The global steel industry is expected to make a recovery this year led by a rebound in Europe and the rest of the world, offsetting a slowdown in Chinese growth.

World production of steel will rise by 3.6 per cent in 2014, with growth finally returning to Europe after bottoming out last year, according to a Financial Times poll of 15 steel analysts.

A 2.4 per cent year-on-year increase in output in Europe, following six years of decline, will partly offset a slowdown in China as the world’s biggest steel producer moves from an investment to a services-driven economy.

Chinese steel production is expected to rise year-on-year by just 4 per cent, compared with about 6 per cent in 2013, according to top steel analysts.

Matthew De Morgan, chief executive officer of Duferco, the world’s biggest steel trader, said: “The steel sector will have a better 2014 in terms of volumes and we are past the bottom from this perspective, but the pricing outlook is not spectacular.”

The research supports forecasts by the World Steel Association that growth rates for Chinese steel output will drop below the rest of the world for the first time since 2006. The industry body expects world steel production excluding China to rise by 3.5 per cent year on year, surpassing growth of 3 per cent in China. Overall global growth last year was 3.1 per cent.

John Lichtenstein, global managing director of Accenture’s metals industry group, said: “This pattern will probably persist for the indefinite future as China shifts to a services and consumer-driven economic growth model, and growth in the other emerging economies takes stronger hold.”

The bulk of new steel production capacity growth is instead expected to come from regions such as India, the Gulf, Latin America and former Soviet states over the next few years, according to Brian Levich of Metal Bulletin Research.

The pick-up in European output will provide a boost to companies’ earnings, particularly Europe-based steelmakers such as ArcelorMittal and ThyssenKrupp, which have been hit by weak demand on the continent in the construction and car industries.

In recent months, steel companies have become more optimistic on the outlook. In November, Lakshmi Mittal, chief executive of ArcelorMittal, said it had passed the bottom of its two-year slump, while Tata Steel also noted modest improvements.

"All the indicators are moving in a positive direction; therefore, we are cautiously optimistic about the prospects for 2014,” said Mr Mittal, the Indian billionaire.

But top steel analysts warned there remained significant problems in the steel sector that would continue to weigh on profits and prevent a full recovery.

Seth Rosenfeld, analyst at Jefferies, said the industry remained “structurally impaired” by significant excess production capacity and low pricing power.

"Following years of demand destruction, a key risk for 2014 is that steelmakers may be too aggressive in restarting idled capacity in an effort to capitalise on current strength and take market share,” he said. “Should this happen, volumes may pick up but prices will remain depressed.”

While analysts foresee a strengthening of the recovery in steel output, they are far from predicting a return to the days of rapid global growth seen before the financial crisis.

World steel output between 2003 and 2007 rose more than 6 per cent a year for six years in a row, driven by a surge in production and consumption in China. Between 2000 and 2012 the country tripled its share of world steel output from 15 per cent to 46 per cent.