Global steel demand will reach 1,657.9Mt in 2018, an increase of 3.9% when compared with 2017, according to the World Steel Association’s (worldsteel) October short-range projection. In 2019 global steel demand is forecast to grow 1.4% to reach 1,681.2Mt.
Source: World Steel Association
Saeed Ghumran Al Remeithi, chairman of the worldsteel economics committee, speaking at the World Steel Association General Assembly in Tokyo, commented: “In 2018, global steel demand continued to show resilience supported by the recovery in investment activities in developed economies and the improved performance of emerging economies.”
Furthermore, Mr Al Remeithi argueed that demand for steel is expected to remain positive into 2019, growing at 1.4% globally.
There are, however, rising concerns stemming from tensions in the global economic environment.
According to worldsteel, while the strength of steel demand recovery seen in 2017 continued during 2018, market risks have increased. Normalization (or lack thereof) of monetary policies in the USA and the European Union could influence the currencies of emerging economies.
In China, steel demand growth is expected to decelerate due to lack of stimulus measures. Demand was boosted during the first half of 2018 by a minor stimulus in real estate, as well as a strong global economy. However, worldsteel argues that continued economic re-balancing efforts and toughening environmental regulations will lead to a deceleration in steel demand towards the end of 2018 and 2019.
In the current environment, both downside and upside risks exist for China. The downside risks have resulted from the ongoing trade frictions with the USA, as well as a decelerating global economy. However, China can capitalize on the upside risk of the market. As worldsteel claim, “If the Chinese government decides to use stimulus measures to contain the potential slowdown of the Chinese economy in the face of a deteriorating economic environment, steel demand in 2019 will be boosted.”
In the developed world, steel demand remains healthy, but growth will be moderate, increasing only by 1% in 2018 and 1.2% in 2019.
US steel demand grew significantly in 2017, benefiting from strong consumer spending and business investment in the USA, which was supported by tax and regulatory changes and fiscal stimulus. In contrast, steel demand growth in 2019 is expected to slow down as car manufacturing and construction activity is expected to see modest growth, with the manufacturing sector performing well thanks to the strength of the machinery and equipment sectors.
In addition, the recovery of European Union steel demand will continue broadening at a reduced pace. According to worldsteel, thanks to higher levels of business confidence, investment and construction continue to recover, but the automotive market may see slower growth demand.
While the economic fundamentals of the EU economy remain relatively healthy, steel demand in 2019 will show some deceleration compared to recent years’ growth. According to worldsteel, this is partially due to uncertainty resulting from global trade tensions.
In Japan, steel demand will remain stable thanks to supportive factors on investment. Specifically, record-high corporate earnings, the continuation of monetary easing, demand associated with the Tokyo Olympics and the increasing need for labor saving investments.
In contrast, steel demand in Korea will contract further in 2018 with only a minor recovery expected in 2019, mainly due to major steel-using sectors’ struggles.
Steel demand recoveries continue in the developing world. However, challenges are still ahead.
As India recovers from demonetization and implementation of the Goods and Service Tax (GST), the country’s steel demand is expected to return to a higher growth track, supported by improving investment and infrastructure programs. However, government finances and corporate debt continue to weigh on the outlook of the growth.
In the ASEAN region, slow-moving construction activity and stock adjustments have resulted in a slow growth in steel demand. However, infrastructure initiatives in 2019 and the following years look to revive growth in that sector. Risks relating to rising trade tensions between China and the USA remain significant, as well as currency volatility and political instability remain significant, and are likely to influence growth.
Furthermore, according to worldsteel, recovery in the remainder of emerging and developing economies has been slow to gain traction due to rising uncertainty in domestic and external environments. some of the main contributing factors include: structural reforms, financial market vulnerability and potential currency pressures from tensions in the global economy.
Gulf Co-operation Council (GCC) countries are experiencing growth in steel demand. This growth is attributed to reforms and a stronger oil market. However, the outlook for Iran is not as positive, due to sanctions reinstated by the USA.
Despite a rise in oil prices, growth in steel demand in Russia is expected to slow down. In addition, steel demand in Turkey it is expected to contract in 2018 resulting from the country’s currency crisis. However, government stabilization measures and an effort to return to the competitiveness of the manufacturing sector is likely to aid Turkey’s recovery in 2019.
Steel demand in Latin America is continuing its second year of recovery, backed by positive developments in the domestic and global economy. In Brazil, demand continues its stable recovery this year and potentially also in 2019. In Mexico, demand has suffered from uncertainties related to the renegotiation of NAFTA and the resultant signing of the USMCA. Subsequently, Mexico is likely to see a slow recovery during 2019.
Global steel demand in emerging economies is expected to grow 3.2% and 3.9% in 2018 and 2019 respectively (excluding China). In addition, steel demand in developing Asia (excluding China) is expected to increase by 5.9% and 6.8% in 2018 and 2019 respectively, according to worldsteel.
Construction sector growth in developed economies is expected to moderate after a strong recovery momentum in 2017-18 driven by a high base and rising interest rates. Conversely, construction activities in developing economies are expected to grow, notably in India, ASEAN and MENA. Brazil’s construction sector, in contrast, has yet to recover from its deep crisis.
Rising fuel prices and interest rates in developed economies are mitigating the growth in the automotive sector. However, automotive demand in developing countries continues to grow at a healthy pace. The EU and US machinery sector continues to be supported by a current strong business investment period.← Back To News