The downside factors severely impacting apparent steel consumption in 2022 and leading to recession (-7.2%)
– i.e., war-related disruptions, poor demand outlook and severe rises in energy prices and production costs -
are expected to continue to weigh until the second quarter of 2023 included as a result of the prolonged effects
of Russia’s war in Ukraine and increasing inflation-led economic uncertainty.

Consequently, apparent steel consumption is projected to contract even further in 2023, with a steeper rate
of decline than previously foreseen (-3%, revised downwards from -1%). This would mark the fourth annual
recession in the past five years. However, in 2024 apparent steel consumption is set to recover at a faster rate
(+6.2%, previous estimate +5.4%), conditional on more favourable developments in the industrial outlook and
improvement in steel demand.

The overall evolution of steel demand remains subject to high uncertainty, which is expected to continue
undermining real demand from steel-using sectors at least for the first half of 2023. It is anticipated that
quarterly positive developments in apparent steel consumption will only start to emerge from the third quarter
of 2023.

EU steel market overview

During the first quarter of 2023, apparent steel consumption in the EU continued to drop significantly (-11.7%),
following another major contraction (-19.3%) in the preceding quarter. The total volume reached 34.5 million
tonnes, representing an improvement compared to the fourth quarter of 2022, which had experienced the
lowest level ever recorded since the exceptional drop due to COVID in the second quarter of 2020. However,
these volumes remained relatively low compared to the levels seen in 2021 and the first half of 2022.

Domestic deliveries continued to mirror weak demand during the first quarter of 2023 and decreased (-6.2%) for
the fourth consecutive quarter, albeit at a slower pace than in the preceding quarter (-15.1%). In 2021, deliveries
had rebounded significantly (+11.9%), after the sharp drop in 2020 (-9.6%) and the already negative performance
in 2019 (-2.9%). As a result of the unfavourable developments in the last two quarters of the year, in 2022
domestic deliveries markedly dropped (-7.9%).

Mirroring the continued and quick deterioration in steel demand, imports into the EU – including semi-finished
products – sharply decreased also in the first quarter of 2023 (-28%, after -33% in the preceding quarter). Overall,
total imports from third countries in 2022 fell (-6.7%). However, it is worth noting that the drops in imports seen
in the last three quarters essentially reflected weak demand conditions. Therefore, the share of imports out of
apparent consumption remained considerably high in historical terms, even in the first quarter of 2023 (22%).

EU steel-using sectors

Despite the challenges posed by Russia’s invasion of Ukraine and rising energy prices, EU steel-using sector’s
output showed unexpected resilience and continued to grow up to the first quarter of 2023. The Steel Weighted
Industrial Production index (SWIP) improved again (+3.7%, following +2.5% in the fourth quarter of 2022).

The overall positive evolution in the first quarter of 2023 was a combination of very favourable developments in
the automotive, mechanical engineering and transport sectors on one hand, and a decline in output in domestic
appliances, tubes and metalware on the other. The construction sector experienced almost flat growth (+0.1%)
and is anticipated to face recession in 2023. The positive trend started after the pandemic had continued so far
in spite of rising energy prices impacting production costs, component shortages and lower output that took
their toll on total production activity in steel-using sectors in the second half of 2022.