World Steel Association: It is predicted that global steel demand will increase by 4.5% this year to 1.855 billion tons
The World Steel Association released the results of short-term steel demand forecasts for 2021 and 2022 on the 14th. The World Steel Association predicts that global steel demand will continue to grow by 4.5% in 2021 after increasing by 0.1% in 2020, reaching 1,855.4 million tons. In 2022, global steel demand will continue to grow by 2.2%, reaching 1.8964 billion tons. This forecast believes that with the acceleration of global vaccination, the spread of new coronavirus variants will no longer cause damage and chaos like previous waves of epidemics.
Al Remeithi, Chairman of the World Steel Association’s Market Research Committee, commented on the results of this forecast: “In 2021, the recovery of global steel demand exceeds expectations, which has caused us to revise up our overall forecasts except for China. Due to the strong recovery, in addition to Outside of China, global steel demand will return to pre-epidemic levels ahead of schedule this year.
The previously suppressed demand release has strongly supported manufacturing activities, which is the main reason for the recovery of steel demand. The performance of developed economies has exceeded our previous expectations and significantly exceeded that of developing economies, which reflects the positive effects of high vaccine coverage and government support measures. In developing economies, the recovery momentum has been interrupted due to the repeated occurrence of epidemics.
Although in the face of recent waves of epidemics, the recovery of the manufacturing industry has shown greater resilience than expected, but due to supply-side constraints, the recovery in the second half of this year will slow down, and the strong recovery throughout 2021 will also be suppressed. Nevertheless, due to the large backlog of orders, the rebuilding of inventories and the continuous advancement of vaccination in developing countries, we expect steel demand to continue to recover in 2022.
High inflation, the continued slowness of vaccination in developing countries, and the further deceleration of China’s economic growth will all affect the results of this forecast.
From 2020 to early 2021, China’s economy continues its strong recovery. However, since June this year, China’s economy has begun to slow down. Since July, the steel industry has shown obvious signs of deceleration. In July, steel demand shrank by -13.3% and in August by -18.3%. The sharp decline in the steel industry is partly due to the recent bad weather and the wavelet epidemic in the summer. However, the main reasons include the deceleration of the construction industry and government restrictions on steel production. The weakening of the real estate industry’s activity is due to the measures introduced by the Chinese government in 2020 to strictly control the financing of developers. At the same time, due to the reduction of investment potential and the limited financing capacity of local governments, infrastructure investment in 2021 will not rise. In addition, the strong recovery of global manufacturing has also weakened the export market.
Due to last year’s high base and the continued deceleration of the real estate industry, China’s steel demand will experience negative growth for the remainder of 2021. Therefore, despite the apparent growth of 2.7% in steel consumption from January to August, overall steel demand in 2021 is expected to fall by -1.0%.
According to the government’s policy positioning of economic rebalancing and environmental protection, it is expected that steel demand will hardly grow in 2022. Part of the replenishment of inventories may support apparent steel consumption. In order to break away from the real estate-dependent growth model, recent measures taken by the government may continue.
02 Advanced economies
In 2021, due to the adoption of more purposeful and more localized blockade measures, the impact of recent waves of epidemics on economic activities has diminished. However, the bottleneck in the supply chain and the lagging service industry are weakening the recovery.
In 2022, with the reduction of supply chain bottlenecks, the continuous release of suppressed demand, and the improvement of corporate and consumer confidence, the recovery will be more robust.
Steel demand in developed economies will increase by 12.2% in 2021 after falling by -12.7% in 2020, and continue to grow by 4.3% in 2022, reaching the level before the epidemic.
In the United States, driven by the release of suppressed demand and a strong response policy, the US economy will continue to recover steadily. The actual GDP level has exceeded the highest level in the second quarter of this year.
Although steel demand was once boosted by the strong performance of the automotive and durable goods industries, the shortage of some parts is affecting the recovery trend that undermines steel demand. With the end of the rapid development phase of the residential industry and the weakness of the non-residential construction industry, the growth momentum of the construction industry has gradually slowed down. The recovery of oil prices is supporting the recovery of investment in the energy industry.
If President Biden’s infrastructure plan is passed, the upside potential will increase, but its effect will not be apparent until late 2022.
In the European Union, despite several waves of epidemics, all steel industries have shown a positive recovery trend; with the recovery of the steel industry, the recovery of steel demand starting in the second half of 2020 is gradually accelerating.
The recovery in steel demand in Germany is supported by exports, which have given the country’s manufacturing sector a strong performance. However, due to the bottleneck of the supply chain, especially the bottleneck of the automobile industry, the recovery momentum of steel demand has weakened. In 2022, due to the large backlog of orders in the manufacturing industry and the continued growth of the construction industry after experiencing a relatively high growth rate during the epidemic, steel demand will benefit from this.
Italy has suffered the most severe epidemic among EU countries. The country is recovering faster than other EU countries, and the construction industry is recovering strongly. Several steel-using industries, including construction and household appliances, are expected to return to their pre-epidemic levels in 2021.
In the developed regions of Asia, due to the slowdown in vaccination in 2021, the situation of the new crown epidemic has deteriorated, but the demand for steel has not interrupted the recovery process. With the help of the strong rebound in global trade and government infrastructure investment, the relevant forecast results have been revised upwards.
In Japan, with the increase in exports, investment and consumption, steel demand is gradually recovering. Manufacturing, especially automobile manufacturing and machinery manufacturing, is leading this recovery. The civil construction industry continues to support steel demand, but the private construction industry is still suppressed, except for warehouses and distribution centers. In 2022, it is expected that all steel industries will experience positive growth, supported by the recovery of consumption and investment.
In South Korea, supported by improved exports and increased investment in manufacturing facilities, it is expected that South Korean steel demand will return to the level of 2019 in 2021. The construction industry will receive the support of the public civil engineering plan and the restoration of the housing construction industry, and it will return to positive growth in 2021/2022. In 2021, South Korea’s new shipbuilding orders suddenly increase, which will drive steel demand in the next few years.
03 Developing economies (except China)
In 2021, with the help of the recovery of commodity prices and international trade, steel demand in developing economies (except China) will continue to recover. However, the recent waves of epidemics, coupled with low levels of vaccines and the slow recovery of international tourism, have imposed constraints on developing economies. In 2022, with the advancement of vaccination, the conditions of developing economies are expected to improve, but the epidemic will have long-term effects on developing economies, including weakening of fiscal conditions and accumulation of structural challenges.
In India, the country has implemented a strict blockade policy in 2020 and is on the track of a healthy recovery. However, the second wave of more severe epidemics that occurred between April and June 2021 has once again affected the country’s economy. Outputs have all declined. However, as the blockade measures are becoming smaller and smaller, the economic impact of the second wave of the epidemic is much lower than that of the first wave. Since July, all industries have experienced a benign recovery. Therefore, India’s steel demand has only seen a slight downward adjustment, and a strong recovery is expected in 2021. India’s steel demand will again reach 100 million tons this year.
In the ASEAN region, Vietnam successfully avoided the severe economic impact of the epidemic in 2020, but in 2021, due to the surge in the number of infected people, the country’s steel demand is expected to shrink. On the other hand, despite the restrictions of the epidemic, construction projects in the Philippines are still under construction on schedule. Due to delays in infrastructure projects and restricted labor mobility, only a moderate recovery in the ASEAN region is expected.
In Latin America, except Brazil, steel demand in other regions will be hit hard by the epidemic in 2020. But in 2021, due to reasons such as the construction and automobile industries and replenishment of inventories, the region has experienced a surprisingly strong recovery. However, in 2022, the region’s recovery momentum will be significantly weakened due to the region’s efforts to cope with complex structural issues, including high inflation, high fiscal deficits, and political instability.
Following the positive growth in Brazil’s steel demand in 2020, affected by the government’s stimulus plan and the high activity of the construction industry, Brazil’s steel demand will continue to grow strongly in 2021, exceeding the level before the epidemic in the first half of the year. However, in 2022, with the weakening of financial support, high interest rates and tensions in the political situation, the country’s steel demand will weaken. In Mexico, driven by industrial activities, especially the automotive industry, the country’s recovery has also greatly exceeded expectations.
In the GCC region, fiscal austerity has led to weakening of construction industry activities. In this context, the recovery of steel demand in the region has been lower than expected. Nevertheless, by 2022, as oil prices rise and the epidemic is brought under control, steel demand is expected to rebound more strongly. In Egypt, due to the suspension of business licenses for construction companies in overcrowded urban areas, the country’s steel demand has been adversely affected. Nonetheless, other large-scale government projects have buffered the impact of the epidemic and supported the recovery in 2021.
In Russia, after a moderate decline in steel demand in 2020, the country’s steel demand is recovering under the support of a strong rebound in the auto industry. The construction industry is supported by the government’s mortgage subsidy program.
In Turkey, the country’s economy showed strong growth in the third quarter of 2020. Driven by the expansion of international demand and consumer loans, the country’s economy will continue to maintain strong growth in 2021. Driven by infrastructure projects and industrial activities, the country’s steel demand will see high double-digit growth in 2021. In 2022, Turkey’s steel demand will exceed 36 million tons before the currency crisis.
- Steel industry
01 Construction industry
Generally speaking, in the face of the impact of the epidemic, the construction industry is still more resilient than the manufacturing industry. Nevertheless, in many developing economies, construction activities have suffered severe disruptions due to the complete shutdown of construction projects. In 2021, due to low interest rates and the government’s recovery plan focusing on the impact of infrastructure projects, it is expected that the global construction industry will experience a steady recovery.
The construction industry in different regions has different degrees of recovery. In developing economies, taking the ASEAN region as an example, the vaccination rate in this region is low, and the recovery of the construction industry has shown instability. In contrast, India’s recent vaccination rate has risen sharply, and the country’s construction activity is showing a positive rebound.
In China, the construction industry is facing a turning point. As the government strives to solve the structural problems of the real estate industry, the real estate industry may be about to enter a period of adjustment.
The future development of global infrastructure projects is affected by two conflicting forces. On the one hand, many governments have to work hard to use infrastructure projects as an economic recovery tool in line with green development plans. This is especially true in developed economies. On the other hand, affected by the epidemic, the government’s financial situation has deteriorated. Many governments in developing economies have reduced their capacity to invest in infrastructure.
In the housing industry, the increase in household savings during the epidemic period and the expansion of home office coverage (the latter brought about an increase in the demand for household space) benefited the housing industry. On the other hand, in the non-housing industry, the recovery of the non-housing industry has been slow due to the decrease in demand for office space.
02 Automotive Industry
Among all steel industries, the automotive industry experienced the sharpest decline in 2020, but showed a strong recovery in the second half of 2020. Although the supply chain disruption in some regions is still very obvious, the release of suppressed demand and the increase in household savings have promoted this round of recovery.
In the United States, although light vehicle production returned to the level before the epidemic in the third quarter of last year, it has continued to decline since then, partly due to the disruption of the supply chain.
In the EU, the region is recovering strongly, and the EU auto industry is expected to rebound by 15.3% in 2021. However, the automotive industry is still far below the level of 2018 when the manufacturing industry first experienced a recession. Due to the shortage of auto parts and the weak demand outlook brought about by the overall economic uncertainty, the EU’s auto industry is facing uncertainty.
In China, automobile production surged in the first half of this year. It is worth mentioning that from January to 8, 2021, the production of new energy vehicles increased by nearly 200%, accounting for 11.2% of the total vehicle production in the same period.
The disruption of the supply chain is having a significant impact on the recovery of the global automotive industry. As the release of suppressed demand weakens, auto production growth will slow in 2022, but a large backlog of orders will provide some support.