The steel industry refuses to be held hostage to a trend. In April, the World Steel Association said it expected global steel demand in 2016 to decline by 0.8%, after having fallen by 3% in 2015. That forecast, its biannual Short Range Outlook on steel demand, has changed. Its October statement expects steel demand to actually grow by 0.2% in 2016, a full percentage point higher.
Ordinarily, one would expect the steel industry to change course gradually. The constantly shifting backdrop in which these forecasts are made may explain the volatility in numbers. Take China. Its economic rebalancing remains on paper but it slipped in a stimulus package which is partly responsible for higher steel demand.
China’s steel demand for 2016 is now forecast to decline by only 1% instead of 4%. That’s a massive shift for a country that accounts for 44% of global demand. Even in 2017, the country’s demand is expected to decline by 2%. This is conservative and is being attributed to expectation that the revival in the real estate market will falter, pulling down steel demand. If these expectations are proved wrong, this forecast may be at risk as well.
What about the rest of the world? Among major steel consuming blocks, the European Union is slipping, with steel demand forecast to grow by 0.8%, from the earlier 1.4%. The NAFTA region too has suffered a similar fate (NAFTA is the North American Free Trade Agreement). However, both regions are expected to see a better time in 2017. India’s demand growth outlook remains unchanged in 2016, though it steps up a bit in 2017.
Developed economies are expected to see flat growth in steel consumption in 2016, but will recover in 2017.
Excluding China, emerging and developing economies could see growth increase by 2% in 2016 and by 4% in 2017. Global steel demand in 2017 is expected to rise by 0.5%, marginally higher than the April forecast (but on a higher base now since 2016 has been revised upwards).
An improved global steel demand outlook is good news for producers. China’s improved demand outlook also points to why iron ore prices remain firm. Any sharp turns in China’s policies are a main risk as is the continued weakness in developed economies.
India’s steel