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UPDATE 1-Salzgitter adds to warning signs for German economy
November 14, 2012 / 7:43 AM / in 5 years

UPDATE 1-Salzgitter adds to warning signs for German economy

* Says demand from auto, engineering sectors slowing

* Q3 pretax loss 24.6 mln euros vs yr-earlier profit

* News comes after Salzgitter cut 2012 outlook (Recasts, adds further details, background)

FRANKFURT, Nov 14 (Reuters) - Steelmaker Salzgitter warned that demand from Germany’s car and engineering sectors was slowing, adding to signs that a downturn in the euro zone is catching up with Europe’s biggest economy.

“During the third quarter, these sectors were exposed to significant braking effects,” the company said on Wednesday as it posted a quarterly loss.

The steel sector has been hit by a slowdown in demand for cars, appliances and new buildings, and hopes for a recovery this year have been fading as euro zone manufacturing has been shrinking for 15 months straight.

Salzgitter earlier this month already cut its full-year outlook, saying it saw its pretax result coming in around breakeven, because it was unable to push through price increases in the current economic environment.

Germany initially held up better in the crisis than many others in the region, but recent data has fanned concern that Europe’s top economy may soon slip into recession.

Domestic engineering orders slumped by 17 percent in the third quarter, causing a decline in demand for steel products.

“The loss of momentum (in Germany’s steel processing sector) has been notable since the start of the second half year, especially in mechanical engineering,” Salzgitter said.

Salzgitter posted a third-quarter pretax loss of 24.6 million euros ($31.27 million) as its steel business was hurt by volatile prices in the uncertain economic environment, compared with a year-earlier profit of 39.2 million.

$1 = 0.7867 euros Reporting by Maria Sheahan; editing by Victoria Bryan

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