Steel demand growth rates to moderate in line with slowing global economic growth

16th April 2019 By: Nadine James - Creamer Media Writer

Global steel demand is expected to increase by 1.3% year-on-year to 1.74-billion tonnes this year, the World Steel Association’s (worldsteel’s) ‘April 2019 Short Range Outlook’ shows.

Demand is projected to grow by a further 1% in 2020 to 1.75-billion tonnes, the association added.

“In 2019 and 2020, global steel demand is expected to continue to grow, but growth rates will moderate in tandem with a slowing global economy. Uncertainty over the trade environment and volatility in the financial markets have not yet subsided and could pose downside risks to this forecast,” worldsteel economics committee chairperson Al Remeithi commented on Tuesday.

Chinese steel demand continues to decelerate as a result of the impact of its economic rebalancing, while unresolved trade tensions have led to slowing investment and a sluggish manufacturing performance.

Worldsteel said the “mild” government stimulus cushioned the economic slowdown in 2018, and that government is likely to heighten the level of stimulus this year, which should lift steel demand. 

However, it forecasts a minor contraction in 2020, once the stimulus effects have subsided.

Steel demand in developed economies grew by 1.8% in 2018 following a resilient 3.1% growth in 2017. The association expects demand to continue decelerating, reaching 0.3% in 2019 and 0.7% in 2020.

“In 2017/18, steel demand in the US benefitted from the strong growth of the economy, driven by government-led fiscal stimulus, leading to high confidence and a robust job market. In 2019, the US growth pattern is expected to slow with the waning effect of fiscal stimulus and a monetary policy normalisation. Therefore, both construction and manufacturing growth are expected to moderate,” worldsteel said.

The European Union (EU) economies, meanwhile, are also facing a deteriorating trade environment and as a result worldsteel expects slower growth in demand for steel in the major EU economies this year, with a slight improvement in 2020, depending on whether or not trade tensions ease.

Steel demand in emerging economies, excluding China, is expected to grow by 2.9% and 4.6% in 2019 and 2020, respectively.

India’s economy is expected to achieve faster growth starting in the second half of this year, following elections. India’s range of continuing infrastructure projects should support growth in steel demand above 7% in both 2019 and 2020.

Steel demand in developing Asia, excluding China, is expected to grow by 6.5% and 6.4% in 2019 and 2020, respectively, making it the fastest growing region in the global steel industry. 

Demand in the Middle East is expected to continue to contract in 2019, with a minor recovery expected in 2020, while North African economies are expected to show resilient growth in steel demand backed by strong investment activities.

A broad recovery in steel demand across Latin America is expected, despite internal and external uncertainty, noted worldsteel.

The automotive industry saw a sharp slowdown in growth in 2018 in many countries, in particular in the EU, Turkey and China. As a result, global automotive production growth decelerated to 2.2% in 2018 from 4.9% in 2017, worldsteel pointed out. 

It expects global automotive production to continue to decelerate to 1% growth this year, with stabilisation expected in 2020.

“The momentum of construction activities is also expected to moderate a bit in the developed economies, but thanks to the rebound in the developing economies, global growth will be maintained at the 3% level in 2019/20.”

Worldsteel cautions that in China, Turkey, South Korea and Argentina, construction activities should continue to contract this year and that the worsening investment and trade environments will result in the global machinery sector steadily decelerating into 2020.