Steel Demand Growing, Thanks to China

World Steel Assn.’s October 2019 Short Range Outlook sees the global market expanding this year to 1.775 billion metric tons

A new forecast for global steel demand finds a slightly more positive outlook than a comparable report issued last spring, mainly due to unexpected strength for Chinese steel output. The World Steel Assn.’s semi-annual Short Range Outlook report calls for global steel demand to grow by 3.9% this year, to 1.775 billion metric tons, and by a further 1.7% in 2020, reaching 1.805 billion metric tons.

“While the global economic outlook is highly unpredictable, we expect to see further growth in steel demand in 2020 of 1.7%, with emerging and developing economies excluding China contributing more,” Saeed Ghumran Al Remeithi, chairman of the World Steel Economics Committee said. “This forecast faces significant downside risks if the current level of uncertainty prevails.”

The Brussels-based trade group represents raw-steel producers in 64 nations, and about 99% of the raw-steel output worldwide. In April, World Steel forecast that 2019 global steel demand would increase just 1.3% year-over-year to 1.735 billion metric tons. IT then called for a 2020 increase of just 1.0%, to 1.752 billion metric tons.

The current year has seen flat steel output in most nations, except the U.S. (up 4.1% YTD) and China (up 9.1% YTD.) Both results are the more notable because of the "trade war” underway between the two countries through most of 2019.

Chinese steel output is consequential because China represents about half of the installed global steel capacity. According to World Steel, steel demand in China will grow by 7.8% this year to 900.1 million metric tons — whereas the rest of the world will see just 0.2% growth to 874.9 million metric tons.

In 2020, Chinese steel demand is seen growing by 1.0%, while the rest of the world will have demand growth of 2.5%.

World Steel commented that global steel demand remains "resilient" notwithstanding the generally weak global economy. Saeed Ghumran Al Remeithi, chairman of the World Steel Economics Committee said: “The current SRO suggests that global steel demand will continue to grow in 2019, more than we expected in these challenging times, mainly due to China. In the rest of the world, steel demand slowed in 2019 as uncertainty, trade tensions, and geopolitical issues weighed on investment and trade.”

Among the major steel-consuming industrial sectors, World Steel forecasts that construction activity is expected to grow only 1.5% in 2019, after a 2.8% rise in 2018, and then just 1.2% in 2020.

Construction activity is given the primary credit for steel demand growth in China. While Chinese steel demand is expected to grow by 7.8% in 2019, this mainly driven by rising real-estate investment. In the first seven months of 2019 China’s real-estate market reported its strongest performance in the past five years, due to the relaxation of control policies and newly implemented construction standards that increase steel intensity in new buildings by about 5.0%.

But, global automotive production slowed in 2018 and is expected to contract further in 2019, especially in Germany, Turkey, China, and South Korea. The automotive market has been hit by more than global economic factors including, market saturation, reduction in purchasing and promotion incentives and most importantly customer hesitancy during the transition of the auto industry from combustion engine-powered via hybrid to fully electric vehicles.

The U.S. auto market is expected to show no growth in 2019 and just a slight improvement in 2020, but steel use is expected to benefit from the shift toward light truck models.

“Manufacturing, particularly the auto industry, has performed poorly contracting in many countries, however in construction, despite some slowing, a positive momentum has been maintained,” Al Remeithi continued.

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