German steel industry sees no broad recovery this year

DUESSELDORF, Germany Wed Feb 13, 2013 3:47am EST

DUESSELDORF, Germany Feb 13 (Reuters) - Germany's steel sector is unlikely to see a sustainable recovery this year as demand remains weak and competition in global markets intensifies, a trade group said.

"The economic and structural conditions are difficult," German steel association president Juergen Kerkhoff told journalists ahead of a steel conference on Wednesday.

Europe Union-wide austerity measures aimed at cutting budget deficits have hit economic growth and proved particularly painful for the steel industry because of the accompanying slowdown in demand for cars, appliances and new buildings.

Germany, Europe's biggest economy, was one of the strongest performers in the euro zone crisis but still saw its economy shrink 0.5 percent in the final three months of 2012.

While the downturn is expected to be short-lived, there have been few signs of recovery in the steel sector, a bellwether of the broader economy.

ThyssenKrupp, Germany's biggest steelmaker, reported a 38 percent slump in core profit on Tuesday and said it saw no growth until its next financial year, weighed down especially by weak demand at its European steel business.

Bigger rival ArcelorMittal, the world's No.1 steelmaker, last week reported a $3.7 billion loss for 2012 after writing down the value of its European steel business by several billion dollars.

The sector produced 4.7 percent less crude steel in the EU in 2012 than a year earlier, the steepest decline of any region in the world. Germany did marginally better, with a 3.6 percent slide.

The German steel association still sees crude steel output rising about 1 percent to 43 million tonnes this year, partly thanks to customers having to refill inventories drawn down last year.

In January, output was up 5 percent, the biggest monthly gain since September 2011, but new orders were down 4 percent.

"At the start of the year, inventories are at least partly being refilled. It remains to be seen how long this 'technical' reaction will last," Kerkhoff said. (Reporting by Maria Sheahan; Editing by Dan Lalor)

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