* German steel association warns of risks to recovery
* Says market environment still difficult
* Demand from outside Europe weighed down by euro strength
* Tata: Europe's return to pre-crisis demand is years away
* German January steel orders at two-year high after Q4 drop
(Adds comments by Tata Steel and ThyssenKrupp, background)
DUESSELDORF, Germany, Feb 11 An expected
recovery in the European steel sector could be derailed by
fierce competition and rising raw material and energy prices,
the German steel association warned on Tuesday.
Efforts to cut government budget deficits across the
European Union in the past two years have squeezed companies and
consumers, hurting the steel industry by curbing demand for
cars, appliances and new buildings.
Though steel producers' lobby group Eurofer said last month
that carmakers and construction should help revive growth this
year, the president of Germany's steel association said the
European sector is still in "crisis mode".
"We currently see slight recovery, albeit in a still
difficult market environment ... This is a recovery from a very
low level," Hans Juergen Kerkhoff told an industry conference.
European steelmakers have been squeezed by 200 million
tonnes of global overcapacity and rising energy and
Henrik Adam, chief commercial officer of Tata Steel Europe
, told the conference it might take until the end of
the decade for demand from major steel-using industries in
Europe to return to pre-crisis levels.
Some see tentative signs of recovery. ArcelorMittal
, the world's biggest steelmaker, last week forecast
higher profits this year, driven by higher steel sales and
margins, and an increase in iron ore production as Europe ends
two years of decline.
But Austrian steelmaker Voestalpine said on
Tuesday its annual profits would decline from last year as weak
energy demand in Europe hits prices for pipeline and power
BOOST FROM RESTOCKING
The German steel association's Kerkhoff expects southern
European countries such as Italy and Spain to continue to lag
the north but remains cautious too about Germany, accounting for
about a quarter of Europe's crude steel production.
In January, German crude steel output grew by 2.2 percent
from a year earlier - its fifth straight increase. But a
two-year high in orders reflected earlier delays in investments
that caused a 4 percent decline in orders for the quarter
"This shows that the recovery is still fragile," Kerkhoff
said, adding that demand from outside Europe in particular was
weighed down by the euro's strength against the U.S. dollar, the
Japanese yen and important emerging market currencies.
Consultancy PwC estimates that steel demand in the European
Union overall will grow at an annual rate of only 1.25 percent
through 2025, well below a global average of 3.5 percent,
according to a study published on Tuesday.
The German steel association - representing steelmakers such
as ThyssenKrupp, which is due to publish quarterly
financial results on Friday - expects the country to increase
its steel output by 2 percent this year to 43 million tonnes
after stagnating in 2013.
But Kerkhoff said he saw German steelmakers further reducing
their headcount as they cut a total of about 2 million tonnes of
capacity, or around 4 percent of overall capacity, this year and
(Reporting by Maria Sheahan and Tom Kaeckenhoff; Editing by
David Goodman/Ruth Pitchford)