Worldsteel Released Short Range Outlook October 2019
The World Steel Association released its Short Range Outlook for 2019 and 2020. In 2019 worldsteel forecasts that steel demand in China will grow by 7.8% to reach 900.1 million tonne and the rest of the world is expected to record 0.2% growth to 874.9 million tonne. In 2020, Chinese steel demand is expected to grow by 1.0%, whereas steel demand in the rest of the world will grow by 2.5%, driven by 4.1% growth in the emerging and developing economies excluding China. Global steel demand will grow by 3.9% to 1,775.0 million tonne in 2019 and will grow by another 1.7% in 2020, reaching 1,805.7 million tonne. Commenting on the outlook, Mr Al Remeithi, Chairman of the worldsteel Economics Committee said that “The current SRO suggests that global steel demand will continue to grow in 2019, more than we expected in these challenging times, mainly due to China. In the rest of the world, steel demand slowed in 2019 as uncertainty, trade tensions and geopolitical issues weighed on investment and trade. Manufacturing, particularly the auto industry, has performed poorly contracting in many countries, however in construction, despite some slowing, a positive momentum has been maintained. While the global economic outlook is highly unpredictable, we expect to see further growth in steel demand in 2020 of 1.7%, with emerging and developing economies excluding China contributing more. This forecast faces significant downside risks if the current level of uncertainty prevails.”
Chinese steel demand showing high growth in 2019 owing to a strong real estate sector, but forecasted to slow down in 2020 - While the Chinese economy continued to decelerate and is expected to record its lowest GDP growth since 1992, steel demand is still expected to grow by 7.8% in 2019, largely driven by real estate investment. In the first seven months of 2019 China’s real estate market reported the strongest performance over the same period for the last five years. Firstly, due to the relaxation of control policies in tier 2 to tier 4 cities and secondly the newly implemented construction standard, put into effect in April 2019, estimated to have increased steel intensity in new buildings by about 5.0%. Conversely, China’s manufacturing sector is experiencing a significant slump due to the slowing economy and the effect of trade tensions. The Chinese automotive industry has contracted for 13 months in a row. We expect the Chinese economy to worsen in the later part of 2019 and in 2020 with the unresolved trade tensions adding further pressure. It is unlikely that the Chinese government will reintroduce substantial stimulus measures as it continues to hold a balance between containing the slowdown and pushing forward its economic restructuring agenda. Selective mild stimuli focused on infrastructure and strengthening consumer purchasing power through tax cuts is more likely. The auto industry could benefit from such stimulus in 2020. China’s steel demand is expected to see growth of 1.0% in 2020.
Steel demand in the developed world stagnates with weakening manufacturing - After growing by 1.2% in 2018, steel demand in the developed economies is expected to show a small contraction of -0.1% in 2019. The consumer sectors and construction maintained positive momentum, however manufacturing slumped due to a deteriorating environment for export and investment. In 2020, with the effect of some technical rebound, steel demand in the developed world is expected to grow by 0.6%.
Developing economies (excluding China) present a mixed picture, but high growth is expected in Asia - Growth of steel demand in the emerging economies excluding China is expected to slow down to 0.4% in 2019 due to contractions in Turkey, MENA and Latin America. But the growth is expected to rebound to 4.1% in 2020 due to infrastructure investments, especially in Asia.