Worldsteel lifts demand forecast on rapid China recovery

Worldsteel has revised up its forecast for global finished steel demand thanks mainly to China’s stunning rebound following the initial Covid-19 pandemic shock at the start of the year. Global demand is now seen falling only -2.4% on-year in 2020 to 1.725 billion tonnes.

This compares to the -6.4% decline forecast in worldsteel’s previous short-range outlook (SRO) in June. This is a difference of 71.2 million tonnes, indicating sentiment has improved significantly.

Chinese steel demand is now seen growing 8% in 2020 to 980.1mt, almost equalling its 2019 growth rate. This will be aided by government infrastructure stimulus and a strong property market.

The world excluding China, however, has seen a deep demand contraction as a result of the pandemic and is unlikely to return to pre-Covid-19 levels until at least 2022, worldsteel director general Edwin Basson said during Thursday’s virtual SRO press conference attended by Kallanish. Demand in the world excluding China is forecast to slump -13.3% in 2020 to 745mt. This compares to the -14.2% drop forecast in June.

A recovery from the pandemic remains fragile due to the second wave of infections, continued social distancing measures, elevated unemployment and weak confidence. The second wave is especially risky given the upcoming flu season in the Northern Hemisphere. “The risk is tilted toward the downside,” worldsteel says. “A W-shaped recovery cannot be ruled out and a full recovery in 2021 is unlikely.”

However, the forecast assumes that despite the current resurgence in infections in many parts of the world, nationwide lockdowns will not be repeated. Instead, selective and targeted measures will be able to contain the second wave, worldsteel observes. “What we will most likely see is the desire by governments and societies to at least keep their economic systems ticking over,” Basson commented.

Global demand in 2021 is seen rising 4.1% on-year to 1.795 billion tonnes, driven by a rebound in the world excluding China, which will be slightly more pronounced in the developing economies. This indicates the pandemic will have a short, sharp “V” effect on steel demand, with most of the downturn seen in the first half of 2020, Basson pointed out.

Chinese demand is seen flat on-year in 2021. Infrastructure and housing projects initiated in 2020 will continue to support demand next year. However, if the economy recovers fully, the government could reverse its stimulus policy to cool down the construction sector. Given the weak global economic outlook, meanwhile, the manufacturing sector’s rebound will be limited.