CORRECTED-(OFFICIAL)-UPDATE 1-European steel unlikely to recover soon - trade group

Wed Feb 13, 2013 5:09pm EST

(In last paragraph ArcelorMittal corrects that long steel demand, not production, declined by 30 percent)

* No sustainable recovery yet, says German steel association

* Market uncertainty remains - trade group president

* 2013 European long-steel consumption seen flat

By Maria Sheahan and Tom Käckenhoff

DUESSELDORF, Germany, Feb 13 (Reuters) - Signs of recovery for Europe's steel sector, a bellwether for the broader economy, may be a mere flash in the pan, a German trade group said on Wednesday.

"I don't see any sustainable recovery of the European market," Hans Juergen Kerkhoff, president of the German steel association, told Reuters on Wednesday.

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

Steel consumption in the EU fell by almost 10 percent last year, and while some economic data has recently fanned hopes of a pick-up in the economy, European steel producers' lobby group Eurofer warned this month that the sector remains "stuck in reverse gear".

Germany's steel sector, which accounts for about a quarter of Europe's crude steel production, has performed better than its counterparts in France, Italy or Spain, but is still expected to post only moderate growth this year.

"There is still uncertainty in the markets, just like there was in the second half of 2012, when both traders and processors were cautious," Kerkhoff said on the sidelines of a steel industry conference.

ThyssenKrupp, Germany's biggest steelmaker, this week reported a 38 percent slump in core profit for the last three months of 2012, hit by European customers using up inventories rather than placing new orders.

Customers have now started refilling depleted inventories, driving up output by 5 percent in January, the biggest monthly gain since September 2011. However, a 4 percent decline in new orders raised doubts that restocking would continue.

FLAT CONSUMPTION

Europe's steel sector overall has a tough year ahead, with EU steel demand, including inventory adjustments, seen down 0.7 percent this year before a 3 percent rise in 2014, Eurofer said.

"We were hoping to see a slow recovery year on year, but it is just not there," Arnaud Poupart-Lafarge, chief executive of ArcelorMittal's Long Carbon Europe operation, told Reuters.

ArcelorMittal, the world's largest steelmaker, last week reported a $3.7 billion group loss for 2012 after writing down the value of its European steel business by several billion dollars.

Poupart-Lafarge said that he expects consumption of long steel products, such as bars used in high-rise buildings, bridges or railway tracks, to remain flat this year.

The EU is now working on a proposal to reinvigorate Europe's steel sector, which employs 360,000 people, with measures covering trade, raw materials, climate change and energy policy.

"We need more demand from the automotive, construction and mechanical engineering sectors ... Only if we see growth coming back will we produce more steel," Poupart-Lafarge said.

Demand for long steel has declined by 30 percent since the start of the crisis, he said. ArcelorMittal has cut capacity and idled several plants. Poupart-Lafarge said he does not expect production to be halted at any more plants for the time being. (Editing by Dan Lalor, David Goodman and Phil Berlowitz)

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