Middle East Steel Consumption Growth Up 5.7% in 2012, but European Union Down 8.7%

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Although the World Steel Association (WSA) (Brussels, Belgium) reports that the global forecast for steel consumption growth has been lowered to 2.1% for 2012, the Middle East region is set to buck the trend and rebound to a growth of 5.7% in 2012, following a 2% contraction in 2011.

The growth has been driven by construction and infrastructure projects in regional economies that have benefitted from high oil prices over the past three years.

In contrast to the Middle East, the apparent consumption of finished steel in the European Union's (EU) 27 member states is expected to slip in 2012 by more than 13 million tons or 8.7%, according to a report by MEPS (International) Limited (Sheffield, England).

The banking crisis created tight credit restrictions in the EU in 2012, and steel prices declined. Customers reduced their inventoried and were not prepared to order significant quantities of material for the fear of lower prices in the future. High rates of unemployment and subdued household consumption added to the difficult market conditions.

A modest increase in demand is anticipated in 2013. A degree of inventory building is expected, and price increases are a real prospect.

In 2011, crude steel output expanded to 177.7 million tons from its low point a year earlier. The sovereign debt problem suffered by many EU member states is believed to have reduced economic activity--and with it steel demand--in 2012.

With growth expected to be sluggish in the short term, with private sector borrowing restricted as banks shore up their balance sheets, MEPS expects 2012 production of crude steel in the EU to be just below 170 million tons. Slow but steady growth is expected through 2016. About 188.5 million tons is expected in 2016, and pig iron will follow a similar pattern.

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