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Steel demand to grow at least 1.4% in 2019, watch out for India: worldsteel

The World Steel Association expects continued growth in global crude steel demand in 2019 despite expectations of slower economic growth, General Director Edwin Basson told S&P Global Platts, noting that steel production and demand in India should be watched this year.

"Global steel demand will continue to grow at least 1.4% this year taking into account a slow world and Chinese economy. This is a conservative view ... China could very easily grow steel use by 1-2% and if that happens this it could lead to 2% growth in global steel demand rather than 1.4%," Basson said in an interview. "Taking this as a starting point and comparing with production figures, the1.64 billion tons of finished steel products produced last year will be not enough in itself to satisfy the expected demand that we are seeing in 2019, so we hope that there will be a growth in production in 2019," he said.


Global crude steel production reached 1,808.6 million mt in 2018, up by 4.6% year on year.Last year Chinese crude steel production reached 928.3 million mt, up by 6.6%, despite China's phasing out of unregulated, induction furnaces, whose production was not included in official figures. China's share of global crude steel production increased from 50.3% in 2017 to 51.3% in 2018, while its demand was stable overall.


INDIA

While Chinese demand is expected again to be stable overall this year, Indian demand is set to grow. "Watch India for growth, but it will not be a second China," Basson said. India's output grew 4.9% last year to 106.5 million mt. becoming the the world's second largest steel producing country in the last part of 2018, overtaking Japan.


India will also "undoubtedly become the second largest consumer globally in the near future," Basson continued, pointing nonetheless to the considerable differences between India's and China's economies.


"The growth rate in India's economy is still very strong, but it is not an economy that relies to the same extent on infrastructure projects like China's does," he said. "Indian steel growth will be supported by the needs of its own growing population rather than as in China by the industrial sector."


As an old-established steelmaking location, India is experiencing a new demand for steel. Already the use of steel has grown in recent years to above 66 kg/person - still below the world average of more than 200 kg/person, but far above its historical levels.


Three main factors will boost Indian steel demand, according to Basson. Firstly, infrastructure development from the so-called industrial corridor, he said, referring to the DMIC, Delhi-Mumbai Industrial Corridor Project, a project to develop industries between India's capital, Delhi and its financial hub, Mumbai. The objective is to expand India's manufacturing and services using DMIC as a backbone with an estimated investment of US$100 billion that will be spread across an area of 1,504 km.


The second factor is the continued growth of its construction sector, that will be driven both by infrastructure spending and housing demand, especially affordable residential housing.


Lastly, its automotive sector is poised to drive Indian steel consumption, together with the manufacturing sector that has slowly gained momentum. After having contributed in the last 40 years for 14-16% of India GDP, this has recently risen to 18%.


EUROPE, JAPAN AND NORTH AMERICA

Japan produced 104.3 million mt in 2018, down 0.3% from 2017 falling to third in the global steel production ranking. The EU produced 168.1 million mt of crude steel in 2018, down 0.3%. Germany in particular produced 42.4 million mt of crude steel in 2018, down 2.0% on 2017, due mainly to the Rhine river problems that impacted production.


"Apart from the specific situation that we saw in Germany, broadly in Europe as in Japan as to some extent in North America (crude steel production up by 4.1% to 120.5 million mt in 2018), there are two forces that are taking place in the old economies," Basson said. "One is the overall slowdown of the economy that together with the stabilization of the populations has as a consequence less construction works and the other one is the use of better and stronger steel that is triggering less steel demand," Basson explained. For example, cars, railway tracks and the construction sector now all use less steel due to lightweighting, he said.

TURKEY - TRADE BARRIERS AND AFRICA

Turkey's crude steel production in 2018 was 37.3 million mt, down by 0.6% on 2017. "We saw a slightly decrease but it was not too much. It seems that Turkey found a new level of production taking into the account all the political challenges in the region," he said. "The US sanctions could have had a bit of impact on Turkey as Turkey was a big export player."


Still, the global steel industry overall has not registered any major impact on trade volumes or direction of steel trade flows as a result of the US Section 232 tariffs and other trade measures taken in response, the worldsteel director said.


Africa is another part of the world to watch out for, according to Basson. The African continent in the last decade doubled its steel usage, triggered by its increase in population and the slow increase in their incomes, he said.


"These factors together will continue in the long term to increase demand and production of steel but it will not happen overnight," he said.


Source: Platts

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