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Real Economy News in Real Time
R/€ = 16.89 Change: -0.43
R/$ = 14.16 Change: -0.27
Au 1288.59 $/oz Change: 0.19
Pt 942.50 $/oz Change: 0.00
 
 
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Steel demand to grow in 2017/18 as recession risk decreases

21st April 2017 BY: Megan van Wyngaardt
Creamer Media Contributing Editor Online

Global steel demand will increase by 1.3% to 1.53-billion tonnes this year, and by a further 0.9% to 1.55-billion tonnes in 2018, following growth of 1% in 2016, the World Steel Association (worldsteel) said in its latest short-range outlook (SRO), published on Friday.

Worldsteel economics committee chairperson TV Narendran noted that steel demand recovery had been stronger than expected in 2016, with the upside mostly coming from China.

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“We believe in 2017 and 2018, we will see a cyclical upturn in steel demand with a continuing recovery in the developed economies and an accelerating growth momentum in the emerging and developing economies.

Steel demand in developed economies is expected to increase by 0.7 % in 2017 and 1.2 % in 2018. The developing world, excluding China, accounts for 30% of global demand and is expected to record increases in steel demand of 4% and 4.9% in 2017 and 2018 respectively.

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“We expect Russia and Brazil will finally move out of their recessions. However, China, which accounts for 45% of global steel demand, is expected to return to a more subdued growth rate after its recent short uplift. For this reason, overall growth momentum will remain modest,” Narendran pointed out.

“With the risk of global recession receding and economic performance improving across most regions, a number of geopolitical changes still create some concern. US policy uncertainties, Brexit, the rising populist wave in current European elections and the potential retreat from globalisation and free trade under the pressure of rising nationalism adds a new dimension of uncertainty in investment environments,” worldsteel notes in the SRO.

The automotive sector has been the top performer among key steel using sectors, owing to the consumption-driven recovery in the developed economies, low oil prices and the government stimuli programmes supporting automobile purchases in several countries. However, this may now be approaching a peak.

The construction, building and infrastructure sector, which accounts for 50% of global steel use, has been showing a divided picture between the developing and developed economies.

This sector has been a major driver of steel demand in developing countries on the back of urbanisation, but activity in the developed economies since the 2008 financial crisis has been more subdued. This appears to be about to change with a recovery in construction activities apparent in the European Union through the improving economic conditions and the potential renewal initiatives for infrastructure in the US.

The machinery sector could also benefit from rising investment activities if the uncertainties surrounding the global economy can be contained. On the other hand, depression in shipbuilding activities is expected to continue for some time given the global glut in shipping capacity. 

EDITED BY: Chanel de Bruyn Creamer Media Senior Deputy Editor Online
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