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    World News

    Worldsteel releases its short range outlook for 2016-2017

    Apr 15, 2016 02:27 GMT   Source:scrapmonster

    By Paul Ploumis (ScrapMonster Author)

    April 14, 2016 12:03:01 AM

    SEATTLE (Scrap Monster):  The World Steel Association (Worldsteel), headquartered in Brussels, has released its short range outlook (SRO) for 2016 and 2017, forecasting that global steel demand will decrease by 0.8 percent to 1,488 million metric tons in 2016 following a contraction of 3 percent in 2015. In 2017, it is forecast that world steel demand will return to growth of 0.4 percent, reaching 1,494 million metric tons.

    TV Narendran, chairman of the Worldsteel Economics Committee says, “The economic environment facing the steel industry continues to be challenging, with China’s slowdown impacting globally across a range of indicators contributing to volatility in financial markets, sluggish growth in global trade and low oil and other commodity prices. The global steel market is suffering from insufficient investment expenditure and continued weakness in the manufacturing sector. In 2016, while we are forecasting another year of contraction in steel demand in China, slow but steady growth in some other key regions including NAFTA (North American Free Trade Agreement) and EU (European Union) is expected. Growth for steel demand in all markets except China is expected in 2017.”

    Narendran says Worldsteel’s forecast has several downside risks: the Chinese real estate market and corporate debt problem, anxiety in the financial markets, high household debt and volatile capital flows in many emerging economies, geopolitical tensions and unstable political situations in several regions that could further worsen the global economic environment.

    He adds, “On a positive note, some emerging economies in South and Southeast Asia show resilient growth and along with NAFTA and the EU will support a recovery in 2017. We expect that steel demand outside China will continue to grow by 1.8 percent in 2016, and this growth will accelerate to 3 percent in 2017.”

    While rebalancing progresses, the Chinese economy continues to decelerate, the association says. The severe depression in construction activity is contributing to a slowdown in manufacturing, especially metal products, as well as to slower growth in automotive. A recovery for the construction sector is not forecast in the near future. The decline in steel demand in China is expected to be 4 percent in 2016 followed by 3 percent in 2017, according to Worldsteel’s forecast. This suggests a demand of 626.1 million metric tons of steel (15 percent less than in 2013) for 2017, a contraction to 41.9 percent of world steel use from 47.9 percent in 2009 and 44.8 percent in 2015.

    Falling investments related to oil and gas and the squeeze on government spending have affected steel demand in economies relying on revenue from the oil industry. On the positive side, lower oil prices have alleviated inflationary pressure in oil importing countries, giving room for monetary stimulus to boost economic growth and providing opportunities for structural reforms, Worldsteel says, adding that it believes the commodity markets are at or near the bottom of this cycle.

    With the deep integration of China in the global manufacturing supply chain, this sector has slowed as a consequence of weak growth in global trade. Manufacturing exports in emerging economies, in particular in Asia, declined owing to slower Chinese demand. The same is true for developed countries experiencing a reduction in the exports of consumer goods and machinery, the association says. 

    Specifically, the mechanical machinery, metal goods and other transport sectors are weakening, but the automotive sector will maintain its growth momentum supported by strong demand in many countries.

    Outside China the construction sector is expected to maintain its mild but steady recovery momentum, particularly in India, the MENA (Middle East and North Africa) and ASEAN (Association of Southeast Asian Nations) regions, Worldsteel forecasts.

    Steel demand in some emerging economies continues to perform below expectation, the association says. A worsening external environment in the form of weak exports, low commodity prices, capital outflows and currency devaluation add adversity to these economies. Geopolitical and internal national political tensions are present in many of emerging economies.

    Brazil and Russia are struggling with their internal and structural issues. Worldsteel says it expects steel demand in both economies to contract strongly in the period ahead. In particular, the Brazilian economy with its political uncertainty has resulted in a severe contraction in steel demand of 16.7 percent in 2015 and will contribute to a contraction of 8.8 percent in 2016 with a recovery of only 3.1 percent in 2017.

    India’s prospects are brightening because of low oil prices, the reform momentum and policies to increase infrastructure and manufacturing output, the association says. India’s steel demand will increase by 5.4 percent in both 2016 and 2017, reaching 88.3 million metric tons in 2017.

    In Turkey, Worldsteel forecasts steel demand to grow by 3.3 percent in 2016 and by 3.2 percent in 2017, supported by the government’s focus on progrowth economic policies and low oil prices.

    Steel demand in the ASEAN 5 (Thailand, Malaysia, Vietnam, Indonesia, Philippines) also is expected to maintain a growth rate of around 6 percent, despite their exposure to China in light of their infrastructure building activities and will reach 74.6 million metric tons in 2017, Worldsteel says.

    Steel demand in the emerging and developing economies excluding China is forecast to grow by 1.8 percent and by 4.8 percent in 2016 and 2017 respectively. Steel demand in these economies will amount to 457.1 million metric tons in 2017, the association says, accounting for about 30 percent of world steel demand.

    While developed economies also are feeling the effect of the worsening global economic environment, Worldsteel says it expects them to maintain stable recovery momentum. Steel demand in the developed economies will grow by 1.7 percent in 2016 and by 1.1 percent in 2017, according to the association’s forecast.

    In the EU, a mild recovery in steel demand continues with generally improving economic sentiments and investment conditions. However, uncertainties in the political landscape related to the refugee crisis and Brexit raises risks to the improving economic condition, Worldsteel says. Steel demand in the EU is forecast to grow by 1.4 percent in 2016 and by a further 1.7 percent in 2017.

    In the U.S., steel demand is dampened by the fall in oil prices and the strong dollar, but an improving job market and a robust housing sector will support steel demand, the association forecasts. Steel demand in the U.S. is forecasted to grow by 3.2 percent in 2016 and by 2.7 percent in 2017.

    The SRO is prepared by the Worldsteel Economics Committee, comprising more than 40 of its member companies and associations, which meets twice annually. The committee considers country and regional economic trends, activity in steel consuming sectors and other publicly available information to compile a global overview on steel demand.

    Courtesy: www.recyclingtoday.com