20th October 2016

Economic and Steel Market Outlook 2016-2017

Q4-2016 Report from EUROFERs Economic Committee 1)

EU macro-economic overview I. EU Macro-economic overview

(y-o-y change in %)
EU sentiment resilient after Brexit
EUROFER Forecast Private consumption to keep its strength
October 2016 Risks & uncertainties weigh on investment
EU Tepid increase public spending
2014 2015 2016 2017 Drag from net exports on growth easing
(f) (f) ECB: no change in monetary stance
EU economic recovery should continue
GDP 1.5 1.9 1.8 1.4 Risks to the outlook remain significant
Economic growth decelerated mode-
1.2 2.0 2.0 1.5 rately in the second quarter of 2016,
Private consumption
having strengthened rather briskly in
the first quarter. Quarterly GDP growth
Government
1.1 1.3 1.7 0.9 slowed to 0.3% in the euro area and to
consumption 0.4% in the EU28 compared with 0.5%
growth in the first quarter of the year.
Investment 2.6 3.1 2.3 2.0 This slowdown primarily reflects
domestic demand losing momentum, in
Investment in mach. addition to base effects, as mild winter
equip.
2.4 4.8 2.8 2.2
conditions and an early Easter had
Investment in
boosted Q1 activity.
construction
1.4 2.2 1.6 1.8 Private consumption grew by just 0.2%
quarter-on-quarter, but also govern-
ment spending rose only marginally
Exports 4.1 5.4 3.2 3.4
whereas investment stagnated.
In contrast, the strength of the external
Imports 4.8 6.0 3.9 3.8 sector was a bright spot in the GDP
breakdown, growing by 1.1% quarter-
on-quarter. However, export growth
Unemployment rate 10.8 10.0 9.4 9.1 could not offset the weakened
performance of domestic demand.
0.6 0.1 0.3 1.4 At the country level, growth slackened
Inflation
in Germany, France and Italy, while
improving in the UK and Poland.
Industrial
1.4 1.9 1.3 1.5 Economic activity in the other EU
production economies stagnated or gained some
strength compared with the preceding
= estimate (f) = forecast
quarter.

1) th
Based on information available as of 19 October, 2016

EU sentiment resilient after Brexit
Third quarter economic surveys show
that sentiment remained resilient in the
aftermath of the Brexit vote.
The monthly business and consumer
surveys published by the European
Commission signal that economic
sentiment improved markedly in
September compared with slightly
lower confidence in July and August.
Industrial confidence climbed to the
highest level since October 2015,
reflecting an improved assessment of
order books and production
expectations. Construction confidence
even showed the best reading since
June 2008, also owing to increased
satisfaction with the level or order
books. Also retail confidence booked a
solid increase.
Markits Eurozone PMI Composite
Output index slipped to 52.6 in
September, a 20-month low. The
average reading of the index over the
third quarter is 52.9 compared with
53.1 in the second quarter, still
remaining comfortably above the 50
threshold that signals no growth.
Underlying data show a significant
slowdown in the rate of expansion in
the service sector, whereas
manufacturing activity increased at the
fastest pace since December 2015, as
manufacturers are reported to have
gained from a significant improvement
in new export business. This appears
to be in line with the latest business
2
and consumer surveys published by
the European Commission.
In principle, this should bode well for
third quarter industrial production,
having lost momentum in Q2-2016 in
all large EU markets except the UK.
However, data for July still signal a
continuation of rather lacklustre
business conditions. On balance,
industrial production in the EU
increased by 1.1% year-on-year over
the first seven months of 2016, with
growth concentrated in the first quarter
and tapering off thereafter.
While confidence data suggest a
certain level of resilience in the EU in
the run-up to and after the Brexit
referendum, weak investment in
combination with global growth failing
to gain momentum appear to have
continued to act as a drag on the
industrial sector.
Private consumption to keep its strength
Meanwhile, positive retail trade data for
July signal that private consumption is
likely to remain the main growth driver
going forward. Trade volumes in July
rose in the euro area by 1.1% and in
the EU28 by 1% compared with June.
This strong increase after the
moderation of retail sales in the second
quarter suggest that private
consumption may have remained at a
strong level in the third quarter.
Fundamentals for a continuation of the
consumer recovery in the EU look
solid. The labour market recovery is

continuing, owing to positive trends in
unemployment and hiring. The euro
area seasonally-adjusted unemploy-
ment rate stood at 10.1% in July 2016,
the lowest rate recorded in the euro
area since July 2011.
The EU28 unemployment rate was
8.6% in August 2016, stable compared
with July and the lowest rate recorded
in the EU28 since March 2009.
Hiring rose in the second quarter by
0.4% in the euro area and by 0.3% in
the EU28 in comparison with Q1-2016.
Improving labour market conditions will
be supportive to a further rise in real
incomes. Household spending growth
will also continue to benefit from low
inflation and still relatively low oil
prices. In addition, the combined effect
of low interest rates and easing credit
conditions should encourage private
households to favour spending over
saving. However, rising inflation and
Brexit-related uncertainty may dampen
private consumption growth in 2017.
Private consumption is currently
forecast to rise by 2% in 2016 and by
1.5% in 2017.
Risks & uncertainties weigh on investment
Investment remained the Achilles heel
of the economic recovery in the EU. In
spite of the very accommodative
monetary policies - resulting in an
ultra-low interest rate environment and
a further easing in access to finance
and credit investment failed to gain
significant momentum so far this year.
The global economy appears to be
stuck in a low-growth scenario which
weighs on international trade dynamics
and as a consequence clouds
business growth expectations.
Uncertainty surrounding the UKs exit
from the EU regarding the dimensions
and duration of the adjustment process
leading to the actual separation will
remain the key factor hindering
domestic investment in the EU and the
UK for the foreseeable future.
3
On the positive side, there is some
evidence that the drag from net trade
may be easing in the remainder of this
year and into 2017. Improving
corporate profitability and sustained
pass-through effects of monetary
policy measures should in principle be
supportive to unleashing pent-up
demand.
For the time being however, the
increased risks and uncertainties
appear to outweigh the positives.
Investment growth is expected to slow
from 3.1% in 2015 to 2.3% in 2016 and
to 2% in 2017.
Tepid increase public spending
The outlook for public investment
remains moderately positive for 2016
and 2017. Owing to fiscal consolidation
efforts in the EU bearing fruits, fiscal
positions of most EU member states
are gradually becoming less austere.
This provides room to growth
enhancing public expenditure, aimed at
removing bottlenecks in IT and
telecoms, transport logistics, energy
grid efficiency and sustainable energy
production. Moreover, public expen-
diture related to the refugee crisis
leads also to higher public spending;
the relative budgetary impact varies
across transit and destination
countries. For transit countries, public
spending typically relates to rescue
operations, border control, registration
of asylum seekers, provision of food,
medical care and shelter. For
destination countries, spending also
includes housing and education.
Government consumption is seen
growing by 1.7% in 2016 and by 0.9%
in 2017.
Drag from net exports on growth easing
Exports swinging from zero-growth
quarter-on-quarter in Q1-2016 to 1.1%
in the second quarter does provide
some hope for an improvement in the
EUs external environment to

materialise in the remainder of this
year and in 2017. The rise however
benefited primarily the service sector.
Other indicators of international trade
show also some improvement in
exports of goods; Chinas net exports
appear to have become more
consistently positive in recent months.
There are also early signs of a
recovery in global demand for IT
equipment, with particular strength in
recent data on Taiwans export orders.
Moreover, among the key emerging
economies, there is lately some
improvement in Brazil and Russia, with
both countries gaining from the
rebound in several commodity prices.
However, while a modest improvement
of the external environment in 2017
seems plausible, it remains to be seen
to which extent the drag from net trade
on economic growth will be easing.
ECB: no change in monetary stance
The ECB decided in its September
meeting to keep the key interest rates
unchanged. The ECB expects them to
remain at present or lower levels for an
extended period of time, well past the
horizon of their net asset purchases
which are intended to run until the end
of March 2017 or beyond if necessary.
As such, monetary policy remains
focused on maintaining price stability
over the medium term and its
accommodative stance towards
economic activity with the aim to
secure a return of inflation rates to
levels that are nearing 2%.
The ECB also called on other EU
policy makers to boost growth in the
Eurozone and advocated the swift
implementation of structural reforms
and supportive fiscal policies.
Meanwhile, euro area inflation came in
at 0.2% in August, unchanged from
Julys reading. While energy inflation
continued to rise, services and non-
energy industrial goods inflation were
lower than in July. Inflation rose to an
4
almost two-year high in September,
Eurostats flash estimate for
September showed harmonised
inflation rising to 0.4%, an almost two-
year high. According to Eurostat, the
main contributors to the September
reading were higher prices for services
and for food, alcohol and tobacco. This
would suggest that the European
Central Banks monetary stimulus is
beginning to bear some fruit.
Going forward, the recent rise in oil
prices suggest that inflation rates could
be rising further in the final months of
2016. Inflation rates should increase
further in 2017.
Directly after the Brexit vote, the euro
depreciated somewhat, but the losses
were recovered very rapidly. Apart
from some day-to-day volatility, the
financial markets did not witness
negative spill overs from sharp falls in
equity prices or a surge in peripheral
bonds. Since then, the euro continued
to trade in a very narrow bandwidth
around 1.12 US$. The ECBs
announcement in September which -
as widely expected - opened the door
to the possibility of an extension of the
asset purchasing programme, did not
impact the exchange rate of the
common currency versus most other
currencies.
EU economic recovery should continue
The economic recovery in the EU was
sustained in the second quarter of this

year, albeit at a slightly lower growth
rate than in the first quarter. Growing
exports and a mild rise in private
consumption were not sufficient to
offset stagnation in investment.
Sentiment surveys signal that so far
the impact of the yes vote in the UK
referendum on confidence has been
rather minor. Sharp knock-on effects
on economic activity and the common
currency were absent, while reactions
in the financial markets were mild. This
suggests that for the time being Brexit
will have political rather than economic
or financial implications.
Against this background and taking the
latest indicators and hard data into
account it seems justified to conclude
that the EU economy is not on the
brink of a major slowdown.
However, uncertainties in the wake of
the UK referendum and the risk that
global growth remaining stuck in slow
motion will prevent international trade
from gaining significant traction could
have a negative impact on investment
and exports.
On balance, the October 2016 outlook
from EUROFERs Economic
Committee foresees EU GDP growing
by 1.8% in 2016 and by 1.4% in 2017,
thereby reflecting that particularly the
2017 forecast is surrounded by
downward risks with increased
uncertainty weighing down on growth
perspectives.
Risks to the outlook remain significant
At this point in time, it is still extremely
difficult if not impossible to assess with
some certainty the impact of the UK
yes vote in the Brexit referendum on
the economic performance of the EU27
and the UK going forward. Since the
referendum, very little information
became available on the expected
duration of the separation process and
the most likely scenario for the UK
modelling an alternative approach to
EU membership.
5
However, what is clear at this moment
is that uncertainty has increased and
that this situation is bound to persist for
some time. The impact will particularly
be felt on the outlook for investment,
and trade. Financial strains could come
to the fore if there would be a serious
impasse in the negotiations during the
separation process or in the event of
the British leave vote encouraging anti-
European populists elsewhere in the
EU to follow a similar track.
The EU refugee crisis is another
political risk with potentially strong
repercussions on the functioning of the
common market. The absence of a
common approach which is supported
and respected by all member states -
with certain countries now going their
own way to the detriment other
countries - could lead to disintegration
of the European Union, malfunctioning
of the Schengen Treaty and eventually
jeopardise the common currency.
The weakness of the emerging
economies - in particular China -
remains also a concern.
Persisting geopolitical risks, terrorism
and political violence could hurt
sentiment on a global scale.
Weaker than expected economic
growth in the US could be exacerbated
by uncertainty related to the
presidential election, with regards to
the actual outcome of the election and
the possible changes in governance.
On balance, risks to the outlook remain
significant, reflecting changing market
conditions, significant volatility and
persistent uncertainty.

USA
Q216 GDP growth strengthened
to 1.1%
Consumers more cautious
recently, but sentiment remained
strong
No indication of imminent manu-
facturing rebound
Two-speed economy seen
persisting in 2017
GDP growth strengthened to 1.1% at
an annualised rate in Q2-2016. Private
consumption remained the key growth
driver, while there was a contraction in
investment and government spending.
Exports improved somewhat.
Weakening retail sales in July and
August suggest that consumers may
have become more cautious recently.
Nevertheless, consumer sentiment
remained at a solid level.
Meanwhile, the latest Manufacturing
PMI surveys point to a sluggish
performance of the industrial sector
with growth in order intakes slowing
significantly in the September. Particu-
larly the more export-oriented
industries are reported to suffer from
the persistently strong US dollar, weak
oil and gas investment and sluggish
global economic growth. With the
presidential elections coming closer by
the day, uncertainty about the outcome
and the impact on economic and
political governance does not help
lifting business confidence.
For the moment, there is little evidence
of an improvement in business
conditions in the near term. This is also
reflected in the Feds decision to leave
the federal funds target rate
unchanged, thereby confirming its
cautious stance towards tightening.
In 2017, the economy is expected to
continue to operate at two speeds, with
consumers remaining in the lead and
business investment on the back
burner. However, headwinds from
weak global growth, low oil prices and
dollar strength are seen easing to
some extent.
GDP is expected to increase by around
1.6% in 2016, followed by a modest
strengthening by 2.3% in 2017.
6
Key emerging regions
Further evidence of economic
stability in the emerging markets
Brazil and Russia picking up
from rock bottom
China's GDP grew by 6.7% in Q2-2016,
matching Q1s annualised growth rate.
Key drivers were housing and
infrastructure investment.
Economic activity in July was negatively
impacted by flood-related disruptions,
but indicators for August signal an
improvement in dynamics. Both indus-
trial activity and retails sales grew
significantly. Fixed asset investment
recovered from its July weakness, driven
by corporate and property investment.
Exports also improved and should
continue to do so going forward in 2017,
owing to the expected mild streng-
thening in global trade. Fiscal stimuli and
relaxed monetary conditions will also
support GDP growth; for 2016 a rise of
6.6% is foreseen and for 2017 6.3%.
India lost some economic momentum in
Q2, dragged down by a drop in fixed
investment and weak growth in private
consumption. GDP rose 7.1% annually
in the April to June period. As signalled
by the PMIs, business conditions in
manufacturing and services improved in
August; also exports improved.
Consumption will remain a key driver
going forward. GDP grow is pencilled in
at 7.5% in 2016 and 2017.
Brazils economy improved in Q2-2016,
contracting at the slowest rate since a
year. While economic indicators and
data remained feeble in July, greater
political stability should provide a basis
for a modest rebound in 2017. This will
enable the government to focus on the
necessary fiscal and economic reforms.
This year will still see a 3% drop in GDP,
for 2017 1% growth is forecast.
The drop in Russian GDP narrowed to
0.6% in Q2-2016. First data for Q3
suggest that the relative improvement
was sustained. The manufacturing PMI
was back in positive territory in August.
The recent rise in oil prices should be
supportive to a further gradual
strengthening in 2017. GDP is expected
to fall by 0.7% in 2016 before expanding
by 1.3% in 2017.
 7

II. The EU Steel Market

Overview Steel Using Sectors

Development of the main steel using sectors EUROFER forecast October 2016
% change year-on-year in the SWIP (Steel Weighted Industrial Production) index1)

% share
Year Year Year
in total Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417
Consumption 2015 2016 2017
Construction 35 1.6 1.4 0.9 1.6 1.8 1.4 0.6 2.5 2.7 2.9 2.2
Mechanical
engineering
14 0.1 0.8 0.6 0.0 0.3 0.4 1.1 0.4 1.6 1.9 1.3
Automotive 18 7.5 6.0 10.5 2.6 1.1 5.1 2.7 0.4 3.4 5.0 2.8
Domestic appliances 3 4.3 4.1 7.8 4.6 2.2 4.6 3.1 0.3 2.6 3.4 2.4
Other Transport 2 6.7 4.5 8.5 2.5 -4.5 2.6 2.2 1.3 2.9 3.1 2.4
Tubes 13 -5.4 -3.0 3.5 3.5 6.6 2.6 6.8 4.9 4.8 2.0 4.6
Metal goods 14 2.2 2.4 4.6 2.4 0.9 2.6 2.0 1.2 2.3 2.6 2.0
Miscellaneous 2 1.5 1.0 2.7 1.5 1.1 1.6 1.4 -0.3 1.6 1.8 1.1
TOTAL 100 2.1 2.1 4.1 2.0 1.7 2.5 2.2 1.6 2.9 3.0 2.4
to the positive trend in production will
Q216 activity growth firms to continue to come from European
4.1% y-o-y consumer-related demand cars,
Positive trend consumer-driven domestic appliances and housing
sectors and a much more modest contribution
Rather bleak outlook for from investment and exports. This
investment goods going forward trend is seen continuing in Q4-2016.
As expected, activity in the EU steel Total activity in the steel using sectors
using sectors gained momentum in the is forecast to rise by 2.5% in 2016.
second quarter: output growth streng- Similar growth is expected for 2017.
thened to 4% y-o-y, coming from 2.1% The mild improvement foreseen for
in the first quarter. Underlying activity global economic growth should benefit
data on the specific industry level export-oriented sector activity. In the
clearly confirm the continued strength EU, consumer demand is seen
in those steel-using sectors which remaining strong, but investment
heavily depend on consumer spending. demand is not expected to gain much
Output of both the automotive industry traction.
and the electric domestic appliances
sector gained significant traction in the
second quarter, with automotive output
even registering double-digit output
growth.
The other sectors were all in positive
territory too, but growth rates varied
between rather modest and more
robust. First estimates for activity in the
third quarter of this year are again
positive, albeit with output growth not
matching the dynamics registered in
the preceding quarter. The main boost
1) As of 2013, steel structures is no longer a separate sector but is included in the construction sector.
Shipbuilding activity is now included in other transport which includes all non-automotive transport equipment
such as railway material, air & spacecraft and motorcycles

Construction
Construction rebound continued in
Q216 - driven by housing activity
Diverging trends at the country
level
Recovery seen gaining traction in
2017 broadening to other sectors
EU construction activity rose by 0.9%
y-o-y in the second quarter of 2016; as
expected, output growth was slightly
lower than in the preceding quarter.
Q1-2016 had seen very mild weather
conditions and as a consequence
hardly any seasonal interruption of
construction activity.
However, significant divergences could
be observed in sector dynamics at the
country level. While output growth was
strong in Germany, the Netherlands
and Sweden the latter even with
double-digit growth all Central
European countries registered a
marked decline in activity. Also output
growth in the UK was slightly negative.
Output in the other countries remained
very close to the year earlier level.
As in previous quarters, strongest
dynamics were seen in the residential
building sector, either in new work or in
renovation and modernisation projects.
But also non-residential and infra-
structure activity picked up in the
countries with the strongest growth
performance.
First estimates for the third quarter are
positive with growth expected to have
strengthened slightly. This is basically
8
reflecting a modest improvement in
construction activity in those countries
which had seen a year-on-year
stagnation in output in Q2-2016.
Meanwhile, construction activity in
Central Europe is expected to have
continued its negative trend.
With fairly similar conditions pencilled
in for the final quarter of this year, total
output growth in the EU is forecast to
amount to 1.4% in 2016.
The outlook for 2017 is for a further
gradual recovery of construction
activity in the EU. As in the recent past,
the major boost to growth will come
from the residential sector. Demand for
residential property will remain on a
growth trend, supported by low interest
rates, easing access to financing,
improving labour market conditions
and rising disposable incomes. Public
investment in refugee housing will also
contribute to the expected rise in
residential construction output.
Non-residential property demand is
also forecast to improve, particularly in
gateway locations across the EU.
Particularly this market segment
attracts the interest of international
investors.
Targeted, high-value public investment
in economic infrastructure is expected
to drive a modest recovery in civil
engineering activity across the EU.
Total EU output is forecast to rise by
2.2% in 2017.

Automotive
EU sales kept their strength over
summer
Exports slightly down on 2015
H116 output sharply up
Continued but more moderate
growth ahead
Having grown vigorously in the first half
of this year, available data for the third
quarter show that automotive demand
continued to expand at a healthy rate.
Passenger car sales rebounded
strongly in August following a
hesitation in July. Passenger car sales
over the first nine months of 2016 rose
by 8% y-o-y. A double-digit increase
was registered in Italy and Spain, but
also the other large EU markets saw a
healthy rise in car sales.
Commercial vehicle demand also
continued to expand robustly over the
July-August period. Especially in
August sales increased very strongly;
the 31.8% y-o-y rise was particularly
boosted by booming demand for vans.
Over the first eight months of this year,
commercial vehicle sales rose by
14.3% y-o-y. All large markets except
the UK posted double-digit growth over
this period.
EU exports of passenger cars to third
countries were slightly down compared
with last year, reflecting falling exports
to the United States, Turkey, China
and Russia.
Automotive output growth once again
surprised on the upside, expanding by
9
10.5% y-o-y in Q2-2016. Output in the
United Kingdom, Spain, the
Netherlands, Sweden and most
Central European countries posted
double-digit growth compared with the
same period of 2015.
First indications for Q3-2016 signal a
continuation of the positive trend in
demand and output, although as a
result of base effects growth will taper
off going forward.
All in all, automotive production is
expected to increase by just over 5% in
2016.
Prospects for the EU automotive
market in 2017 remain favourable. The
outlook for passenger car demand is
positive, owing to improving labour
market conditions, rising wages and
low interest rates. Both private demand
and fleet sales are expected to
increase moderately further.
Commercial vehicle demand is seen
benefiting from the sustained economic
recovery in the EU and the related rise
in transportation needs.
The export markets will most likely not
contribute significantly to growth in
automotive activity. Most international
markets are not expected to register
strong growth; moreover, localisation
trends limit car exports from the EU.
Total EU automotive output - including
parts and components - is forecast to
rise by 2.8% in 2017.

Mechanical Engineering
Q216 activity did not gain traction
Business investment held back
by weak confidence
Post-Brexit uncertainty does not
bode well for 2017 prospects
Very modest improvement 2017
EU mechanical engineering activity
failed to gain momentum in the second
quarter of 2016. Output increased by
just 0.6% y-o-y, even slower growth
than registered in the first quarter. The
weakest performance in comparison
with the same period of 2015 was seen
in the UK and Sweden as well as some
smaller EU countries. Most of the other
countries registered only a moderate
increase in output, with the exception
of Spain and Poland where growth was
more significant.
Both EU and foreign demand for
capital goods remained lacklustre in
recent months. Fixed business invest-
ment was negatively affected by weak
confidence, still depressed profit
margins and little evidence of a near-
term improvement in capacity
utilisation and earnings growth.
Current estimates for production in the
third quarter of 2016 signal that activity
probably has again been held back by
rather weak growth in international
trade and by elevated levels of
economic and political uncertainty.
Little change is foreseen for the final
10
quarter of the year. This would imply
that activity in the EU mechanical
engineering sector will more or less
stagnate around the year earlier level
in the second half of this year. On
balance, total growth over 2016 is
forecast to be a meagre 0.4%.
Prospects for 2017 have become more
muted lately. This has to do with the
potential negative impact of Brexit on
business confidence in the EU in
general and the UK in particular. Fixed
investment decisions both in the UK
and the continent may be postponed
until more clarity has been provided on
the Brexit timetable and preferred exit
scenario. This uncertainty could at
least partially - offset the expected
moderate improvement in business
fundamentals across the EU. The
monetary and fiscal stance is seen
becoming more supportive to capex, in
combination with improving capacity
utilisation and profit margins.
Prospects for international capital
goods demand remain uncertain. While
there is evidence that in some regions
demand could be firming, the outlook
for business investment in the US and
China is opaque. The euro exchange
rate is expected to remain mildly
supportive to euro area exporters.
On balance, output is forecast to rise
by a very modest 1.3% in 2017.

Tubes
Positive growth activity Q216
Improvement business situation
line pipe segment
Outlook for 2017 is for tube
production gaining traction
EU steel tube production rose by 3.5%
y-o-y in the second quarter of 2016,
following a five-year period of basically
only quarterly contractions in activity.
Production activity posted positive
growth in the majority of EU countries
involved in tube manufacturing.
The key factor explaining this reversal
of the trend in production activity is the
improvement in the line pipe segment.
Demand has been boosted by the
Nord Stream 2 project, a twin pipeline
system that will transport natural gas
via the Baltic Sea route from Russia to
Germany.
But also other projects in Europe and
abroad coming into the actual
construction stage are supportive to
demand for line pipe. Production
started in Q2 for delivery in the second
half of 2016 and in 2017.
Other tube market segments have
continued to perform rather satisfactory
such as the automotive sector,
onshore and offshore wind energy
projects and the building sector.
First estimates for steel tube
production in the third quarter of 2016
point to a further recovery of EU tube
11
production with most of the underlying
business conditions in the various tube
market segments performing
satisfactory.
A year-end acceleration in production
growth should bring overall growth in
2016 tube output to 1.8%.
The outlook for 2017 is for steel tube
production to gain further traction,
supported by improving business
conditions in the key tube markets.
OPEC members agreeing to freeze or
slightly reduce output pushed oil prices
up by almost 10% recently, with the
Brent crude price nearing again $50. If
other oil producers would join the
OPEC move, then the likelihood of
prices remaining higher going forward
would increase. This would have a
positive impact on oil and gas sector
investment and pipeline construction
activity as well as demand for OCTG.
Demand for smaller welded tubes and
seamless tubes will be supported by
activity in the automotive industry,
construction, metal goods and
mechanical engineering sector gaining
further momentum.
EU output is expected to rise by 4.8%
in 2017, albeit from still low levels.

Domestic Appliances
Healthy rise output in Q216
Favourable demand conditions
seen continuing
EU production activity on an
expansionary course in 2016-2017
Production in the electrical domestic
appliances sector in the EU grew by a
healthy 7.8% y-o-y in the second
quarter of 2016. All reporting EU
countries registered growth, with the
exception of the Italy, UK and Sweden.
Particularly in Germany output grew
vigorously.
Demand conditions for the electrical
domestic appliances sector have
remained favourable, reflecting the
sustained boost from private consum-
ption in the EU and improving
momentum in activity of the residential
construction sector. Labour market
fundamentals have been steadily
improving and translate into rising
disposable incomes in several EU
countries. Low interest rates and
easing financing conditions have also
encouraged private real estate
investment.
Preliminary activity data for the third
quarter of 2016 signal that output in
this sector probably rose by almost 5%
y-o-y.
Business conditions in the fourth
quarter of 2016 look set to remain
positive. All in all, total production
12
activity of the electrical domestic
appliances sector in the EU is forecast
to increase by 4.6% this year.
Prospects for 2017 are overall
favourable. The sustained economic
recovery in the EU is expected to lead
to a further improvement in labour
market conditions, owing to an
increase in hiring and lower
unemployment. Upward pressure on
real wages is therefore expected to
continue. With no major changes
indicated by the ECB in their monetary
policy, access to and cost of finance
should remain supportive to private
investment in residential property.
Both new work and modernisation and
renovation activity are expected to
increase further in 2017, with the
residential construction rebound sprea-
ding to more EU countries.
Customers in the EU becoming
increasingly aware of how innovative
and resourcesavings functions in
household equipment contribute to
balance the demand and supply for
energy should be supportive to the
competitive position of EU producers
in a highly competitive market,
because of their focus on energy
efficiency and product design.
Production in the EU electric
household appliances sector is
forecast to grow by 2.4% in 2017.

Real Consumption
Forecast for real consumption - % change year-on-year
Year Year
Period Q116 Q216 Q316 Q416
2015 2016
1.3 4.0 4.3 1.3
Upward trend real consumption
continued in Q216
Steel tube sector stopped acting
as a drag on final demand
Steady growth in 2016 and 2017
In the second quarter of 2016, EU real
steel consumption grew by 4.3%
compared with the same period of
2015, fairly similar growth as registered
in the first quarter. As such it reflects
the continuation of rather positive end-
user fundamentals in the EU steel
processing chain over the first half of
this year.
While all steel using sectors
contributed to the year-on-year rise in
real steel consumption, especially
demand from the automotive industry
strengthened considerably further from
already positive levels in the preceding
quarters. Moreover, the steel tube
sector stopped acting as a drag on
total activity growth in the steel using
sectors and therefore also on real steel
consumption in Q2-2016.
On a par with the trend in end-user
activity which is expected to have been
somewhat less dynamic in the third
1) steel intensity is the ratio of steel consumption to steel weighted production in the steel using
industries (SWIP)
13
Year
Q117 Q217 Q317 Q417
2017
0.8 2.6 1.7 1.2 1.9 2.2 1.7
quarter, EU real steel consumption is
currently estimated to have grown by
just over 1% y-o-y in Q3-2016. A more
or less matching growth is currently
pencilled in for the final quarter, which
would result in a 2.6% increase in real
consumption over the whole of 2016.
The outlook for 2017 is for continued
growth of real steel consumption in the
EU. As in 2015 and 2016, the major
impulse for the rise in end-user
demand will come from consumer-
oriented sectors such as the
automotive and residential construction
industry. Post-Brexit uncertainties
could result in investment failing to
gain significant traction going forward.
Export-oriented sectors should be in
the position to benefit from the mild
improvement foreseen for global
economic growth. Steel intensity is
forecast to have a slightly negative
impact on real steel demand.
As a consequence, EU real steel
consumption is forecast to increase by
1.7% in 2017.
 14

Apparent Consumption
Forecast for apparent consumption - % change year-on-year
Year Year Year
Period Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417
2015 2016 2017
3.6 3.0 2.3 0.9 2.6 2.2 -0.5 -1.3 0.4 1.3 -0.1

EU Apparent
Consumption
in million tonnes per
annum
2009 121
2010 148
2011 158
2012 141
2013 141
2014 147
2015 152
2016 (f) 155
2017 (f) 155

EU steel demand rose 2.3% y-oy in
Q2-2016 - imports grew by 11%
Customs data signal imports
remaining high so far in H216
Neutral stock cycle in 2017 will result
in stagnation apparent consumption
EU apparent steel consumption rose
by 2.3% y-o-y in Q2-2016; the rising
trend in real consumption explains this
growth. While stock building -
particularly by distributors - contributed
to the rather healthy level of apparent
steel consumption in Q2, the actual
inventory rise was somewhat lower
than in the same period of 2016, thus
having a slightly negative impact on
year-on-year growth in demand.
Imports remained in Q2-2016 at the
same level as registered in the first
quarter; however in terms of year-on-
year change, the growth rate slowed
down to 2% y-o-y. This is largely due
to a sharp reduction of imports in June,
reflecting a more cautious attitude from
steel buyers towards purchasing from
third countries due to the anti-dumping
investigations into several steel
products undertaken by the European
Commission. However, this relieve was
only short-lived: in July and August,
imports came back to the higher levels
seen earlier this year and SURV2 data
for September show the highest level
of finished steel product imports since
October 2015.
Apparent consumption in the second
half of this year is expected to be lower
than in the first half, in a reflection of
the usual seasonal destocking over
this period. With no clear indication of
serious overstocking in H1-2016, the
impact of inventory reductions is
expected to be moderate.
Total apparent consumption in 2016 is
forecast to rise by 2.2%. However,
import data for the first eight months of
this year signal that once more third
country suppliers will benefit most from
this modest uptrend in demand.
In 2017, apparent steel consumption is
seen moving sideways. The continua-
tion of cautious inventory management
- reflecting business uncertainty - will
result in an almost neutral stock cycle
over the year, thereby offsetting the
slight increase in real consumption.

Imports
Finished product imports +12%
y-o-y over 8m2016
No moderation in July-August
Concerns about imports gaining
most from the EU steel market
recovery appear to be justified
Steel imports from third countries into
the EU remained at an elevated level
in recent months.
Total imports in Q2-2016 grew by 2%
y-o-y, while moving sideways
compared with Q1. Imports of semis
and finished products rose slightly
compared with the same period of last
year. However, while imports of flat fell
by 3% y-o-y, long product imports rose
by 16% y-o-y. Over the quarter, June
imports were the lowest since the start
of the year, most likely due to
importers of steel products shying
away from third country deliveries
because of several products being
under anti-dumping or anti-subsidy
investigation.
Customs data for July-August and
SURV2 data for September reveal that
the slowdown in imports was only
temporary; imports came back to or
above the level seen earlier in 2016.
As a result, finished product imports
over the first eight months of 2016
show a rise of 12% y-o-y, with flat
product imports growing by 10% and
long product Imports by 19% y-o-y.
15
At the product group level, two trends
can be observed. Firstly, third
countries fined by provisional or final
anti-dumping duties for a certain
product focus instead on other product
segments. Chinese producers reduced
their exports of cold-rolled flat steel
products by 94% y-o-y over the first
eight months of 2016, but at the same
time increased their exports of coated
sheets by 81%. Secondly, an
imposition of duties leads to other
countries taking the place of the
country or countries fined for dumping
practices, thereby keeping overall
import pressure at an elevated level.
Steel products which have seen the
strongest rise so far this year are
coated sheets, wire rod and heavy
plates.
China remained the most important
exporter to the EU, followed by the
Russia, the Ukraine, South Korea and
Turkey. Together these countries
accounted for 67% of total imports over
the January-August period. Only
imports from Russia are lower than a
year ago.
As such, persistent concerns regarding
imports gaining most from the tepid
improvement of the EU steel market
appear to be justified.

Exports
EU exports fell 15% over the first
half of 2016
EU trade deficit remained
significant
Global steel market: demand
could improve slightly in 2017,
supply remains key uncertainty
factor
EU exports to third countries continued
to contract in Q2-2016, in a reflection
of the fact that the window of
opportunity for international steel trade
is closing due to global overcapacity
problems fuelling competition and
protectionist measures.
Total exports over the first half of this
year decreased by 15% y-o-y.
Underlying customs data show a 70%
reduction in exports of semis whereas
finished product exports fell by 8% with
both flat and long product exports
being equally affected.
Similar to the situation in 2015, the EU
remained a net importer of steel
products in the first half of 2016.
The total trade deficit over this period
amounted to 817,000 tonnes per
month, compared with an average
monthly deficit over the same period of
2015 of 302,000 tonnes. The deficit is
due to net imports of semis (683,000
tonnes per month) and flat products
(479,000 tonnes per month) and a
16
trade surplus in long products (345,000
tonnes per month).
As far as the main countries of
destination of EU exports are
concerned, Turkey and the United
States remained the key destinations
for flat product exports and Algeria as
well as Turkey and the US for long
products.
With no indications for a short-term
relief in pressures arising from global
overcapacity on international trade,
market conditions look set to remain
difficult for the time being.
The outlook for 2017 is marginally
better as far as global demand is
concerned. It seems that a slight rise in
steel consumption is to be expected
thanks to better prospects for the
NAFTA region and Central and South
America.
However, the key uncertainty factor
remains the supply side. At this point in
time, it is extremely difficult to foresee
whether a meaningful net reduction in
global steelmaking capacity could be
achieved within a foreseeable
timeframe.