Global steel demand to drop 2.3% on year in 2022: worldsteel

Steel demand is expected to drop 2.3% year on year in 2022 to 1.8 billion mt and then only recover 1% in 2023 to 1.815 billion mt, the World Steel Association said in its short-range outlook update released Oct. 19.

In April the association had forecast 2022 demand to grow 0.4% to 1.84 billion mt, after increasing 2.8% in 2021, and 2023 demand to rise a further 2.2% to 1.88 billion mt.

The global economy had been hit by inflation, US monetary tightening, China’s economic deceleration and Russia’s invasion of Ukraine, worldsteel Economics Committee Chairman and Ternium CEO Máximo Vedoya said, with the demand forecast revised lower due to high energy prices, rising interest rates and falling confidence resulting in a slowdown in steel-using sectors.

“The prospect for 2023 depends on the impact of tightening monetary policies and central banks’ ability to anchor inflation expectations,” he said.

“Particularly the EU outlook is subject to further downside risk due to the high inflation and the energy crisis that have been exacerbated by the Russia-Ukraine war.”

Europe’s potential gas supply crisis was also a downside risk and, while supply chain problems had partially eased in 2022, they also continued to constrain production due to emerging new disruptions, the association said.

“Assuming that the war will not end soon and China continues to maintain its strict COVID containment policy for the time being, supply bottlenecks will not dissipate completely, despite slowing demand,” worldsteel said.

In China, the association forecast that steel demand was likely to drop 4% on the year, after it fell 6.6% in the first eight months of 2022 due to repeated COVID lockdowns cooling the country’s economy and a deepening slump in the property market.

In 2023, steel demand in China was expected to remain steady, assuming that small new stimulus measures were introduced, lockdown measures were largely removed and new infrastructure projects and a mild recovery in the real estate market could prevent further demand contractions.

Developed world demand to fall 1.7% in 2022

Steel demand in the developed world was forecast to fall 1.7% in 2022 and inch up 0.2% in 2023, after recovering by 16.4% in 2021 from the pandemic dip of 12.3%, worldsteel said.

This was down from April’s forecast of a 1.1% increase in 2022 and a 2.4% jump in 2023.

Steel demand in Europe was expected to drop 3.5% year on year in 2022, due to with high inflation and the energy crisis, as well as the Ukraine war causing supply-chain issues.

European steel demand was expected to contract further in 2023, worldsteel forecast, saying there were no immediate improvements in the gas supply situation in sight and there was significant downside risk in the case of a harsh winter or further energy supply disruptions.

However, worldsteel said there was some upside potential in 2023 if the Ukraine war ended sooner than expected.

In the US, worldsteel said it did not expect steel demand to turn into a contraction, as the automotive sector was expected to maintain positive momentum on the back of pent-up demand and easing of supply chain constraints, the new infrastructure law was due to boost infrastructure investment and rising energy sector investment would support steel demand growth, despite a weakening economy.

Japan’s steel demand was expected to see a moderate recovery in 2022, due to support from the non-residential construction and machinery sectors and continue to recover in 2023 amid automotive industry growth and easing supply chain constraints, the association said.

The steel demand outlook for South Korea was expected to decline in 2022 due to falling facility investment and construction, although a recovery in 2023 would be led by less auto supply chain bottlenecks and improved ship deliveries and construction.

High growth in India, ASEAN region

Outside of China, worldsteel said developing economies, especially energy-importing ones, were experiencing more acute inflation and monetary tightening cycles, although fast-growing Asian developing economies, like India and the ASEAN region, were expected to maintain high growth, supported by the structural strength of the domestic economy.

Worldsteel said India’s demand was forecast to show high growth due to strong urban consumption and infrastructure spending, while demand in the ASEAN region had been growing in 2022 as governments pushed for infrastructure projects, with the body predicting particularly strong demand in Malaysia and the Philippines.

Meanwhile, demand in Russia was expected to contract less in 2022 than previously expected, despite sanctions, mainly due to high oil prices and government measures supporting construction, worldsteel said, although demand in Russia’s automobile and machinery sectors would contract due to high dependence on imported components.

Russia’s steel demand in 2023 was then expected to fall further due to sanctions.

“Steel demand in war-ridden Ukraine contracted more than 50% in 2022, but a partial recovery is expected in 2023 on the back of reconstruction activities,” worldsteel said.

Turkey’s demand was also expected to contract in 2022 and have a limited rebound in 2023, due to the lira’s depreciation and high inflation impacting construction.

Demand in countries in South and Central America were expected to contract in 2022 due to significant destocking, slowing construction and a high inflation environment, with US monetary tightening also putting additional pressure on financial markets, it said.

— Jacqueline Holman