La World Steel Association (WSA) provides that global steel consumption will grow by only 0,5% in 2015, after the modest growth rate (0,6%) already recorded last year. The main reason comes from China's economic slowdown, the world's largest producer and consumer of steel, whose consumption should continue to decline in the two-year period 2015-16. At the same time, Chinese steel companies increase their exports to the world market, contributing to a reduction in the prices and revenues of many companies in the sector. Excess production capacity is thus increasingly a problem for many steel producers and traders. Despite the decrease in iron ore prices, this continued pressure on steel prices negatively affects the profitability and profit margins of steel companies, who find themselves operating in a highly competitive market. At the same time, Europe's steel industry is confronted with increasingly stringent environmental standards imposed by the EU, while plants in North America suffer the consequences of the sharp contraction in investments in the energy sector, caused by the reduction in the price of oil.
As reported by atradius, the German steel industry (whose main sub-sectors are metalworking and wholesale of metals and minerals, iron and steel) depends heavily on the general economic development of Germany, especially the performance of the construction sector and of those strongly export-oriented sectors such as mechanical engineering and automotive. In 2014, German crude steel production reached 42,9 million tonnes, roughly the same as the previous year's levels. According to theGerman Association of Steel Companies, steel production grew by 1,5% between January and June, while orders also grew during this year's quarter. However, the flow of orders essentially depends on the demand from foreign markets, while domestic income and demand decreased by 3,8% and 5,3% respectively. In 2015, steel consumption is expected to increase by 2,1%. Despite the good trend of orders and production volumes, German steel producers and traders are faced with some structural challenges; in fact, in 2014 steel prices fell by 10% and continued to fall again this year mainly due to persistent excess production capacity (especially in China) and growing competition from foreign markets , with a negative impact on business turnover. In many cases, manufacturers have not been able to pass on the increase in production costs to customers. Profit margins are still under pressure, while net profits have suffered a sharp decrease caused by the entry of China and India into the European steel market (with China's steel exports growing 28% in the first half of this year). Furthermore, the German steel sector is strongly affected by the increase in energy costs: here then that, following the renunciation of nuclear energy, the increase in costs for the sector is expected to fluctuate between 1 and 1,5 billion euros per year.
