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Other relevant documents:
The impact of the strong Pound on steel: report by the Centre for Economic and Business Research.
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For UK and international monthly and annual market and trade data, consult ISSB Ltd
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Gaining value in tough times
The difficult trading conditions which typified 1998, continued into 1999. As the year progressed volumes began to recover after a dreadful start to the year. Prices remained low and margins were poor. In fact steel prices in real terms were the lowest ever, contributing to the UK's low inflation record and our customers' competitiveness, but undermining steel's ability to invest.For the second year running, UK crude steel production was down around 5%.
Sluggish UK market
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UK Steel Demand 
Unit: million tonnes per annum Source ISSB |
The UK market also shrank, but import penetration fell back fell back from 44% in 1998 to 40% in 1999. Home sales by UK steel mills were adversely affected by a sluggish performance in UK manufacturing. The UK construction industry, which accounts for nearly 30% of steel sales by UK mills, was one of the better performing steel using sectors with growth around 5%. The benefits of this were reflected in an improved performance for many construction-led steel products, such as heavy sections, structural hollow sections and galvanised steel sheet. |
The UK engineering sector, which consumes around a quarter of domestic sales by UK mills, had a poor year with the mechanical equipment sub-sector down 5% and metal products down 4%. This helped to depress the performance of products such as engineering bars and flats and bright bars.
Meanwhile, the UK automotive sector was relatively stable, with production of passenger cars falling only slightly from 1.75 million to 1.7 million vehicles. However the prospects for 2000, based on projections by the Society of Motor Manufacturers and Traders, show a growth of 4% to 1.775 million vehicles rising to 1.85 million in 2001.
However, while the Engineering Employers Federation forecast growth of nearly 2% in 2000 for the engineering sector, new work in the construction sector for 2000 and 2001 is expected to be below the levels seen in 1998 and 1999, probably due to a tail-off in Millennium related projects.
Tough world markets
With one out of every two tonnes of UK steel exported, buoyant global trading conditions are vital for the health of steel mills. The Asian economic slowdown, that first appeared in 1997 and continued throughout 1998, began to show signs of recovery by the end of 1999. Asia consumes about 40% of world steel and any drop in Asian consumption has major repercussions on patterns of international trade as steel mills, particularly in Japan, South Korea and Russia, start exploiting alternative markets.
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Throughout the 1990's, the majority of UK steel exports to markets outside the EU have gone to Asia, although this trend was reversed in 1998 when exports to the Americas exceeded those to Asia - a trend maintained in 1999. However, the key market for UK steel exports remains the EU, which receives three out of every four export tonnes. The impact of a strong Pound, particularly in relation to the Euro, may be the difference between success and failure in this highly competitive field. Apart from the perils of an overvalued currency, the potential for exports in 2000 are good. Recovery in South East Asia appears to be underway, the indicators for EU growth are positive and the North American economy remains in a healthy condition. |
Exports to the Americas and Near, Middle & Far East 
Unit: thousand tonnes per quarter
Source: ISSB |
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© UK Steel Association,
1999
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Last updated: 15th December 1999