The World Steel Association released its October 2017 Short Range Outlook (SRO) — its assessment of the global steel market — on Monday.
For the most part, the latest SRO relates good news for the global market.
“In 2018, we expect global growth to moderate, mainly due to slower growth in China, while in the rest of the world, steel demand will continue to maintain its current momentum,” said T.V. Narendran, chairman of the World Steel Association’s Economics Committee, in the report.
According to the SRO, global steel demand will reach 1,622.1 million tons (Mt) in 2017 and 1,648.1 Mt in 2018. Excluding China, demand is expected to grow 2.6% this year and 3.0% next year.
Dr. Nae Hee Han, the World Steel Association’s director of economic studies and statistics, wrote on Monday that while the numbers in the SRO are mostly positive, there are a few caveats.
First, she wrote, the growth of emerging economies did not meet previous SRO estimates set in April.
“A number of emerging economies did not perform as well as expected in 2017 due to short term disruptions caused by ongoing reform initiatives or political factors,” Nee Han wrote.
On the other hand, developed economies — the European Union, Japan and the United States — performed better than expected. But Nee Han explains that emerging economies will experience greater growth in 2018, partially as a result of reform initiatives, including the Goods and Services Tax (GST) system in India, energy and tax reform in Mexico, exchange rate reforms in Argentina and Egypt, and fiscal reforms in GCC countries.
As for the sustainability of the current growth trend, Nee Han writes that it might not be a long-term thing.
“Secondly, the worldsteel Economics Committee at its most recent meeting in Amsterdam a month ago was in agreement that the current momentum is driven mostly by cyclical rather than structural factors,” she wrote. “We do not find the improved growth figures to be sustainable in the long term: China’s continued deceleration, megatrends such as aging populations, a shift to a circular economy and increasingly stringent environmental regulations continue to weigh against steel demand.”
Another optimism-mitigating factor listed by Nee Han is the statistical anomaly that is China’s 2017.
“In 2017 China closed most of its illegal induction furnace capacity, which up until now had not been included in official statistics,” Nee Han explains. “With this closure, the demand satisfied from these producers is now being met by the official sector. This shift of demand explains the forecasted jump in the Chinese growth rate in 2017 – the technical effect of the underestimated 2016 base.”
Around the World
Demand for finished steel is variable around the world, but, for the most part, is forecasted to increase this year and next in most regions.
In the North American Free Trade Agreement (NAFTA) bloc, there is an expected 4.9% year-over-year increase in demand (or 138.7 Mt) and 1.2% increase in 2018 (140.4 Mt).
Meanwhile, the report forecasts a 2.5% jump this year in the EU (162.1 Mt) and 1.4% increase next year (164.3 Mt).
In the Commonwealth of Independent States (CIS) bloc, which includes Russia, there is an expected 3.6% increase in 2017 (51.1 Mt) and 3.8% next year (53.0 Mt).
In the Asia and Oceania region, there is an expected 9.3% growth in 2017 (1,098.8 Mt) and 1.1% in 2018 (1,111.1 Mt).
In Africa, there is an expected 1.6% drop in demand this year (37.0 Mt) and a 3.3% jump next year (38.2 Mt).
In Central and South America, the report forecasts a 2.5% jump this year (40.4 Mt) and 4.7% jump next year (42.3 Mt).
Construction and Automotive Sectors
What about industry sectors, like construction and automotive?
According to the SRO, construction growth in developed countries, which has been relatively slow since the 2008 economic recession, is “now showing more positive signs both in the residential and commercial sectors due to rising incomes and improving investment sentiments.”
As for the automotive sector, the report states that despite a strong 2017 overall, growth could moderate in the U.S. and China, a trend that is “likely to extend to other countries in 2018.”