Apr 19, 2023
Worldsteel improves demand outlook; inflation, interest rates weigh
2023-05-11
Worldsteel has revised up its 2023 global steel demand forecast to 2.3% growth, compared to its 1% growth projection made in October when market sentiment was notably gloomier. Manufacturing is expected to lead the recovery, but high interest rates will continue to weigh on steel demand.
“Persistent inflation and high interest rates in most economies will limit the recovery of steel demand in 2023, despite positive factors like China’s reopening, Europe’s resilience in the face of the energy crisis, and the easing of supply chain bottlenecks,” Ternium chief executive and worldsteel economics committee chair Máximo Vedoya says in the association’s April short-range outlook seen by Kallanish.
Global finished steel demand is seen at 1.82 billion tonnes in 2023. In 2022, it fell 3.2% on-year to 1.78 billion tonnes, as steel-using sectors’ activity slumped markedly in the fourth quarter, exacerbated by the effect of stock adjustments.
In 2024, demand should grow 1.7% on-year to 1.85 billion tonnes, with Chinese growth seen slowing to zero, but investments in decarbonisation and dynamic emerging economies, primarily in Asia, driving positive global momentum.
After falling 3.5% in 2022, Chinese demand in 2023 is seen inching up 2%, with a slight pick-up in real estate sector activity envisaged in the later part of the year thanks to government support measures. Infrastructure may continue to benefit from the projects initiated at the end of 2022, while manufacturing is expected to show only a moderate recovery in 2023-2024, with slowing exports.
The EU economy meanwhile turned out to be more resilient to the energy crisis caused by the Ukraine war than initially thought. In 2023, the EU steel industry will nevertheless continue to feel the impact of war, other supply chain-related issues, and continued monetary tightening. Regional demand is expected to fall 0.4% this year, after a 7.9% slump last year.
In the US, the strong post-pandemic economic rebound has run its course with the Fed’s steep interest rate hikes to tackle inflation. Growth in 2023-2024 is expected to be subdued by recessionary pressure, worldsteel observes.
Rising interest rates as well as land and material costs are putting negative pressure on US construction, particularly for the residential sector. Infrastructure is however aided by recent legislation, while energy sector demand should be boosted by expanding energy production, worldsteel concludes. After a fall of 2.6% in 2022, US steel demand is expected to grow by 1.3% in 2023.
Adam Smith Poland
Source: Eurometal
