Short Range Outlook: Global steel demand to increase marginally in 2016 and 2017

SPOKANE (Scrap Monster): The World Steel Association (worldsteel) has released its Short Range Outlook (SRO) for 2016-2017. The report forecasts 0.2% growth in global steel demand in 2016. The demand, which will touch 1,501.3 million metric tonnes in 2016, will increase further by 0.5% to total 1, 509.6 million metric tonnes. It must be noted that global steel demand had contracted by 3% in 2015.

According to T.V. Narendran, Chairman of the worldsteel Economics Committee, the steel industry environment continues to remain challenging. The geopolitical unrests in various parts of the world have added to sector uncertainties. The Brexit decision has raised doubts on the much awaited recovery of the sector in the EU region. The report predicts EU region’s steel demand growth at 0.8% and 1.4% in 2016 and 2017 respectively. The global investment continues to remain weak. The weakness in real estate sector is likely to cap steel sector growth in China. The growth momentum in developed economies may remain weak. On the other hand, the steel demand in emerging and developing economies excluding China is expected to record growth, thereby boosting global steel demand marginally during 2016 and 2017. The steel demand in the world excluding China is likely to grow by 1.1% and 2.6% in 2016 and 2017 respectively.

The Chinese GDP growth is projected to hit the lowest level since 1990. The government stimulus measures aimed at boosting infrastructure, real estate and automotive sectors will help to arrest steel demand decline in the country during 2016. However, recovery in real estate market looks limited on account of high inventory levels. Moreover, apartments are increasingly unaffordable to most residents. Consequently, construction sector will continue to drag down steel demand. The SRO predicts limited room for recovery in steel demand by manufacturing sector. The Chinese finished steel demand is expected to decline from 672.3 million metric tonnes in 2015 to 665.6 million metric tonnes in 2016, which may drop further to 652.3 million metric tonnes in 2017.

The steel demand will witness moderate recovery in Brazil during 2017. The minor rebound in oil prices may help to stabilize the steel demand decline in Russia, Mexico, South America and GCC region. The report maintains weak outlook for the MENA region, mainly on account of unstable oil prices and rising geopolitical risks. India is reported to see solid steel demand growth in 2016 and 2017, backed by various reform projects and increased infrastructure spending by the government. However, the sustainability of this development is not assured. In short, the steel demand in emerging and developing economies excluding China is expected to increase by 2% in 2016 and by 4% in 2017.

The Chinese steel demand is likely to decline by 1% in 2016 and by 2% in 2017. The steel demand in the US is likely to fall by 1.2% in 2016, but is likely to witness positive growth of 3% in 2017. Indian steel demand is forecast to grow by 5.4% and 5.7% in 2016 and 2017 respectively. The Japanese steel demand is expected to decline marginally by 0.4% in 2016, whereas it is expected to recover by 1.4% in 2017. The steel demand by South Korea may witness 1% growth in 2016, but may fall by 3.1% in 2017.