How will European steel and iron ore markets cope with coronavirus? Report

Insight 23 March 2020

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Report summary

European governments are attempting to limit the spread of Covid-19 by restricting movement. Therefore, many workplaces are reducing output or closing. Consumerism has declined and manufacturing – particularly in the automotive sector – has stalled. We will see a decline in European steel demand this year – but by how much? 80% of the European automotive industry is currently idle for two weeks. If the construction sector operates at 75% of expected output for that same period, demand will slide by just 1.8 million tonnes – barely 1% of the annual total. But we don't think a slowdown will be so brief. We currently factor in a one month go-slow. It could be longer. As demand falls, so too will production. And, unlike in China, we think production via the BF/BOF route will be hit hardest. This will exacerbate the impact of declines on steel-making raw materials such as iron ore and metallurgical coal.

Executive Summary
Overview
EU + UK steel demand to decline by 2% year-on-year in 2020
- Automotive sector already down
- Construction less clear
- Steel demand summary
Steel production to be hit harder than steel demand
- Hot metal production to bear the brunt of declines
Trade and the poor outlook post-virus to exacerbate production declines
Raw materials to decline inline with hot metal production loses
- Iron ore
- Metallurgical coal
Can steel markets survive?
Methodology

Tables and charts

This report includes 10 images and tables including:

Key forecast data in million tonnes
Location of Italian steel makers by asset type. Over 80% of coronavirus cases diagnosed in Italy are in the regions north of Bologna (as of 19/3/2020)
EU + UK crude steel and hot metal production forecast and iron ore and metallurgical coal demand forecast (Mt)

EU+UK crude steel production forecast to decline this year
Hot metal production declines are forecast to exceed crude steel declines
Methodology behind the assumption that 80% of the EU + UK automotive industry is currently idled
Forecast finished steel demand loss in the automotive sector assuming 80% production volume decrease for selected lengths of time
Forecast finished steel demand loss in the construction sector assuming 25% reduction in activity for selected lengths of time
Forecast finished steel demand loss from the automotive and construction sectors for selected lengths of time
EU + UK crude steel, hot metal and raw material declines attributed to fall in domestic demand only for selected time durations