According to a new report by Moody's Investors Service, improving fundamentals in the European steel industry, reflected by slight growth in euro area GDP and in the steel end user markets, have resulted in a change of outlook to stable from negative.

The outlook, which had been negative since October 2011, reflects Moody's view of the fundamental business conditions for the industry over the next 12 to 18 months.

Moody's believes apparent steel use, which is a good proxy for end-user demand, in the European Union will be flat to up 1% to 2% in 2014, versus an expected 1 to 2% decline in 2013.

Moody's corporate finance group vice president, senior analyst and report author, Mr Denis Perevezentsev said that "Despite the fragility in the euro area economy recovering, we are seeing the European steel industry starting to benefit from the slight improvement. Next year, we also expect improvements in the steel end-user sectors, such as volumes stabilising at low levels in the building materials industry and some growth in European light vehicle sales which in turn will push demand growth in the steel sector."

Moody's latest macroeconomic forecast is for euro area GDP growth of 0.5%-1.5% in 2014 versus flat to a 1% contraction in 2013 and there are signs that economic activity may be bottoming out in peripheral states.

In Russia, Moody's forecasts GDP growth of 2.5%-3.5% in 2014 after a slowing to 1%-2% in 2013. The ratings agency expects this to help growth in steel end-user markets.