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Global steel demand will decrease by 1.7% to 1.5Mt in 2015 following growth of 0.7% the previous year, and is forecast to show growth of 0.7% in 2016, reaching 1.5Mt, according to the World Steel Association (worldsteel) short range outlook.
Hans Jürgen Kerkhoff, chair of the worldsteel economics committee, said at the 49th World Steel Association conference in Chicago that the steel industry had reached the end of a major growth cycle based on rapid economic development in China. He said that China’s economic slowdown meant that the industry faces low investment, financial market turbulence and geopolitical conflicts in many developing regions of the world.
“The steel industry is now experiencing low growth, which will last for the time it takes for other developing regions of sufficient size and strength to produce another major growth cycle,” said Kerkhoff.
He added that the current headwinds will calm down in 2016 based on the belief that the Chinese economy will stabilise. “Of particular concern is the vulnerability of the emerging economies to external shocks,” he said, adding that India was expected to show resilience to the global slowdown.
“On a positive note, the recovery of steel demand in the developed economies, even though the momentum has weakened a little, remains on track,” said Kerkhoff.
The deceleration of the Chinese economy following rebalancing measures on the investment and real estate sectors, has turned out to be more severe than expected.
Chinese steel demand is expected to decrease by 3.5% this year and by 2.0% in 2016 following peak demand in 2013.
According to worldsteel, ‘there is an increasing risk associated with this economic slowdown and the consequent financial market volatility, which has become a global concern.’
The performance of key emerging and developing economies started to deteriorate in 2012 due to internal structural issues, lower commodity prices associated with China’s slowdown and escalating political instability in some cases.
Russia and Brazil experienced severe contractions in steel demand and there were geopolitical tensions in the Middle East, Africa and Ukraine, which are continuing to have a negative effect.
Steel demand in India and Mexico, however, and other countries in the ASEAN and MENA regions, is expected to maintain growth momentum despite an adverse external environment due to positive domestic demand and progress in reform.
With the exception of China, steel demand in emerging and developing economies will grow by 1.7% this year and by 3.8% in 2016, despite major slowdowns in some countries.
Strong momentum experienced in developed economies last year ‘weakened considerably’ in 2015 and while US economic fundamentals remain solid, US steel demand is expected to show negative growth this year due to currency appreciation and a slowing energy sector.
Lower oil prices have led to a broadening of the recovery momentum in the European Union (EU) and this has been helped by low interest rates and a weak Euro.
Japan and Korea are expected to show negative growth due to adverse structural forces weighing on their economy.
According to worldsteel, developed economies’ steel demand will contract by 2.1%, but positive growth of 1.8% is expected next year. Excluding China, world steel demand will grow by 0.2% in 2015 and by 2.9% in 2016.
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