Profit margins of many business increased in 2021, but several markets are facing major downside risks
Short-term outlook: strengths and growth drivers
- Strong rebound and higher sales prices in the recent past: Many metals and steel businesses in advanced market have benefited from strong pent-up-demand and high sales prices in 2021 and early 2022. This resulted in higher profit margins and increased financial resilience.
- Trade liberalisation: The partial scaling back of Section 232 tariffs for EU aluminium and steel imports by the US should support production and exports from Europe.
- Fiscal stimulus: Supports metals and steel demand in key markets like the US and China.
Short-term outlook: constraints and downside risks
- War in Ukraine: A longer-lasting war in Ukraine will negatively affect the sector performance in Europe into 2023, as high energy prices would continue to weigh on metals and steel production, while the weaker economic performance in many countries impacts demand from key buyer industries.
- Supply chain issues: demand for metals and steel could be stronger if supply chain bottlenecks were not still impacting key buyer industries (automotive, construction).
- Aggressive monetary tightening continues: this would lead to even weaker consumer spending and deteriorating investments. Key buyer industries like automotive, construction and engineering are cyclical sectors and strongly investment-driven.