World Steel Association upbeat on infrastructure amid weakened steel demand

The World Steel Association is optimistic that government funding for infrastructure projects will help to support steel demand as economies recover from the effects of the coronavirus pandemic, Director General Edwin Basson said June 4, as the association reported it expects global steel consumption to contract by 6.4% in 2020.

In the US in particular, the pandemic has caused a sharp manufacturing recession, which is expected to reach its lowest point in the second quarter, worldsteel said in its Short Range Outlook report, released June 4.

In its updated forecast, worldsteel said it expects steel demand in the NAFTA region to drop 20% year on year to 108 million mt in 2020 from 135 million mt in 2019. For 2021, worldsteel forecasts NAFTA steel demand will total 114.7 million mt.

“The fall in oil prices has placed additional downward pressure on energy sector investment, which was already distressed prior to the crisis,” worldsteel said of the US steel market. “Surging unemployment is leading to reduced income and confidence, impairing residential construction. Although non-residential construction is faring relatively better, it is expected to face a decline in 2020 and a slight recovery in 2021.”

Much of the decline in US construction activity has likely already been seen in recent months as states stopped some construction activities amid more aggressive virus mitigation efforts, Basson said in a video call.

“We think [infrastructure] most definitely will become part of government policy as an initiative in order to get economic systems to revive and recover and therefore we are quite optimistic that expenditure on infrastructure investment around the world may also continue at quite a nice pace,” he said.

In its outlook, worldsteel noted that overall it does not expect the decline in construction activity to be as severe as the drop seen during the financial crisis of 2007-09.

Residential construction activity will likely be constrained over the next year, however reconditioning work on existing family homes seems set to be supported, particularly with many people staying home and spending less amid stay-at-home orders, Basson said.

Non-residential construction may be the area that sees the most adjustment over the course of the next year or two as businesses look at their value chains and make changes in favor of shorter supply chains, he added.

— Justine Coyne