How does Global Steel Demand Look Like in 2018 and 2019?
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WSA (World Steel Association) has released its forecasts for global steel demand in the year 2018 and the same is expected to reach 1,616 MnT, a surge of 1.8% against the global steel demand of the previous year 2017. Further, in 2019, it is being forecasted by WSA that the global steel demand will grow by 0.7% to reach 1,626.7 MnT.
Mr. T.V. Narendran, Chairman of Worldsteel Economics Committee has commented that "In the next couple of years the global economic situation is expected to remain favorable with high confidence and recovery of investment levels in advanced economies. Benefitting from this, steel demand in both developed and developing economies is expected to show sustained growth momentum with relatively limited risks. However, possible adverse impact from rising trade tensions and the probable U.S. and EU (European Union) interest rate movements could erode this current momentum."
In 2018, high confidence, strong investment levels and a recovery in commodity prices are going to generate a positive cycle for steel demand globally both in developed and developing economies. There will be a slight deceleration in steel demand in 2019 due to decline in China and weakened investment momentum amid higher interest rates in U.S. and EU.
On the negative side, possible escalation of trade tensions, rising inflationary pressure and tightening of U.S. and EU monetary policies may cause financial market volatilities and trouble highly indebted emerging economies.
Steel demand in China may experience a fall
In 2017, the government stimulus measures provided some boost to construction activity, but investment continued to decelerate and steel demand showed only a moderate increase despite the stimulus.
In 2018 and 2019 China's GDP (Gross domestic product) growth is expected to decelerate slightly. This combined with the Chinese government focus on having more consumption-driven demand rather than investment driven, there are chances that the steel demand in China may plunge. AS per the WSA, China's steel demand in 2018 is expected to stay flat while in 2019, it is expected to contract by 2% amid slow construction activity. In manufacturing, the machinery sector is expected to maintain positive growth on the back of a strong global economy while automotive and home appliances are expected to decelerate.
Positive steel demand outlook for developed economies
U.S.: The outlook for steel demand in the U.S. remains robust on the back of the strong economic fundamentals (lower interest, high-income levels, and high investments). Central and South America are likely to realize 6.2% growth this year to 43.5 MnT and 4.9% growth to 45.6 MnT in 2019.
With the new import tariffs on steel announced by the Trump government, the domestic steel demand of U.S. is likely to get a strong boost.
The NAFTA region should realize a 3% increase in 2018 and another 1.6% rise in 2019, translating into the demand of 145 MnT and 147.3 MnT respectively.
EU: Europe will experience small year-on-year increases in growth, with the European Union 28 countries' collective demand to rise 2% this year to 165.6 MnT and 0.8% next year to 166.9 MnT.
Prompted by robust domestic demand, investments are expected to remain a major growth driver for steel. This coupled with low inflation and real income growth will support private consumption of steel in EU. Steel demand will also be supported by a pickup in non-residential construction and strong manufacturing activities.
Japan: Steel demand in Japan has been benefitting from improving investment sentiments and government stimulus packages, but the scope of growth will become limited by structural factors such as an aging population.
South Korea: Despite improved consumer sentiment, steel demand growth in South Korea will be restricted by high consumer debts, slow construction activities and a slack in the shipbuilding sector.
The likelihood of recovery in steel demand of developing economies
Steel demand in emerging and developing economies (excluding China) is expected to increase by 4.9% and 4.5% in 2018 and 2019 respectively.
MENA (Middle East & North Africa): Recovery in oil and commodity prices has improved the outlook for MENA countries. If geopolitical stability continues to remain in these countries, steel demand outlook for the region could further improve as a result of reconstruction activities.
CIS region: CIS region is expected to see a continued positive growth of 2.3% and 1.8% in 2018 and 2019, after a contraction just a few years ago. Its demand will total 54 MnT this year and 55 million MnT in 2019. Recovery in Russia will be supported by credit expansion, easing monetary policy and improving consumer and business confidence.
India: According to WSA, India, which is expected to realize the year-on-year growth of around 5.5% in 2018 and 6% in 2019, is likely to overtake the U.S. for the No.2 spot in terms of global steel demand leaders in a year or so. The Indian economy is stabilizing from the impact of currency reform and GST (Goods and service tax) implementation and steel demand is expected to accelerate gradually, mainly driven by public investment.
5-ASEAN countries: Steel demand in ASEAN-5 countries (Indonesia, Thailand, Malaysia, Philippines, and Vietnam) dipped in 2017 due to slow construction activity. However in 2018 and 2018, steel demand is expected to regain the growth momentum backed by infrastructure investment.