Good news for the Australian iron ore and coal industries, and of course the country’s balance of payments for the next 18 months or so.
The world steel industry remains confident that this year and next will see solid growth in steel use, despite forecasts of slowing economic growth in major economies from groups like the IMF and OECD.
And there was one reason for the continuing confidence from Big Steel, China and other still growing economies in Asia are expected to maintain their current high levels of consumption of steel.
It means that the billions of dollars mining companies led by BHP Billiton, Rio Tinto, as well as Fortescue are spending expanding their iron ore and coking coal businesses in WA, South Australia, Qld and NW are not being wasted.
The World Steel Association (worldsteel) overnight released its October 2011 Short Range Outlook for 2011 and 2012 and says growth in use will slow next year, but not by as much as some forecasters have suggested.
Worldsteel forecasts that apparent steel use will increase by 6.5% to 1,398 million metric tonnes (mmt) this year and by a further 5.4% in 2012 to more than 1.46 billion tonnes.
So by the end of next year world steel use could be up 150 million tonnes from 2010’s level, with more than 70% of that increase occurring in emerging and developing economies, led by China, India and Brazil.
Those forecasts follow the upgraded 15.1% jump in apparent steel use in 2010.
In April, the World Steel Association released its first short term forecast for 2011 and saw an increase of 5.9% to 1,359 mmt this year and 6% next year to 1.441 million tonnes.
Interestingly in its April forecast, the Association said 2010 had seen a rise of 13.2%, but the latest forecast has boosted that to 15.1% following more analysis.
In other words, 2010 was far better than previously reported and as a result the forecast for 2011 and 2012 will actually be bigger than estimated back in April because of the rise in 2010’s consumption.
Worldsteel says the projections consider both real and apparent steel use. "Apparent steel use reflects the deliveries of steel to the marketplace from the domestic steel producers as well as from importers. This differs from real steel use, which takes into account steel delivered to or drawn from inventories," the Association explained.
And the main driver will of course be China, helped by solid increases forecast for the likes of India.
The Association said China’s apparent steel use in 2011 is expected to increase by 7.5% to 643.2 mmt following 8.5% growth in 2010.
In 2012, Chinese steel demand is expected to rise 6%, which will bring its apparent steel use to 681.6 mmt.
The Association said the new estimates could be described as "cautiously optimistic" because of the continuing problems in the eurozone economies and the sluggish level of activity in the US.
In a commentary with the forecast, Daniel Novegil Chairman of the worldsteel Economics Committee said, “In the first half of 2011, we witnessed sustained momentum in the recovery of steel demand globally carrying over from 2010.
"This is despite a series of anticipated and unanticipated negative developments: the ongoing euro area sovereign debt crisis, the earthquakes in Japan, the political/social unrest in some countries of the MENA region leading to the related surge in oil prices and the tightening of government monetary measures in many emerging economies.
"Today the global economy is facing increased uncertainty over how the ongoing turmoil in the financial markets will evolve and how it will affect the real economy.
"Our current forecast for 2012 assumes that developing economies continue to drive global growth and the policy response to the European sovereign debt crisis prevents increased volatility in the equity and financial markets.
"We expect to see growth performance varying widely across regions.
"The recovery of steel demand in the developed world will be slow while most of the emerging and developing world should continue to enjoy robust growth in their steel demand.”
After China, the Association saw Indian usage up next year.
In 2011, India’s steel use is forecast to grow by 4.3% to reach 67.7 mmt due to slowing economic growth.
In 2012, the growth rate is forecast to accelerate to 7.9%.
Apparent steel use in the US is forecast to rebound strongly by 11.6% this year, but that growth rate will more than halve next year to 5.2%, to usage estimated at 93.8 mmt.
That will take US usage to 87% of the 2007 level. For North America as a whole, apparent steel use will grow by 9.0%, but slow to a rate of 4.9% in 2011 and 2012 respectively.
In Central and South America, apparent steel use is forecast to grow by 4.7 % in 2011 to reach all time high of 47.8 mmt, according to the Association.
In 2012, the region’s apparent steel use is forecast to grow by a further 9.8% to reach 52.4 mmt, almost 28% higher than the 2007 level.
European countries continued to show divergent recovery paths in 2011.
While steel demand in Germany and Poland is expected to grow at impressive rates, steel demand in Spain in contrast is expected to record a sluggish 1.7% improvement.
Overall, apparent steel use in the EU is projected to increase by 7% in 2011 to 155 mmt.
In 2012, the growth of steel demand is expected to stall in most of the European countries with the notable exception of Poland which is forecast
