following a series of measures by the government. Despite the low level of private investment, public investment and the fall in interest rates should therefore boost demand, in particular in the residential building sector. Futhermore, industrial production is also benefiting from these measures and is increasing, giving the prospect of a rise in steel consumption during the second half of 1999. As a result, steel production in Japan looks likely to stabilise following the period of stock adjustment during the first half of the year and the country’s steel exports should fall in view of the gradual upturn in domestic demand. The latest forecasts do not, however, provide any hope of an improvement on the 1998 results for 1999 as a whole, at least not in the steel sector. 21. 7. 1999 EN Official Journal of the European Communities C 206/13 2. 3. 2. 3. The economies of China and South-East Asia The first signs of recovery in the main economies of South-East Asia appeared towards the end of 1998 and, in 1999, the average growth in this region could be slightly positive thanks to the good performance expected in manufacturing industry in particular. Steel consumption in this region should increase by around 2 % in 1999, in parallel with domestic production. On the trade front, however, the steel these countries will remain unchanged shortage in all of because of the delay in making certain investments in the steel industry. Developments in South Korea, which are very favourable, are the key to the recovery now taking shape in this area. In China, the economy is doing well, with economic growth of 7,5 % in 1998 and expected growth of 6,5 % in 1999. Investment and domestic consumption will probably continue to be of fundamental importance for this economy and, during the second half of the year, activity is expected to speed up in the mechanical engineering sector as well as in the civilian and industrial building sectors. Foreign trade, however, is likely to continue to suffer from the competition exerted by other countries with devalued currencies. Steel consumption in China could therefore rise by about 4 % in 1999, suggesting there will be a slight rise in imports, even taking account of the foreseeable increase in production. 2. 3. 2. 4. The countries of Latin America The economies of the Latin American countries were severely affected by the economic crisis in Asia and the financial crisis in Russia, especially during the second half of 1998. The devaluation of the Brazilian currency, which occurred when the country’s economy was already declining, will this year affect the business activities of the main trading partners in this area. As a result, in 1999 this region is likely to be faced with a recession, despite the good level of recovery expected in some countries such as Argentina, Chile and Peru during the second half of the year. Steel consumption, which is affected by the very high interest rates following the devaluation of the Brazilian Real, has been falling in all of the Latin American countries in 1999, as has domestic production. Given these prospects, the positive foreign trade balance is in this area looks likely to shrink given the difficulty of finding outlets for the surplus on the international market. 2. 3. 2. 5. Economic situation in the Central and Eastern European countries and the Republics of the CIS In most of the Central and Eastern European countries (CEEC), the economic recovery which started in 1994 has remained undiminished pronounced despite slowdown in some countries of the region. Overall growth will therefore be less than 1 %. 1998, very the in 1,5 %. The economies of these countries should, however, be able to further benefit during the second half of the year from the improvement in the international situation, possibly leading to a slight rise in steel consumption which will benefit domestic production. In 1998, Russia has again being facing a severe recession after the the weak signs of recovery seen 1997 and, country’s economy is expected to stay on a downward trend. in 1999, As it has spread, Russia’s financial crisis has affected the economies of the other republics and put them on the same downward slope. Steel production in this region looks set to fall further in 1999, in particular because of the difficulty of diposing of stocks surplus to domestic requirements on the international market. 2. 4. PRICE TRENDS the considerable Following shrinkage consumption in 1998 due in particular various regions, international they stopped falling at the beginning of 1999. steel in the supply surplus and the disturbance to though trade caused steel prices to collapse, in world to the crises On the world market, flat products lost 25 % to 40 % of their value between the first quarter of 1998 and the beginning of 1999. Long products lost between 15 % and 35 % during the same period. However, this downward trend would appear to have come to an end. For several months, prices have been either steady or even rising slightly, depending on the products concerned, especially those of concrete reinforcing bars and hot-rolled coil. In the USA, the fall in steel prices has paralleled that in the EU. However, thanks to the buoyancy of the US economy and to trade measures which have been taken or announced (anti- dumping and anti-subsidy procedures, import quotas, etc. ), there has been a reversal in the general price trend since the end of 1998. The US prices of most products are therefore now about 15 to 20 % higher than those on the Community market. Economic growth in the CEEC could strengthen slighly in the course of the year, but is unlikely to exceed an average rise of In Japan and South Korea, the appreciation of the currencies has to some extent improved the market prices. Nevertheless, the prices in these countries are generally lower than in the EU, though the difference is narrowing. C 206/14 EN Official Journal of the European Communities 21. 7. 1999 On the Community market, the lower pressure of imports and the fall in production have permitted a return to a better balance between supply and demand. The unprecedented price deterioration seen in 1998 thus at last seems to be over in the beginning of 1999. Steel prices have therefore in recently stabilised and increases can at particular for hot-rolled coil and long light products, such as wire rod, concrete reinforcing bars and merchant bars. last be seen, As for price changes in the months ahead, the trade measures announced or launched by the USA will probably in time achieve their goal of limiting imports to the US market. This might result in some exports being redirected towards the the very Community market and there is recently restored but still fragile balance between supply and demand will be upset. Taking a number of other factors into account, however, it is nonetheless likely that the onset of the trend of moderately rising price on the Community market will be confirmed in the course of the year. the risk that 2. 5. TRENDS BY PRODUCTS Flat products - Hot-rolled coil The market for hot-rolled coil has improved considerably following the difficulties seen in 1998. This improvement is the result of the drop in imports due in particular to the start of anti-dumping and anti-subsidy action, the rise in the dollar to the euro which has boosted the value of in the stocks held by dealers and exports and the fall service centres. The improved balance between supply therefore pushed prices up slightly and demand has during the confirmed by first quarter of 1999, quotations during the second quarter. as - Cold-rolled sheet There is good demand for cold-rolled sheet, user and merchant stocks have returned to acceptable levels and imports have also fallen sharply. However, although these factors should help to push up prices, these settled at an all-time low in the first quarter of the year. This trend could, however, be bucked during the second quarter given exports, however, the situation remains difficult as price levels on the world market are not profitable. healthier market situation. For the effect on deliveries by Community producers. At the same time, the supply from third countries is bringing strong level of market prices, pressure to bear on the general which continued to fall during the first quarter of the year. Nonetheless, there are two positive factors which should help to raise prices during the next few months, namely the continuing strength of demand from the motor vehicle industry and the upward trend in the prices of hot-rolled coil. - Quarto plate The export market for plate is currently under strong pressure and trade action by the USA (anti-dumping measures, import quotas, etc. ) is tending to redirect inter- national trade flows to other destinations. There is good demand on the Community market, except in the large welded tubes sector, which is still suffering from the absence of an upturn in the oil industry. The anti-dumping action brought by Community producers against certain third countries, do, however, seem to have contributed to in imports of heavy sheet onto the Community the fall market. This factor together with the return to stock levels more in line with consumption should therefore enable the price trend to be reversed as from the second quarter of the year. Long products - Heavy sections and beams Imports of these products increased considerably in 1998 and levels remain high, in particular in products from the CEEC and South Korea. However, there is strong demand on all of the Community markets and stocks have fallen back to normal levels. The prices of beams can therefore be expected to rise for deliveries starting in the second quarter. For exports, the demand from Asia is weak and subject to strong pressure on prices. Business region is therefore not very attractive to Community producers. the foreign supply on the US market has Moreover, trade gradually brought prices down and the threat of action by the US authorities may well reduce access to this market in the course of the year. in this - Wire rod - Coated sheet The crisis in South-East Asia is continuing to make itself felt on the Community market, in particular due to the continuing surplus in supply compared with demand. The strong growth in imports of coated sheet has had a direct On the Community market, the good performance in the motor vehicle sector (high-quality wire rod), a certain amount of recovery in the building industry (wire rod for welded mesh) and the return of stocks to normal mean that prices can be expected to pick up to some extent throughout the year. On the world market, on the other 21. 7. 1999 EN Official Journal of the European Communities C 206/15 hand, competition is stiff and prices are not always prof- itable. The signs of economic recovery in South-East Asia nevertheless suggest there will be less pressure from Korean wire rod on the export market, thereby reducing the pressure on prices. The gloomy state of the market at the beginning of the year was followed first of all by a return to stability and then a slight improvement back in April and the second half of the year should see demand and prices continuing on their upward trends. - Concrete reinforcing bars This product is the first to have been able to reverse the negative price trend seen in 1998, which it has been doing since the beginning of the year. The buoyant demand in most of the major Community markets and the recovery which seems to be taking shape in the building and construction industries trend to continue or even to quicken its pace over the next few months. should enable this Exports are, however, in a less healthy situation and prices have deteriorated severely due to the competition from all of the producer countries (CEEC, Russia, Turkey, South-East Asia, etc). - Merchant bars light As with other long products, stocks have fallen considerably, consumption is picking up again and prices are again starting to rise. The temporary rise in the rates for few weeks will push up scrap seen during the last production costs, but should also help to bolster the upward trend in the prices for these products. 2. 6. CRUDE STEEL BALANCE FOR THE SECOND HALF OF 1999 AND REVISION OF FORECASTS FOR 1999 AS A WHOLE More than in 1998, the Community economy this year seems destined to suffer from the negative impact of deterioration of the international environment. The marked slowdown in growth in the Community as a result of this outside factor should, however, not last very long as a gradual improvement in the economy is already expected during the second half of the year under the effects of the foreseeable recovery in the world economy. The recovery of industrial activity which started to take shape after the first few months of the year should be confirmed during the course of the year, providing good prospects for a rise in steel demand. The consequences of stocks returning to normal and imports falling combined with a gradual increase in new orders are therefore likely to improve the conditions on the Community steel market, which was very depressed up to the end of the first quarter of the year. Any worsening in foreign protectionism could, however, cast a encouraging prospects on the few shadows over the Community steel market, to which disruptive international trade might be redirected. On the basis of the trends announced in this programme, as indicated in Table 1 (Crude steel supply and demand), real steel consumption during the second half of 1999 could reach 78,5 million tonnes, an increase of 1,9 % on the figure for the same period in 1998. Apparent consumption, with the same figure of 78,5 million tonnes now that the period of stock reduction is over, should show an increase of 3,2 %. Given the stabili- sation of imports and the slight rise in exports compared with the respective volumes for the second half of 1998, equilibrium production is expected to be 78,5 million tonnes, an increase of 4,5 % on Community steel production during the second half of last year. The improvements expected during the second half of the year following a very mediocre first half of the year lead to the forecast, for 1999 as a whole, that real consumpion will fall by 1,4 % compared with the 1998 figure to settle at 156 million tonnes. Given the slight fall in stocks, apparent steel consumption is likely to be 154 million tonnes, 4,5 % lower than in 1998. In view of the drop of about 15 % in imports and the slight rise in exports, equilibrium production is estimated at 155 million tonnes, down by 2,9 % compared with last year’s result. 3. RAW MATERIALS 3. 1. THE SCRAP MARKET The fall in world steel production following the deterioration in the economic situation in various countries led to a general fall in demand and scrapprices throughout 1998. At the beginning of 1999, the prices of this raw material for the steel industry recovered slightly on the US and Community markets. The prospects for 1999 are for a gradual recovery, for various reasons, in particular the increase in orders from Korea and Turkey, the new electric steelworks which have been brought into service, notably in the USA, the fall in shipping costs following the surge at the end of 1998 and the upturn in the prices of steel products. C 206/16 EN Official Journal of the European Communities 21. 7. 1999 3. 2. IRON ORE After four consecutive years of rising, the prices of mineral ore fell in 1998 due to the reduction in demand as a result of the Asian crisis, which has severely affected the world steel industry and caused steel prices to slump across the board. After a rise of 0,7 % in 1998, world consumption of zinc could see an increase of 2,2 % this year, taking it to 8,05 million tonnes. In the Community, zinc consumption is not expected to increase by more than about 1,7 % during 1999 as a whole. in surplus at the beginning of Steel supply, which was still 1999 given the relatively weak level of demand, has had a tangible impact on world steel production, resulting in the negotiations to reduce iron ore prices, which in 1999 will be an average of 11 % lower than in 1998. Steel demand should pick up again to some extent from the second half of the year, however, and this should gradually increase world steel production and iron ore consumption. The prices of this raw material could then change slightly to bring them in line with market conditions in the year 2000. The pellets market has suffered as a result of the competition from scrap and pig iron, the prices of which have plummeted. The effects have been limited to the modest quantities of DRI marketed since almost all of this raw material is consumed by producers themselves. This situation has also not any effect on the expansion of international capacity which, following the addition of a further 10 million tonnes, exceeds 40 million tonnes, with 5 million tonnes of new capacity due to be coming into service in the course of the year. 3. 3. FERRO-ALLOYS Following the gradual deterioration in the market conditions during the second half of 1998, the first half of the year has been marked by a recovery in the demand for ferro-alloys and this trend is expected to continue until the end of the year. In the meantime, the reduction in market supply following the production cutback has made it possible to stop the fall in prices, which have finally stabilised. During the second half of the year, the market is expected to enabling the remain in a satisfactory state of balance, assumption to be made that the price of ferro-alloys will be stable or rising slightly. 3. 4. TIN, ZINC AND NICKEL In 1998, tin production increased by about 5 % compared with 1997, while apparent consumption oft this metal fell by 3 %. Following a period of stability at the beginning of the year, the second half of the year is expected to see a slowdown in exports from China which should provide a better balance on the market and push up prices for the metal. World production of this raw material, which rose by 2,2 % in 1998, could rise again by 2,1 % in 1999 to 8,2 % million tonnes. Following a period of weakness, zinc prices have picked up to a rate of just over USD 1 000 per tonne, a figure which looks set to remain stable until the end of the year. For 1999 as a whole, the International Nickel Group puts the world balance between nickel supply and demand at 1,04 million tonnes. World nickel production in 1999 should therefore for consumption the same figure would represent an increase of the increase in nickel 3 %. On the Community market, consumption in 1999 should be higher still at 412 000 tonnes, up 8 % on 1998. rise by 2 % compared with 1998, while the year because of this metal have been picking up since the The prices of beginning of the buoyant demand for steel from Western countries, the continuous fall in stocks on the LME and the announced production cuts. Nickel rates could therefore stabilise between now and the end of the year. 4. EMPLOYMENT the Community, Throughout situation is changing all the time, in particular because of the continuing pace of technological development and the need for companies to remain competitive. the employment the steel industry also demands more highly- Therefore, qualified workers capable of adapting to the higher level of skills required. The efficient management of human resources has thus become an essential factor for success in the steel market, which is becoming increasingly globalised and competitive. At the same time, the development of a forward- looking strategy to anticipate coming changes isnow of prime importance as a means to enable companies to adapt gradually. in the steel industry is The trend as regards employment therefore towards increasing specialisation, in line with the competitive advantage which the European Union generally seems to have in the production of high-quality products. However, in industry resulting in automated production techniques and the trend toward business concen- trations along with the Asian crisis and the protectionist measures taken in the US market are increasing the threats to employment in the Community steel industry. In addition the changes 21. 7. 1999 EN Official Journal of the European Communities C 206/17 to the jobs which have been shed, the widespread availability of early retirement over a large number of years has clearly upset the age pyramid in the Community steel industry and led to a loss of skills among the workforce in companies. Since this scheme has imposed very high costs on the Member States, greater preference isnow being given to alternative schemes, some of them new in kind, to minimise the social impact of job cuts while at the same time reducing the loss of skills within companies. Net job losses in 1999 will be around 11 000, according to the most recent estimates. This figure still reflects the difficulties in the markets, even if it is not comparable with the number of jobs shed during the years in which the steel industry faced serious crisis. The Commission will continue to apply its social policy to workers in the industry who are affected by restruc- turing or closure and, except for training, which may be co-financed by the ESF, all other measures provided in retraining under Article bilateral agreements on aid for 56(2)(b) of the Treaty expires on 23 July 2002. the ECSC Treaty will be maintained until The 11 000 job losses, or thereabout, expected in 1999 do not, however, represent the number of workers who will be eligible for ECSC aid since some Member States have not signed up to the restructuring policy and, in addition, the aid for retraining in 1999 will also take account of job losses last year. The funds in the ECSC’s amending budget for traditional aid for retraining in the coal and steel industries amount to EUR 75 million. ANNEX Table 1 Crude steel supply and demand (1) EU-15 Outturn Estimate Forecast (million tonnes) 1995 1996 1997 first half of 1998 second half of 1998 (R1) 1998 (R1) first half of 1999 second half of 1999 1999 Apparent user consumption (a) Change stocks (b) in merchant Apparent consumption Imports EU-15 Exports EU-15 Changes stocks in producer Production 142,6 139,4 149,8 1,3 145,6 16,5 21,6 - 4,0 135,4 12,2 28,0 1,0 150,8 14,4 24,0 81,2 4,0 85,2 11,7 10,0 77,0 158,2 - 1,0 76,0 9,6 9,7 3,0 161,2 21,3 19,7 5,0 4,0 - 1,0 1,0 - 1,0 0,0 155,7 147,2 159,4 84,5 75,1 159,6 77,5 - 2,0 75,5 9,0 10,0 0,0 76,5 78,5 0,0 78,5 9,0 10,0 156,0 - 2,0 154,0 18,0 20,0 - 1,0 - 1,0 78,5 155,0 (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) Changes in merchant stocks in Germany, France, the United Kingdom and Benelux. (1) Conversion factor of finished products to crude steel: 1. 11. C 206/18 EN Official Journal of the European Communities 21. 7. 1999 Table 2 Indicators of activity - EU-12 (1) (Not seasonally adjusted) Sector Periods Second half of 1999 (Second half of 1998 = 100) Second half of 1998 (Second half of 1997 = 100) 1999 (1998 = 100) 1998 (1997 = 100) Manufacture of metal articles Mechanical engineering Electrical engineering Motor vehicles Other means of transport Building/civil engineering 102,9 102,4 103,5 101,6 104,7 103,8 104,6 103,4 105,8 115,3 107,0 100,8 104,5 104,8 106,0 109,1 104,5 101,3 103,3 102,2 104,3 103,1 106,8 102,2 (1) In 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. Table 2(a) Trends in the steel-consuming sectors in the main producer countries (1) (Activity indicators (2)) Member States Sector/indicator Manufacture of metal articles Mechanical engineering Electrical engineering Motor vehicles Other means of transport Building/civil engineering Germany France Italy United Kingdom Spain II/1999 1999 II/1999 1999 II/1999 1999 II/1999 1999 II/1999 1999 102,0 101,0 102,0 100,0 106,0 102,0 106,5 106,0 106,5 117,0 107,9 97,3 103,0 104,0 104,0 101,0 105,0 102,0 103,0 103,0 105,0 102,0 106,0 102,0 - - - - - - - - - - - - - - - - - - - - - - - - 109,0 109,5 112,2 110,2 110,2 107,0 108,0 107,5 112,0 109,0 110,0 106,7 (1) Source: National steel users’ associations. (2) For each country: - first column, activity indicator second half of 1999 (second half of 1998 = 100), - second column, activity indicator (1998 = 100). 21. 7. 1999 EN Official Journal of the European Communities C 206/19 Table 3 Changes in the numbers employed in the steel industry (including apprentices) Member State Number of employees (in ’000) Austria Belgium Denmark Germany Greece Spain France Finland Ireland Italy Luxembourg Netherlands Portugal Sweden United Kingdom EU-15 (2) (Reference month) (Most recent month) (1) 12,5 (December 1997) 12,2 (December 1998) 20,4 (December 1997) 20,3 (December 1998) 1,2 (December 1997) 1,2 (December 1998) 81,3 (December 1997) 79,7 (December 1998) 2,1 (January 1998) 2,0 (January 1999) 22,8 (December 1997) 22,5 (December 1998) 38,3 (December 1997) 38,0 (December 1998) 7,8 (December 1997) 0,4 (December 1996) 8,0 (December 1998) 0,4 (December 1997) 38,0 (December 1997) 38,4 (December 1998) 4,3 (November 1997) 4,2 (November 1998) 12,0 (December 1997) 11,9 (December 1998) 1,8 (December 1997) 1,8 (December 1998) 13,5 (January 1998) 13,3 (January 1999) 35,2 (December 1997) 32,5 (December 1998) 291,6 (1997) 286,4 (1998) Source: Eurostat. (1) Most recent figures available. (2) As the reference period is not the same for all countries, this average is only indicative. Change (%) - 2,4 - 0,5 0,0 - 2,0 - 4,8 - 1,3 - 0,8 2,6 0,0 1,1 - 2,3 - 0,8 - 10,0 - 1,5 - 7,7 - 1,8 Non-opposition to a notified concentration (Case No IV/M. 1493 - United Technologies/Sundstrand) (1999/C 206/05) (Text with EEA relevance) On 25 May 1999, the Commission decided not to oppose the above notified concentration and to declare it compatible with the common market. This decision is based on Article 6(1)(b) of Council Regulation (EEC) No 4064/89. The full text of the decision is only available in English and will be made public after it is cleared of any business secrets it may contain. It will be available: - as a paper version through the sales offices of the Office for Official Publications of the European Communities (see list on the last page), - in electronic form in the CENí version of the CELEX database, under document number 399M1493. 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