Steel Market

The demand for steel in Europe is mainly driven by the increased spending on renovation and maintenance of buildings in Western and Northern Europe. The increasing investment in the commercial construction for infrastructure development mainly in Central Europe is likely to add to the growth of the steel market in Europe. Additionally, the rise in the sale of automobiles mainly in the Eastern European countries is projected to boost the product demand in the coming years.

The increasing use of advanced high strength steel (AHSS) in electric vehicles coupled with increased production of electric vehicles to reduce carbon emissions is likely to create lucrative opportunities for the players operating in the Europe steel market.

However, the growing use of alternative materials that are lightweight, such as aluminum and plastic composites, is likely to restrict the growth of the steel market in Europe.

Over one-quarter of steel produced annually is used in the construction of buildings. Steel finds numerous applications in low- & high-rise buildings, sports stadiums, bridge deck plates, harbors, cladding & roofing, offices, security fencing, and coastal & flood defenses. Thus, the growth of the building and construction industry in Europe is expected to play a prime role in the growth of the steel market in the region.

The total construction output in the European Union (EU) amounted to around USD 1,454 billion in 2017. This growth was attributed to the rise in construction activities mainly in Germany, France, Italy, the UK, and Nordic countries. The increased spending on renovation and maintenance of buildings in Western and Northern Europe to meet the growing need for modern architecture and smart buildings is likely to drive the growth of the steel market in Europe. Additionally, the growing construction activities in Eastern Europe due to surging number of single-family dwellings, growing formal lending to households, and the prevalence of low mortgage and interest rates are the other factors expected to support the growth of the market in Europe.

Furthermore, the increasing investment in commercial construction for infrastructure development, mainly in Central Europe, is also likely to add to the growth of the steel market in Europe. The growth in infrastructure development is attributed to the increased spending on various construction projects, for instance, expansion of the Berlin Brandenburg airport. Besides, the ongoing Stockholm bypass project that is aimed at reducing the traffic in the city by expanding a patch of the European Highway is likely to be completed in 2025. This is also expected to fuel the demand for steel products, and thus steel. Also, the London’s Crossrail Project, Russia’s Crimean Bridge, and Power of Siberia are some of the other projects that are expected to increase the demand for steel in Europe.

Environmental regulations by the ECHA to reduce carbon and nitrogen oxide emissions by vehicles has resulted in an increase in the manufacturing of electric vehicles.

Although aluminum is being used in electric vehicles to reduce the weight of the vehicles, it is costlier as compared to steel. Also, the manufactures operating in the steel market are developing advanced high strength steel (AHSS), which possesses light weighting properties. The development of AHSS together with the high cost of aluminum has resulted in a shift from the use of aluminum to AHSS in the electric vehicles. AHSS is used in battery protectors in electric vehicles to ensure strong protection and lower the weight of the vehicle. For instance, Tesla, a global leading producer of electric vehicles launched a new small and cheap model under the brand name Tesla Model 3, which is made using AHSS. AHSS is suitable for small and lightweight vehicles, while aluminum, on the other hand, is more likely to be used in SUVs and light trucks where the light weighting is more important. Thus, the use of AHSS is likely to increase in electric vehicles in the coming years.

Some of the major countries embracing the production of electric vehicles in Europe are Norway, the Netherlands, the UK, France, Spain, Denmark, Germany, and Switzerland. In 2017, Europe accounted for around 26% of the total electric vehicles produced globally. Government initiatives and support to promote the production of electric vehicles is another important factor driving the demand for steel. In 2018, the major players such as Volkswagen AG, BMW, and Audi proposed to expand the production of electric vehicles in the European market to meet the zero-emissions target set by the government.

Thus, the increasing adoption of electric vehicles to meet the environmental regulations is expected to offer lucrative opportunities to the players operating in the Europe steel market.

Use of steel is responsible for around 60% weight of an automobile. With the increase in environmental regulations against carbon emissions, the need for lightweight materials has increased in the automotive industry. The European Chemicals Agency (ECHA) has set specific targets for fuel efficiency and emissions reduction. As a result of this, automotive manufacturers are emphasizing on reducing the use of steel in vehicles and preferring for lightweight materials such as aluminum, magnesium, and plastic composites. However, the development of advanced high-strength steel (AHSS) is expected to lower the impact of alternative materials, but it is limited to small and lightweight vehicles.