Steel demand recovery following the coronavirus pandemic is expected to occur at different rates in different regions but may be drawn-out outside China, according to the World Steel Association.
China’s steel demand is expected to increase by 8% in 2020, aided by government infrastructure stimulus and a strong property market, but demand in the rest of the world is expected to decrease by 13.3%. “We don’t expect a return of steel demand to the levels of 2019 before 2022 in the rest of the world, excluding China,” Edwin Basson, worldsteel general director, told reporters Oct. 15 during the launch of the association’s October Short Range Outlook.
Developed economies are expected to register a decrease in steel demand by 14.4% this year from 2019 to 336 million mt and rise by 7.9% in 2021 to 363.5 million mt, according to worldsteel’s outlook. Steel demand in the developed economies in 2019 was 393.4 million mt.
The global financial crisis saw a major fall in developing economies but during the coronavirus pandemic declines have been seen in both developed and developing economies, with a “short, sharp effect on steel demand, with most of the impact seen in the H1 2020,” Basson noted. Overall, steel demand is forecast to fall 8%-18% this year from 2019 levels, depending on country or region, he said.
In developed economies manufacturing sectors, which were only just about to recover from the slowdown in late 2019, were pushed back again by the pandemic. Even with a strong bounce back after the economies reopened, which has closed the gap with pre-pandemic levels, double-digit contraction over the whole year still seems unavoidable, the association stated.
US sees substantial government support
In the US, recovery from the lockdown has been strong, aided by substantial government support measures. The manufacturing downturn was shorter and less acute than expected, worldsteel said. However, the US is still struggling to control the virus’s spread, and the recovery momentum might taper off in the coming months, it said. The outlook for 2021 is less optimistic, with a subdued outlook for construction and auto production. According to worldsteel, US steel demand for this year is expected to be down by 15.3%.
In the EU, where the negative economic impact of COVID-19 was softened by strong social security schemes and fiscal stimulus, expectations are for a decrease in steel demand of 15.5% this year from 2019 to 134.3 million mt of crude steel.
In the Middle East, demand is expected to fall 19.5% this year, while in India it should fall 20%, marking the deepest decline in steel demand in decades. However, a “relatively fast recovery” should take place in India next year, supported by rural consumption and government investment in infrastructure, worldsteel said.
Basson said the Short Range Outlook has taken into account a second wave of the coronavirus pandemic, roughly of the same magnitude as the first, but expects governments and economies to respond differently.
“Economic systems cannot tolerate a similar response as in the first wave with complete meltdown and shutdown… that is not tolerable in the long term: what we will most likely see is a desire by governments and societies to keep their economic systems ticking over with more regional or specified focused events, such as lockdowns in certain areas or periods,” he said. “That’s what we’ve built into the second scenario where there will be a desire to keep economic systems moving forward with construction and infrastructure.”
The construction sector remained more resilient to the COVID-19 shock as many governments focused on implementing public projects, Basson noted. Following the easing of lockdowns this continued in the advanced economies, mostly driven by infrastructure investment. The automotive sector suffered “dramatic consequences” from the pandemic, he said. In April, automotive production fell by 70% -90% in many countries. While supply-side issues dissipated relatively quickly, post-lockdown recovery has been constrained by a slow return in demand.
In China, robust domestic demand has facilitated a faster recovery, but overall from January to August 2020 China’s motor vehicle production is still 9% below the 2019 equivalent, according to worldsteel.
— Annalisa Villa, Diana Kinch
