Industry body the World Steel Association (worldsteel) has released its Short Range Outlook (SRO) for 2022 and 2023, forecasting that steel demand will grow by 0.4% this year to reach 1.84-million tonnes, after having increased by 2.7% in 2021.

In 2023, steel demand will see further growth of 2.2% to reach 1.88-million tonnes.

The current forecast, however, has been made against the backdrop of the conflict in Ukraine and is subject to high uncertainty, while inflation can also cloud the outlook for steel demand.

In 2021, recovery from the pandemic shock turned out to be stronger than expected in many regions, despite continuing supply chain issues and Covid-19  waves.

However, a sharper than anticipated deceleration in China led to lower global steel demand growth in 2021.

“For 2022 and 2023, the outlook is highly uncertain. The expectation of a continued and stable recovery from the pandemic has been shaken by the war in Ukraine and rising inflation,” worldsteel Economics Committee chairperson Máximo Vedoya reiterates.

The magnitude of the impact of this conflict will vary across regions, depending on their direct trade and financial exposure to Russia and Ukraine.

There is an immediate devastating effect on Ukraine, consequences for Russia, and a major impact on the European Union (EU) owing to its reliance on Russian energy and its geographic proximity to the conflict area.

The impact will also be felt globally through higher energy and commodity prices – especially raw materials for steel production – and continued supply chain disruptions, which were troubling the global steel industry even before the war.

Further, financial market volatility and heightened uncertainty will undermine investment.

Vedoya states global spillovers from the war in Ukraine, along with low growth in China, point to reduced growth expectations for global steel demand in 2022.

There are further downside risks from the continued surge in virus infections in some parts of the world, especially China, and rising interest rates. The expected tightening of US monetary policies will hurt financially vulnerable emerging economies.

worldsteel’s forecast assumes that the confrontation in Ukraine will come to an end in the course of 2022 but that the sanctions on Russia will largely remain.

Additionally, the geopolitical situation surrounding Ukraine poses significant long-term implications for the global steel industry.

Among them are a possible readjustment in global trade flows, a shift in energy trade and its impact on energy transitions, and continued reconfiguration of global supply chains.

CHINA

The association reports that Chinese steel demand saw a major slowdown in 2021 owing to the tough government measures on real estate developers.

Steel demand will remain flat this year, as the government tries to boost infrastructure investment and stabilise the real estate market.

The stimuli introduced this year are likely to support small positive growth in steel demand in 2023.

There is upside potential from more substantial stimulus measures, which is likely if the economy faces more challenges from the deteriorating external environment.

OTHER REGIONS

Despite the sporadic Covid-19 infection waves and the manufacturing sector’s supply chain constraints, steel demand recovered strongly in 2021, especially in the EU and the US.

However, the outlook for 2022 has weakened as a result of inflationary pressure, which is further reinforced by the events surrounding Ukraine.

worldsteel says the impact of the war will be particularly pronounced in the EU owing to its high dependence on Russian energy, as well as the inflow of refugees in countries neighbouring Ukraine.

Steel demand in the developed world is forecast to increase by 1.1% and 2.4% in 2022 and 2023 respectively, after having recovered by 16.5% in 2021.

In developing economies, recovery from the pandemic faced more challenges with the continued impact of the pandemic and surging inflation, which prompted a monetary tightening cycle in many emerging economies.

After falling by 7.7% in 2020, steel demand in the developing world excluding China grew by 10.7% in 2021, slightly less than worldsteel’s earlier forecast.

In 2022 and 2023, emerging economies, excluding China, will continue to face challenges from the worsening external environment, the Russia/Ukraine war, and US monetary tightening, leading to low growth of 0.5% in 2022 and 4.5% in 2023.

SECTORS

worldsteel reports that global construction activity continued to recover from lockdowns to record growth of 3.4% despite a contraction in China, in 2021.

The recovery was driven by an infrastructure push as part of recovery programmes in many countries, and these and investments related to the energy transition will likely drive the construction sector’s growth for years to come.

However, the construction sector faces some headwinds from rising costs and interest rates.

The association says the recovery of the global automotive industry in 2021 was underwhelming, as the supply chain bottlenecks arrested the recovery momentum in the second half of the year.

The war in Ukraine is likely to delay any return to normal of the supply chain issues, especially in Europe. Despite the slump in global automotive production, the electric vehicle (EV) segment grew exponentially during the pandemic.

Global sales of EVs in 2021 reached 6.6-million units, almost doubling from 2020.

The share of EVs in total car sales increased from 2.49% in 2019 to 8.57% in 2021.