World Steel Association releases short-term steel demand forecast for April 2019

Mr. Al-Rimi, chairman of the World Steel Association Market Research Committee, commented on the forecast results: "In 2019 and 2020, global steel demand is expected to continue to grow, but the growth rate will decline with the slowdown of the global economy. The uncertainty of the trade environment and the volatility of the financial markets have not weakened, and may bring downside risks to the current forecast results."

Global steel demand remains positive

In 2018, global steel demand increased by 2.1% (this figure was obtained after considering the impact of China's shutdown of induction furnaces on statistical data - see the short-term steel demand forecast results released in October 2018), slightly lower than in 2017. In 2019 and 2020, despite the relatively severe global economic environment, global steel demand is still expected to continue to grow. China's economic slowdown, slowing global economic growth, uncertainty from trade policies, and changes in the political landscape in many regions could all weaken business confidence and affect investment growth.

China's steel demand remains strong under the government's stimulus measures

Under the dual impact of economic restructuring and trade tensions, China's investment growth has slowed, and the manufacturing sector has performed weakly, and steel demand growth will continue to slow down. The moderate stimulus policies launched by the Chinese government effectively alleviated the economic slowdown in 2018. In 2019, the Chinese government may increase its stimulus efforts, and steel demand is expected to be boosted.

In 2020, as the stimulus effect gradually weakens, China's steel demand will decline slightly.

Steel demand in developed economies will be affected by the deterioration of the trade environment

After a strong growth of 3.1% in 2017, steel demand in developed economies grew by 1.8% in 2018. Affected by the deteriorating trade environment, the growth rate of steel demand in 2019 and 2020 is expected to slow to 0.3% and 0.7%, respectively.

From 2017 to 2018, under the effect of fiscal stimulus measures launched by the US government, the US economy grew strongly, business confidence was high, and employment was strong, and US steel demand also benefited. As the fiscal stimulus effect gradually weakens and monetary policy normalizes, the US economic growth rate is expected to slow down in 2019. Growth in the construction and manufacturing sectors is expected to slow. Oil and natural gas exploration investment is also expected to slow, and infrastructure spending is not expected to increase.

The EU economy is facing risks from the deteriorating trade environment and the uncertainty of Brexit. It is predicted that the growth of steel demand in major EU economies (especially those with high export dependence) will slow down in 2019. Steel demand growth is expected to improve in 2020, which will depend on the easing of trade tensions.

In 2018, Japan's steel demand grew, mainly due to a favorable investment environment, continued strong construction activity, and increased consumer spending before the consumption tax increase. In 2019 and 2020, despite the support of public projects, steel demand may decline slightly due to the slowdown in both construction and export growth.

Since 2017, South Korea's steel demand has continued to shrink, due to weakening demand from the two major steel-using industries, shipbuilding and automobiles. Due to the upgraded real estate market regulation and the deterioration of the export environment, steel demand is expected to continue to decline in 2019, and a moderate recovery is expected in 2020.

Steel demand in developing economies (excluding China) is expected to grow, but the situation is mixed

Steel demand in emerging economies (excluding China) is expected to grow by 2.9% and 4.6% in 2019 and 2020, respectively.

Asia

After experiencing the dual shocks of demonetization and the implementation of the Goods and Services Tax (GST), the Indian economy is now expected to resume rapid growth in the second half of 2019 after the general election. Although the fiscal deficit may put some pressure on public investment, the continued progress of a series of infrastructure projects may support steel demand growth of more than 7% in 2019 and 2020.

It is expected that in 2019 and 2020, steel demand in developing Asian countries excluding China will grow by 6.5% and 6.4% respectively, becoming the fastest-growing region in the global steel industry. In the ASEAN region, infrastructure construction will support the demand for steel.

Middle East and North Africa

Gulf Cooperation Council (GCC) member states continue to cope with the low oil price environment with efforts to diversify their economies, but fiscal austerity is still suppressing construction activity. Steel demand is expected to continue to shrink in 2019, and a slight recovery is expected in 2020.

Iran's economy has fallen into recession due to the restoration of US sanctions, and Iran's steel demand will also decline in 2019.

With the strong recovery of the Egyptian economy after structural reforms in 2017, the situation in North Africa is improving. Energy investment and the recovery of the real estate market are expected to drive steel demand in Egypt. Other North African economies are also expected to see growth in steel demand, supported by strong investment activity.

Commonwealth of Independent States and Turkey

Despite rising oil prices, growth in Russian steel demand will continue, but is expected to be constrained by structural issues. Supported by domestic consumption, the growth prospects for steel demand in Ukraine are stable and gradually improving.

Turkey's economy is still suffering from the currency crisis of August 2018, and steel demand has shrunk. This trend is expected to continue into 2019 and stabilize in 2020.

Latin America

Despite internal and external uncertainties, a full recovery in Latin American steel demand is expected to continue. Brazil's economy has recovered for three consecutive years, and a slight improvement in the construction industry is expected in 2019. On the other hand, due to weak mining investment, fiscal budget constraints, policy uncertainty, and the slowdown of the US economy, the growth of steel demand in Mexico is expected to be relatively moderate.

The political situation in Venezuela and its impact on steel demand in the region remain unclear.

Automotive Steel and Construction Steel

With suppressed automotive demand and the effects of government stimulus measures gradually weakening, the growth of the automotive industry in many countries slowed significantly in 2018, especially in the European Union, Turkey, and China. The largest declines were in Turkey (-9.0%) and the United Kingdom (-5.5%). As a result, global automotive production growth slowed from 4.9% in 2017 to 2.2% in 2018. In 2019, global automotive production growth will continue to slow to 1%, and is expected to stabilize by 2020. However, in Latin America, especially Brazil, automotive production will buck the trend and continue to show a steady rebound.

The growth momentum of the construction industry in developed economies is also expected to slow slightly, but the rebound in construction growth in developing economies is expected to keep global growth at 3% in 2019-2020. However, in China, Turkey, South Korea, and Argentina, the construction industry is expected to continue to contract in 2019. With weak investment and a deteriorating trade environment, the global machinery industry is expected to experience a continued slowdown, which will continue into 2020, with the slowdown being more pronounced in major producing countries such as Germany, Japan, and China.

Editor's Note:

The World Steel Association is one of the largest and most active industry associations in the world, with members from all major steel-producing countries. Members of the World Steel Association include steel producers, national and regional steel industry associations, and steel research institutions. The crude steel production of its members accounts for about 85% of the world's total crude steel production.

The Short Range Outlook (SRO) results include forecast reports, estimates, and other information. Although these forward-looking results represent our current judgment of future steel demand, there are risks and uncertainties associated with the forecast results, which may differ significantly from actual steel demand. We remind readers not to over-rely on these forward-looking results. The current forecast results only represent the views of the World Steel Association on the date of publication of this forecast.