worldsteel Short Range Outlook April 2023
World Steel Association forecasts global steel demand to rebound by 2.3% to reach 1,822.3 Mt in 2023 and grow by 1.7% to 1,854.0 Mt in 2024. The manufacturing sector is expected to lead the recovery, but high-interest rates will continue to weigh on steel demand. The growth rate is expected to accelerate in most regions in 2024, except in China, where a deceleration is expected. China’s steel demand is expected to stay flat in 2024 after growing by 2.0% in 2023, despite China’s declining population and move towards consumption-driven growth, which reduces its contribution to global steel demand growth. Advanced economies, such as the European Union and the United Kingdom, are expected to have a recovery of 3.2% in 2024, after a sizable contraction in 2022. However, the outlook is subject to persisting uncertainty. In this news article, we will delve deeper into the SRO steel demand forecast by region, focusing on China and advanced economies.
China's steel demand contracted in 2021 and 2022 as the economy decelerated sharply due to unexpected lockdowns that extended across the country. The negative momentum in the construction sector, seen in 2021, intensified in 2022 as all key real estate indicators were in deeply negative territory. The floor space of newly started projects dropped by 39.4% and investment in real estate declined by 10.0%, the first year-on-year decline in 25 years. These acute declines will put pressure on construction activities in 2023-2024, but a slight pickup in the real estate sector is likely in the later part of 2023 due to government support measures. The recovery of real estate is expected to continue in 2024, but it will be only moderate.Infrastructure investment showed a strong pickup of 9.4% thanks to government support, but this was largely focused on less steel-intensive areas such as water supply systems, telecommunications, and logistics. In 2023, the infrastructure sector may continue to benefit from the projects initiated at the end of 2022, although growth may weaken in 2024 if no large-scale projects begin in 2023. China’s manufacturing sector performance in 2022 was weak, although exports performed relatively well. The manufacturing sector is expected to show only a moderate recovery in 2023-2024, with slowing exports. After declining by 3.5% in 2022, China’s total steel demand is expected to grow by 2.0% in 2023, but it is expected to stay flat in 2024.
India remained a bright spot in the global steel industry in 2022. Having managed inflation well, the Indian economy is on a healthy growth track, with a rising share of investment in GDP thanks to strong government spending on infrastructure. The residential sector is also expected to grow, backed by affordable housing projects and urban demand. Private investment is improving on the back of the Production Linked Investment Schemes. India’s capital goods sector is also expected to benefit from the momentum in infrastructure and investment in renewable energy. Automotive and consumer durables are expected to maintain healthy growth driven by sustained growth in private consumption. After growth of 8.2% in 2022, demand is expected to show healthy growth of 7.3% in 2023 and 6.2% in 2024.
The steel demand in advanced economies suffered a sizable contraction in 2022 due to monetary tightening and high energy costs. After falling by 6.2% in 2022, it is expected to increase by 1.3% in 2023. In 2024, a recovery of 3.2% is foreseen. The European Union (27) and the United Kingdom turned out to be more resilient to the energy crisis caused by the Ukraine war than initially thought. While the EU economy grew by 3.5% in 2022, avoiding recession, industrial activities suffered significantly from high energy costs that led to a sizable contraction in steel demand in 2022. In 2023, the EU steel industry will continue to feel the impact of war, other supply chain-related issues, and continued monetary tightening. In 2024, demand is expected to see a visible rebound as the impact of the Ukraine war and supply chain disruptions are expected to dissipate. However, the outlook is subject to persisting uncertainty.
In the wake of the pandemic, the US economy is experiencing a period of subdued growth, largely attributed to the Federal Reserve's interest rate hikes aimed at combating inflation. The construction industry, particularly the residential sector, is grappling with the adverse effects of escalating material costs and rising interest rates, while the non-residential sector is expected to keep recuperating. However, the US infrastructure industry is poised to benefit from recent legislation, such as the 2021 infrastructure law and the Inflation Reduction Act (IRA), which could drive steel demand from the expanding energy production. The US manufacturing sector is experiencing a slowdown due to increasing car prices, high gasoline rates, and interest rates' upward pressure, which has reduced auto sales. Nevertheless, the sector is anticipated to witness an 8.0% recovery in 2023, followed by an additional 7.0% in 2024, potentially fueled by a decline in interest rates. Although steel demand is anticipated to grow by 1.3% in 2023 and 2.5% in 2024, following a 2.6% decline in 2022, the recent bankruptcy of SVB could have a ripple effect on the economy, requiring close monitoring.
Japan's steel demand declined in 2022 due to weak manufacturing and destocking, and the impact of the weak global economic environment is expected to continue to weigh on steel demand in 2023. However, Japan's supply-constrained economy is not expected to be significantly affected. The construction sector remained positive in 2022, and it is expected to expand further with civil engineering projects and recovery in capital investment. The industrial machinery and automotive sectors are also expected to grow in 2023 and 2024 as supply constraints ease. Despite a fall of 4.2% in 2022, steel demand in Japan is forecasted to increase by 4.0% in 2023 and then by 1.2% in 2024.
In 2022, South Korea's steel demand faced significant contraction due to declining facility investment and construction activity, further exacerbated by flood damage in the Pohang mills. As the global economy weakens, exports are expected to continue suffering in 2023, while sluggish facility investment and construction will persist. Despite moderate growth in automobile production in 2022, production is expected to remain below pre-pandemic levels in 2023 and 2024. However, the shipbuilding sector is expected to contribute to mild demand recovery. Steel demand is projected to increase by 2.9% in 2023 and then by 2.0% in 2024, following an 8.6% fall in 2022.