Slower Global Growth in Steel Use in 2012 but Recovery Forecast

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--In the past week, the World Steel Association (WSA) has forecast that the short range outlook for 2012 and 2013 indicates that global apparent steel use will increase 3.6% to 1.42 billion tons in 2012, following global growth of 5.6 million tons in 2011. The forecast for 2013 is that world steel demand will grow 4.5% to about 1.49 billion tons. "Apparent steel use" is the net sum of imports and domestic production minus exports.

Chairman of the Worldsteel economics committee, Hans Juergen Kerkhoff, said that world steel demand achieved solid momentum in the first half of the year due to economic recovery. "Though we saw a number of negative events in 2011, including Japan's earthquake, political turmoil in MENA (Middle East- North Africa) and flooding in Thailand, their impact proved to be contained mostly locally. The exception was the euro zone debt crisis which did have global impact and is the main cause behind the deterioration in this new forecast from the previous one issued in October 2011. Signs of stability are now emerging and we expect the recovery to resume in the second half of this year, leading to a higher growth forecast for 2013."

High oil prices and geopolitical tensions are also important downside risk factors with euro zone uncertainties continuing to exist and this remains the key downside risk. The possibility of a hard landing for the Chinese economy cannot be ignored but at this point WSA do not attach high probability to this, said Kerkhoff.

"The most important development in our revised forecast is the continuing slowdown of Chinese steel demand driven by the Chinese government's efforts to restructure the economy. However, part of China's projected slower growth is offset by improvement in other emerging markets and the strengthening recovery of the U.S," the chairman said.

Apparent steel use in the U.S is forecast to grow by a healthy 5.7% in 2012 and in 2013 by 5.6% to 99.5 million tons, bringing it to 92% of 2007 levels. For the NAFTA region as a whole, steel use is forecast to grow 5.2% and 5.1% in 2012 and 2013, respectively.

China's apparent steel use in 2012 is forecast to increase 4% to 648.8 million tons. Growth will be 4% in 2013 as the economy enters a less steel-intensive growth phase, with the government's efforts to rebalance the economy and contain the real estate bubble. This projection brings China's use in 2013 to 674.8 million tons, 61% higher than the 2007 level.

All regions are forecast to see apparent steel use growth in 2012-13, some approaching record levels, with the exception of Japan and the E.U.

In Japan, apparent use is expected to decline by 0.6% in 2012 followed by a 2.2% decline in 2013 to 77% of the 2007 level. These declines are driven by the impact of exchange rate appreciation despite reconstruction efforts.

In the E.U., apparent use is forecast to decline1.2% with a modest recovery to growth of 3.3% in 2013, which is 79% of the 2007 level.

The forecast suggests that by 2013 steel use in the developed world will still be at 14% below the 2007 level, whereas the emerging and developing economies will be 45% above that level. In 2013, the emerging and developing economies will account for 73% of world steel demand in contrast to 61% in 2007.

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