Recently, the World Steel Association (WSA) has revised the October 2018 forecasts of country-wise steel consumption and these figures are being formally announced in April 2019 meeting. The global demand for finished steel at 1,711.6 MT in 2018 is slated to reach 1,734 MT (+1.3%) and 1,750 MT in 2020.
The volume growth in steel consumption during 2018 was 54 MT and the anticipated growth in consumption for the current year is around 53 MT. This growth in global demand would originate largely from the Asian region in such a manner that the demand in Asia forms 69% of the total global steel consumption in 2019.
In Asia, the revision in China’s demand growth has made all the difference. It is felt that falling GDP growth in China, resulting from consumption-led growth as opposed to the investment-led one, would not decrease steel consumption. Thus, it has been estimated that Chinese demand for steel in 2018 has increased by 54 MT from the substantial investment in real estate that has boosted steel demand.
India has been projected to consume 96 MT of steel in 2018 which would rise up to 102.8 MT in the current year and would grow up to 110.2 MT in 2020.
The latest steel demand estimates for India are not much of a revision of the earlier ones made in October 2018.
Infrastructure growth would continue to remain India’s primary driver of demand for the commodity in the next few years. Slowdown in the pace of construction in roads, rail and Metro rail connectivity, dedicated freight corridors, industrial corridors, upgradation of existing major airports and the construction of minor ones, ports upgradation and mechanisation, shipbuilding, rural and urban infrastructure, real estate, etc, in the next few months would imply a hindrance to the projected demand volume of steel for a short period and then picking up the pace again.
This feature has been a regular phenomenon in the economic growth of many countries. This only implies that the incremental consumption growth of 14MT of finished steel in the next two years may not follow a uniform pattern of growth. This may overshoot if the pace of construction is speeded up after the election process completes.
Indian economy is exhibiting a substantial growth and it is heartening that gross fixed capital formation as a percentage of GDP (current prices) has moved up to 29% in April-December 2018 from 28.7% in the corresponding period of last year. India is, however, facing a wider current account deficit at $16.9 billion at the end of the third quarter of FY19 that stands at 2.6% of GDP.
Though the net foreign direct investment rose to $7.5 billion in Q3, the portfolio investment recorded a net outflow of $2.1 billion along with the depletion of foreign exchange reserve in Q3. The global financial scenario is uncertain with renewed efforts by the US to cut down its trade deficit with China. The stimulus measures in China, USA and Japan are providing more capital investment for capacity-building. This is also pushing up exports. India needs to monitor its steady import growth. Steel imports during the first 11 months at 8.03 MT is 2.5% more than the previous year, while steel exports during the period at 7.77 MT is much lower at 27.2% compared to the previous year.
WSA report summarises a country-wise assessment of steel intensity of GDP arrived at by dividing the apparent steel usage volume by millions of real GDP in US dollar. According to this, at an average 59.6, China continues to have the highest steel intensity in GDP (other than Vietnam, a country with poor GDP level) and is much above the global average of 20.7; South Korea has 34.9, Turkey has 31.2 and Russia has 29.0.
India, with average 36.5 steel intensity, has to enhance consumption to reap the benefits of higher GDP growth in the coming years. Based on the estimated demand figures for 2019 and 2020, it has been estimated that per capita steel consumption in India is likely to exceed 75 kg by 2019. This is against the global average of 225 kg and Chinese figure of 594 kg.
The current steel-making capacity in the world has been assessed by the Organization for Economic Cooperation and Development (OECD) at 2.234 billion tonnes by December 2018, a marginal reduction from the previous year. With global crude steel production at 1,818 tonne in 2018, the current capacity utilisation stands at 81.4%, which is quite respectable and minimises the adverse implications of excess capacity.
The OECD estimates also indicate about 88 MT of fresh capacities, involving 107 proposals, are planned to be activated.
Asian region holds the maximum (61% of the total) of these, followed by West Asia — a region in the midst of geo-political uncertainty.
The global steel market is seized with trade uncertainty fuelled by the US-China conflict. Europe is not immune to steel imports diverted from the US market with internal demand showing little signs of upward movement. While India needs to enhance its steel exports, meeting the domestic demand should be the basic determinant of capacity augmentation efforts.
Source: Financial Express
(To contact the reporter on this story: molly.shi@steelhome.cn or 86-21-50585358) |
