The world steel industry will slow this year and next from the double digit growth of 2010, but according to the World Steel Association, growth will still grow 12% or more over the next two years.
That is good news for the Australian iron ore industry and for prices as exports from India are again expected to fall short of expectations as that country ramps up output and export taxes cut shipments into the Chinese market.
The first forecast from the Association for this year and next shows growth in both years with output topping the 1.4 billion tonne level in 2012.
The World Steel Association forecast that apparent steel use will increase by 5.9% to 1.359 billion tonnes this year, following growth of 13.2% in 2010.
In 2012, it is forecast that world steel demand will grow further by 6% to reach a new record of 1,441 billion tonnes.
Last October, the Association forecast a 5.3% growth in apparent steel consumption this year to 1.340 billion tonnes and 13.1% growth for 2010.
And in April of last year, the Association forecast a 5.3% rise in 2011 demand to 1.306 billion tonnes.
That was after a forecast 10.7% rise to 1.241 billion tonnes (and the -6.7% plunge in 2009).
This forecast suggests that by 2012, steel use in the developed world will still be at 14% below the 2007 level whereas in the emerging and developing economies, it will be 38% above.
In 2012, the emerging and developing economies will account for 72% of world steel demand in contrast to 61% in 2007.
It is a significant change and one the Australian iron ore industry has successfully exploited.
The forecast came as the Association also reported that crude steel production in March hit an all time high of more than 129.3 million tonnes.
The sharp rise in output this year of more than 8% has seen capacity utilisation move back above 80% for the first time since August 2008 as output outside China continues to rebound strongly.9See above graph).
The Association said that steel demand in China, the world’s leading steel producer, is expected to grow 5% this year and next to 605 million tonnes in 2011 and 635 million tonnes in 2012.
But while some analysts say that’s modest, others wonder if it’s too conservative, given that the Chinese economy is forecast to grow by more than 8.5% this year and next.
Significantly next year will see emerging and developing economies accounting for 72% of world steel demand, up from 61% in 2007.
The Association commented: "Given the pace of steel production in the first quarter of 2011, Chinese apparent steel use could be even higher.
"However, it is expected that the Chinese government’s efforts to cool down the overheating economy, particularly the real estate sector, will impact Chinese steel demand somewhat later this year."
But Chinese economic growth could be higher than expected over the next two years and the IMF has already upgraded its forecasts.
Steel demand in India, a fast growing steel producer, is forecast to grow by 13.3% this year and to accelerate to 14.3% in 2012.
In the US, steel consumption will grow by 13% in 2011 to 90.5 million tonnes and in 2012, US is expected to grow by 6.9% to 96.7 million tonnes bringing it back to 90% of the 2007 level. For NAFTA as a whole, apparent steel use will grow by 10.9% and 6.3% in 2011 and 2012 respectively.
The EU will grow at 4.9% this year to 151.8 million tonnes and at 3.7% in 2012 to more than 157 million tonnes, as the cuts in government spending hit home.
The largest economy eurozone countries like Germany and France are forecast to enjoy solid recovery in steel use mainly in the automotive and machine building sectors.
Other economies (i.e., Greece, Ireland, Portugal and Spain) are projected to show slow growth in steel use, particularly as a result of weak construction activity.
In 2012, the region will see apparent steel use back to 80% of the 2007 peak.
Japan’s steel use was expected to decline by -1.2% to 63 million tonnes in 2011 as stimulus measures expire.
In 2012, apparent steel use in Japan was forecast to remain around 63 million tonnes, 78% of the 2007 level.
The impact of the earthquake and tsunami points to a significant downward adjustment in steel use for 2011 and upward adjustment for 2012.
Japanese steel production could be down by 7-10 million tonnes this year as the car industry struggles to rebuild capacity.
Industry giants Toyota and Honda say it will take until the 4th quarter of this year before capacity in Japan is back to pre March 11 levels).
But offsetting this will be the needs for the reconstruction program and the country will need larger than normal volumes of long products such as rebar for reconstruction soon.
Because of the expected power shortages and restrictions on production at some producers like Nippon Steel, Japan will probably be forced to import more long products from China or Korea.
Steel demand in the Middle East and North Africa will suffer the consequences of the political unrest that has shaken the region in the past few months, and steel demand growth in Africa this year will fall 3.1% from 2010’s level.
And the recovery of steel use in the old Russian federation states "has been
