Global steel sector crisis fading, demand set to grow
12 October 2016
The global steel sector crisis that prompted high profile plant closures and job losses last year is easing, with demand set to grow this year and next, the World Steel Association (Worldsteel) told its conference in Dubai on Tuesday.
In 2017, it expects global steel demand to grow 0.5 percent year on year to 1.510 billion tonnes while this year, Worldsteel sees demand up 0.2 percent to 1.501 billion tonnes.
In April it had forecast demand would fall 0.8 percent this year.
"Global steel demand is through the bottom of this cycle," said Worldsteel, citing a better than expected outlook for China and Russia and strong growth in emerging Asian economies excluding China.
Global steel demand contracted 0.3 percent last year to 1.499 billion tonnes, while prices fell to their lowest since 2004, according to steel consultancy MEPS. They have since recovered by about 30 percent.
"The forecast ... does suggest steel prices will be better off in 2017," said Alistair Ramsay, research director at Metal Bulletin Research.
But "our big point to watch is how much of that additional demand will be secured by Chinese suppliers. If China takes all of it, prices will remain under pressure," Ramsay said.
China produces and consumes about half the world's steel, and has an estimated over-capacity of 300 million tonnes.
Faced with global criticism over cheap Chinese steel exports, Beijing pledged to cut steel capacity by 45 million tonnes this year, and had achieved 47 percent of this target by the end of July.
Despite the cuts, China's crude steel output rose for a sixth straight month in August and its exports are on track to beat last year's record 112 million tonnes.
Worldsteel had forecast in April that Chinese steel demand would fall 4 percent this year, but the association said on Tuesday it now expects demand in China to fall only 1 percent to 665.6 million tonnes.
Next year, it sees Chinese demand falling 2 percent to 652.3 million tonnes.
Worldsteel said the global steel industry, seen as a gauge of economic health and worth about $900 billion a year, remains vulnerable to geopolitical and economic uncertainties.
"Downside risks come from the high corporate debt and real estate market situation in China ... (and) Brexit uncertainties," said T.V. Narendran, chairman of the Worldsteel economics committee.
Worldsteel, which represents more than 150 steel producers covering 85 percent of world production, forecast demand in Russia, the world's sixth largest steel consumer, would grow 0.9 percent next year after falling 3.6 percent this year.
Source : reuters.com