The world iron and steel association has released its short-term steel demand forecast compiled in April 2018. The world iron and steel association predicts that global steel demand will reach 1.616.1 billion tons in 2018, up 1.8 percent from 2017. Global steel demand is expected to grow 0.7 percent to 1.6267 billion tons by 2019.
Commenting on the forecast, t.v.narendran, chairman of the world iron and steel association's market research committee, said: "the global economy is expected to continue to perform well over the next few years, thanks to the investment recovery and rising confidence levels in advanced economies. As a result, steel demand in developed and developing economies is expected to continue to grow, with relatively limited exposure to risk factors. However, the potential negative impact of increased trade tensions and the possibility of higher interest rates in the us and eu could weaken current growth momentum."
The momentum of global economic growth is driving demand for steel, but risks escalating global trade tensions
The upside and downside risks identified in this forecast are basically balanced. The boost in consumer confidence, strong investment levels and a rebound in commodity prices in 2018 are creating a virtuous circle for steel demand in both developed and developing economies. In 2019, China's economy will slow further and higher interest rates will lead to weaker investment growth, leading to a slight slowdown in steel demand.
Rising trade tensions, rising inflationary pressures and tighter monetary policy in the U.S. and the European Union, which could lead to financial market volatility and deep troubles in highly indebted emerging economies, pose major downside risks.
China's steel demand growth will slow again
In 2017, the Chinese government's mild stimulus measures slightly boosted growth in the construction market, but investment activity continued to slow and steel demand grew only slightly.
China's GDP growth is expected to slow slightly in 2018 and 2019, but investment activity growth is likely to slow further as the government continues to shift the engine of growth towards consumption. Steel demand is expected to remain flat in 2018. Steel demand is expected to fall 2.0 per cent by 2019 as construction activity slows further. The manufacturing and machinery sectors are expected to maintain positive growth on the back of a strong global economy, while demand for steel for cars and home appliances is expected to slow.
The outlook for steel demand in developed economies remains strong
Steel demand in developed countries is expected to grow 1.8 percent in 2018 and fall to 1.1 percent in 2019. The outlook for us steel demand remains strong, supported by strong economic fundamentals such as high consumer confidence, rising incomes and low interest rates that have boosted consumption and investment activity. Manufacturing is supported by a falling dollar and increased investment activity, while rising house prices and steady growth in the non-residential sector point to sound construction fundamentals. While recent tax changes are expected to boost steel demand by having a positive impact on investment activity, concerns about the economy overheating have increased. The announced infrastructure plans are unlikely to affect steel demand in the short term.
The eu economy enjoys a strong momentum of development and the scope of economic recovery is expanding. Investment activity is expected to remain the main driver of growth, driven by strong domestic and external demand, while low inflation, wage and real income growth will support private consumption. Steel demand will be supported by non-residential construction and strong manufacturing activity.
The automotive steel industry in the eu and us will slow down due to saturation effects and rising interest rates, while the mechanical steel industry is expected to benefit from increased investment activity. Monetary tightening in the us and eu is expected to slow steel demand growth in 2019. Japanese steel demand has benefited from improved investment confidence and government stimulus, but the scope of economic growth will continue to be constrained by structural factors such as an ageing population.
Despite the improvement in consumer confidence, steel demand growth in South Korea will be constrained by high consumer debt, weak construction and a weak shipbuilding industry.
The recovery in developing economies is strong, but it still needs momentum
Steel demand in emerging and developing economies excluding China is expected to grow 4.9 per cent in 2018 and 4.5 per cent in 2019.
The recovery in oil and commodity prices has improved the outlook for steel demand in the Middle East and north Africa. If geopolitical stability is achieved, the outlook for steel demand in the region could be further improved by reconstruction activities.
Modest recoveries in Russia and Brazil are expected to continue. Russia's economic recovery will be supported by an expansion of credit, easy monetary policy and improved consumer and business confidence. Brazil's economy began to emerge from a deep recession in early 2017, but uncertainty remains about the sustainability of the recovery. Moreover, construction activity has been slow to recover. Other Latin American economies are also starting to recover, and growth in the region could accelerate if reforms are implemented, but the upcoming elections will create uncertainty.
Steel demand in Turkey was strong in 2017, supported by supportive government measures. Steel demand in Turkey is expected to grow steadily in 2018/19, although it has slowed slightly as the impact of economic stimulus wears off.
India's economy is stabilizing from currency reforms and the implementation of goods and services taxes, and steel demand is expected to grow gradually, driven by public investment. Weak private investment has limited strong growth in steel demand.
Steel demand in the five asean countries declined in 2017, mainly due to slowing construction activity and destocking. However, steel demand is expected to regain momentum in 2018 and 2019, supported by infrastructure investment.