Oct 19, 2022
Global steel demand to drop 2.3pc this year
2022-11-03
Global steel demand will fall by 2.3pc this year to 1.79 bn t, industry association Worldsteel said today, revising down its April guidance of 0.4pc demand growth.
High interest rates and persistently high inflation led to the revision, along with monetary tightening and market softening in China.
"The expectation of a continued and stable recovery from the pandemic has been shaken by the war in Ukraine and rising inflation," chairman of the Worldsteel economics committee and steelmaker Ternium's chief executive, Maximo Vedoya, said.
Interest rate hikes by the US Federal Reserve and the strength of the dollar have increased the risk of a recession in the US and will cause capital outflows from emerging markets, as well as dampening investment and consumer spending in general, Worldsteel said.
Risk is skewed to the downside because of monetary policy, inflation, the impact of Covid-19 on the Chinese economy, and the potential gas supply crisis in Europe.
Chinese demand is likely to fall by 4pc this year, equating to 38mn t, after contracting by 6.6pc in the second quarter, because of repeated lockdowns. Investment in Chinese real estate has slowed to the lowest level in 30 years and all major real estate market indicators are negative, Worldsteel said. The amount of floor space under construction in China has contracted for the first time in modern history.
Infrastructure spending is recovering but it will be hard for steel demand to rebound significantly while spending from the real estate sector is weak. Worldsteel expects Chinese demand to remain flat if lockdown measures are largely removed in the latter part of this year, and if small stimulus measures are introduced.
Global demand will increase by 1pc next year, supported by growth in infrastructure spending, particularly within the transportation and energy sub-sectors, Worldsteel director general Edwin Basson told Argus.
Advanced economies
Worldsteel expects demand from developed economies to decrease by 1.7pc in 2022 and marginally rise by 0.2pc in 2023. The association in April projected a 1.1pc increase for 2022 and 2.4pc increase for 2023.
Sustained inflation and supply-side bottlenecks were exacerbated by the war in Ukraine, with the EU bearing the brunt of the economic consequences.
EU demand is forecast to fall by 3.5pc this year and by another 1.3pc next year. German demand is set to decline by 4.9pc this year, while Italian demand is expected to fall by 3.6pc. Projections have been revised from previous expectations of strong demand recovery — particularly for next year. The downward revisions are mainly because of high inflation rates and the energy crisis, which have forced shutdowns in steel production.
The forecast for US demand was also revised down, but to a lesser extent, as the US automotive sector is expected to maintain positive momentum owing to pent-up demand and improved supply chain logistics. A new US infrastructure law could boost investment and support steel demand, with demand forecasted to rise by 2.1pc in 2022, from a projected rise of 2.8pc in April.
Worldsteel slashed the outlook for Japanese and South Korean demand, with demand now expected to grow by 0.2pc and -2.5pc respectively, from an earlier forecast of 1.2pc. Contracting construction activity underpins these revisions.
Developing economies
Worldsteel has revised down its forecasts for 2023 growth in emerging economies to 3.5pc, down by 1pc from the 4.5pc growth forecast in April.
India and Asean steel demand is expected to show strong growth in 2022 and into 2023, as urban consumption and government spending on infrastructure supports demand from the automotive and capital goods sectors. Worldsteel predicts a growth rate in India of 6.1pc in 2022 and 6.7pc in 2023, and of 5.8pc in Asean economies in 2022 and 6pc in 2023.
In Russia, steel demand was expected to contract by 20pc in 2022, when forecasts were made at the beginning of the Russia-Ukraine war. High oil prices and government support measures for construction have led to the forecast for Russian demand being revised to 6pc demand contraction. But Worldsteel now forecasts a 10pc contraction in Russian steel demand in 2023, as sanctions will increase in severity.
South and Central America, as well as Turkey, have seen major decelerations in steel demand, particularly from the construction sector. Construction has been affected by high inflation and rising interest rates, impacting the cost of material and reducing government spending for infrastructure projects. But there are positive signs for demand growth forecasts for 2023, with Turkish steel demand anticipated to increase by 4pc compared with this year. Brazilian demand is expected to grow by 5pc in 2023.
By Lora Stoyanova, Lizzy Lancaster and Colin Richardson
Source: Argus
