The World Steel Association (worldsteel) today released its Short Range
Outlook (SRO) for 2019 and 2020. In 2019 worldsteel forecasts that steel
demand in China will grow by 7.8% to reach 900.1 Mt and the rest of the
world is expected to record 0.2% growth to 874.9 Mt. In 2020, Chinese
steel demand is expected to grow by 1.0%, whereas steel demand in the
rest of the world will grow by 2.5%, driven by 4.1% growth in the
emerging and developing economies excluding China.
Global steel demand will grow by 3.9% to 1,775.0 Mt in 2019 and will
grow by another 1.7% in 2020, reaching 1,805.7 Mt.
Global steel demand remains resilient despite an uncertain global
economic environment, driven by developing and emerging economies
Commenting on the outlook, Mr Al Remeithi, Chairman of the worldsteel
Economics Committee said, “The current SRO suggests that global steel
demand will continue to grow in 2019, more than we expected in these
challenging times, mainly due to China. In the rest of the world, steel
demand slowed in 2019 as uncertainty, trade tensions and geopolitical
issues weighed on investment and trade. Manufacturing, particularly the
auto industry, has performed poorly contracting in many countries,
however in construction, despite some slowing, a positive momentum has
been maintained.
While the global economic outlook is highly unpredictable, we expect to
see further growth in steel demand in 2020 of 1.7%, with emerging and
developing economies excluding China contributing more. This forecast
faces significant downside risks if the current level of uncertainty
prevails.”
Chinese steel demand showing high growth in 2019 owing to a strong real
estate sector, but forecasted to slow down in 2020
While the Chinese economy continued to decelerate and is expected to
record its lowest GDP growth since 1992, steel demand is still expected
to grow by 7.8% in 2019, largely driven by real estate investment. In
the first seven months of 2019 China’s real estate market reported the
strongest performance over the same period for the last five years.
Firstly, due to the relaxation of control policies in tier 2 to tier 4
cities and secondly the newly implemented construction standard, put
into effect in April 2019, estimated to have increased steel intensity
in new buildings by about 5.0%.
Conversely, China’s manufacturing sector is experiencing a significant
slump due to the slowing economy and the effect of trade tensions. The
Chinese automotive industry has contracted for 13 months in a row.
We expect the Chinese economy to worsen in the later part of 2019 and in
2020 with the unresolved trade tensions adding further pressure. It is
unlikely that the Chinese government will reintroduce substantial
stimulus measures as it continues to hold a balance between containing
the slowdown and pushing forward its economic restructuring agenda.
Selective mild stimuli focused on infrastructure and strengthening
consumer purchasing power through tax cuts is more likely. The auto
industry could benefit from such stimulus in 2020. China’s steel demand
is expected to see growth of 1.0% in 2020.
*Note: The statistical issues reported by worldsteel in previous SROs
relating to the closure of induction furnaces and the consequent
underreporting of demand in official figures will have now largely
played through the system. However, it is believed that some degree of
underreporting from 2018 could still affect the 2019 growth rate. Due to
this effect, while nominal growth points to 7.8% in 2019, worldsteel
estimates real growth to be 4.0%.
Steel demand in the developed world stagnates with weakening
manufacturing
After growing by 1.2% in 2018, steel demand in the developed economies
is expected to show a small contraction of -0.1% in 2019. The consumer
sectors and construction maintained positive momentum, however
manufacturing slumped due to a deteriorating environment for export and
investment. In 2020, with the effect of some technical rebound, steel
demand in the developed world is expected to grow by 0.6%.
Developing economies (excluding China) present a mixed picture, but high
growth is expected in Asia
Growth of steel demand in the emerging economies excluding China is
expected to slow down to 0.4% in 2019 due to contractions in Turkey,
MENA and Latin America. But the growth is expected to rebound to 4.1%
in 2020 due to infrastructure investments, especially in Asia.
Construction
The global construction sector’s growth is expected to slow to 1.5% in
2019 and 1.2% in 2020 after growth of 2.8% in 2018.
The picture for construction activity in the developed economies in
2019-2020 is somewhat mixed. The US construction sector is expected to
weaken in 2019 with no recovery in 2020. In Europe, the construction
sectors in Germany, Spain, the Netherlands and Central European
economies, while still maintaining growth, will slow down due to
weakening economic fundamentals and constraints in construction
capacity. Civil engineering is expected to be the construction driver
owing to investment in energy, transport and communication networks.
The Japanese construction sector is projected to report almost no growth
as the decline in residential construction will be offset by growth in
civil engineering. Korea’s construction sector is expected to continue
contracting despite some support from public projects.
Construction in emerging markets will be strong, largely influenced by
infrastructure projects. In China, the real estate sector drove growth
in construction activity in 2019, but in 2020 this will slow down.
Infrastructure investment is expected to be boosted by government
stimulus. In ASEAN and India, active infrastructure investment is
expected to drive construction.
Turkey has seen contracting construction activity in line with the
overall economy. After a severe decline in 2019, Turkey will see only a
moderate rebound in 2020.
In Latin America generally, infrastructure investment is constrained by
uncertainty and government budget issues. Brazil’s construction sector,
which has been contracting since 2014, has shown positive growth in 2019
and this could continue with infrastructure a policy priority.
Automotive
Global automotive production decelerated in 2018 and is expected to
contract in 2019 with recession deepening and broadening across several
major markets including Germany, Turkey, China and South Korea. The
automotive market has been hit by more than global economic factors
including, market saturation, reduction in purchasing and promotion
incentives and most importantly customer hesitancy during the transition
of the auto industry from combustion engine-powered via hybrid to fully
electric vehicles.
This decline has been particularly severe in Germany and China with
passenger car production declining by -10.6% and -13.8%, respectively in
the first eight months of 2019. It is expected that the Chinese
government may introduce some tax measures to boost sales of passenger
vehicles, especially new energy vehicles. This could lead to a recovery
in 2020.
In the US, the auto market is expected to decelerate with no growth in
2019 and only a slight increase in 2020, but steel use is expected to
benefit from the shift toward light truck models. Japanese and Korean
car production is being affected by weak export markets.
The Indian automotive industry suffered from the liquidity crisis and
weak global demand to show almost no growth in 2019, but it is expected
to pick up in 2020 before the introduction of stringent pollution
standards in April 2020. The Turkish auto industry continues to struggle
with contraction in both domestic and export markets. In Brazil and
Mexico, auto production maintained positive but slowing growth in 2019.
Mechanical machinery
After strong growth in 2017-18, global mechanical machinery is expected
to decelerate to remain flat in 2019-20 as the deceleration of the
global economy and continuation of trade tensions hurt global investment
activities.
The mechanical machinery output in major exporters - China, Germany and
Japan - is expected to keep falling in 2020. The Chinese mechanical
machinery sector is expected to decline by -1.0% in 2019, even though
the replacement demand for equipment will provide some support in 2019
and 2020.
General-purpose machinery, including energy related machinery, will
positively contribute to the sector’s growth. On the other hand,
construction machinery is expected to decline in 2019 and 2020, but the
decline will be partially offset by the demand deriving from expansion
of infrastructure projects in developing countries.
# Ends #
Notes to Editors:
-
The World Steel Association (worldsteel) is one of the largest and
most dynamic industry associations in the world, with members in
every major steel-producing country. worldsteel represents steel
producers, national and regional steel industry associations, and
steel research institutes. Members represent around 85% of global
steel production.
-
The SRO includes presentations, estimates and other information that
are forward-looking. While these forward-looking statements
represent our current judgement on what the future holds, they are
subject to risks and uncertainties that could cause actual results
to differ materially. Readers are cautioned not to place undue
reliance on these forward-looking statements, which reflect
worldsteel’s opinions only as of the date of this presentation.
Source from WSA |