The World Steel Association (Worldsteel) forecasts that global steel demand will grow by 3.9% to 1.78 million tonnes in 2019 and 1.7% to 1.81 million tonnes in 2020.
That global growth, however, does not reflect strong growth in China and slow growth in the United States, Europe and other developed economies.
Case in point: Chinese steel demand is expected to grow by 7.8% to 900.1 million tonnes in 2019 while the rest of the world is expected to see growth of 0.2% to 874.9 million tonnes.
That trend is expected to slow in 2020, with steel demand growing by only 1% in China and 2.5% in the rest of the world. The driver of growth in 2020 will be emerging economies outside of China, Worldsteel said.
“China surprised us this year. But we expect next year to really slow down,” Saeed G. Al Remeithi, chairman of the Worldsteel Economics Committee said during a news conference following the release of the outlook on Monday October 14.
Growth in China was driven in large part by its real estate sector, which has seen the steel intensity of new construction increase by approximately 5%. That has helped to offset a “significant slump” in China’s manufacturing sector and a Chinese auto sector that has contacted for 13 months in a row, Worldsteel said.
China - like the rest of the world - has been hurt by trade tensions. The country is unlikely to roll out “substantial stimulus measures” but “selective mild stimuli” in infrastructure and tax cuts aimed at boosting consumer spending should help offset that headwind, Worldsteel said.
The rest of the world, not so much
North American steel demand is expected to grow by 0.6% to 141.5 million tonnes in 2019 and by another 0.8% to 142.6 million tonnes in 2020, Worldsteel said. That broadly reflects trends in other developed economies, where growth is expected to slow by 0.1% in 2019 before rebounding by 0.6% in 2020.
Drags include the US construction sector, which is expected to weaken in 2019 and to see “no recovery” in 2020, Worldsteel said. Construction is also expected to slow or stagnate in Europe, Japan and South Korea on weak economic fundamentals.
Another hit comes from the automotive market, where car production fell by 10.6% in Germany in the first eight months of 2019. The US automotive sector is forecast to see no growth in 2019 and only a slight rebound in 2020, Worldsteel said.
It is also a mixed picture in the developing world, where growth outside of China is expected to slow to 0.4% in 2019 due to weak fundamentals in Turkey, the Middle East and Latin America. It is expected to rebound by 4.1% in 2020 on infrastructure investments, particularly in Asia.
It could have been worse
Middling growth in the US and much of the rest of the world is not much to get excited about. But with prevailing pessimism in steel markets and in geopolitics in general, the showing was stronger than expected, Worldsteel general director Edwin Basson said during the news conference.
“Given the uncertainty and pessimism that we have seen in most steel markets… surprisingly enough, when you add the figures up, it shows a very robust market,” he said. “It raises the question, are we too optimistic? And we very well may be.”
Despite trade tensions - think Section 232, EU safeguard measures and President Donald Trump’s trade war with China - broader trends continue to benefit steel demand. In Southeast Asia, people are increasingly moving from the countryside into the city, and this has led to a construction boom for steel-intensive apartments, Basson said.
If there is an impediment to success, it might be consumer spending in developed economies. In the United Kingdom, for example, people are putting off buying and selling homes because of uncertainty over Brexit, Basson said.
“Consumers seems to be waiting… for more clarity,” he said.