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Worldsteel lowers global demand forecast for 2014, 2015

6th October 2014

By: Leandi Kolver

Creamer Media Deputy Editor

  

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The World Steel Association (worldsteel) on Monday lowered its global steel demand growth forecast to 2% for 2014 and 2015, as the positive momentum seen during the second half of 2013 abated in 2014, with a weaker-than-expected performance in emerging and developing economies, worldsteel economics committee chairperson Hans Jürgen Kerkhoff said on Monday.

In April, worldsteel forecast that global apparent steel use would increase by 3.1% in 2014 and 3.3% in 2015, following growth of 3.8% in 2013.

“The slowdown in China’s steel demand, reflecting the structural transformation of the economy, has contributed significantly to our lower global growth projection,” Kerkhoff said, noting that global steel demand was now expected to reach 1.56-billion tons in 2014 and 1.59-billion tons in 2015.

He added that there had also been a major slowdown in South America and the Commonwealth of Independent States (CIS) countries owing to falling commodity prices, structural constraints and geopolitical tensions. In contrast, developed economies fared well this year.

“Recoveries in the European Union (EU), the US and Japan are expected to be stronger than previously thought, but not strong enough to offset the slowdown in the emerging economies,” he added.

In 2015, worldsteel expected steel demand growth in developed economies to moderate, while growth in the emerging and developing economies was expected to pick up. In China, rebalancing would continue to act as a drag on steel demand.

The association expected overall apparent steel use in developed economies to register more than 4% growth in 2014, after which it would slow to 1.7% in 2015. On the other hand, emerging and developing economies, excluding China, were expected to see demand grow by 1.7% in 2014, followed by a rebound of 4.7% in 2015.

REGIONS
Further, apparent steel use in China was expected to slow to 1%, or 748.3-million tons, in 2014 as a result of the rapid cooling of the real estate sector as the government’s efforts to rebalance the economy curtails investment and weakens business sentiment.

This weak growth momentum was expected to continue into 2015, with China’s apparent steel use expected to only grow by 0.8%.

“However, possible use of targeted stimuli and easing of restrictions on the real estate market in response to slower gross domestic product growth could increase the forecast,” worldsteel noted.

Individually, India’s demand was expected to grow by 3.4% in 2014 and 6% in 2015, while, following a 2.1% increase in steel use in 2013, Japan’s demand was forecast to increase by a further 2.3% in 2014 aided by economic policies.

However, in 2015 Japan’s demand was expected to decline by 1.5%.

Further, in the US, after a decline of 0.4% in 2013, demand was expected to increase by 6.7% in 2014 and 1.9% in 2015, while in Central and South America demand would decline by 2.4% in 2014 and increase by 3.4% in 2015.

Further, worldsteel said the recovery in the EU had gained further momentum in 2014 and that the steel demand outlook had improved considerably to grow by 4% to 145.9-million tons after increasing by 0.8% in 2013. Apparent steel use in 2015 was projected to grow by 2.9%.

Meanwhile, the outlook for apparent steel use in the CIS had been revised down significantly in 2014 to a decline of 3.8% owing to the crisis in Ukraine. In 2015, however, assuming a stabilisation of the political situation, CIS steel demand was expected to grow by 1.9%.

In the Middle East and North Africa region, steel demand growth in 2014 had been revised downwards owing to the political instability in some countries in the region, but was still expected to grow by 3.3%, aided by strength in the oil producing countries, and again by 6.6% in 2015.

Kerkhoff noted that the worldsteel outlook was informed by risks on various fronts.

“The US interest rates increase expected in 2015 is likely to impact global capital flows, creating instability in the vulnerable emerging markets. At the same time, the outlook in emerging markets is constrained both by the need for structural reforms and geopolitical tensions and as a result energy prices, globally, that have emerged as a new risk factor.

“In China, the rebalancing and transition towards a consumption-driven economy is not without challenges and uncertainties. Lastly, the recovery in the euro area is still constrained by household and government deleveraging,” he said.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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