core sector communique

worldsteel Short Range Outlook

 

Tokyo, 4 October 2010 – The World Steel Association (worldsteel) today released its October 2010 Short Range Outlook (SRO) for 2010 and 2011. worldsteel forecasts that apparent steel use will increase by 13.1% to 1,272 mmt in 2010 after contracting by - 6.6% in 2009. This represents an improvement of 35 mmt over the April SRO for 2010 exceeding the pre-crisis peak of 1,222 mmt in 2007. In 2011, it is forecast that world steel demand will grow by 5.3% to reach a record 1,340 mmt. 

 

The worldsteel Economics Committee met in Rio de Janeiro in September 2010 to discuss the October 2010 SRO.

 

Commenting, Daniel Novegil, Chairman of the worldsteel Economics Committee said, “Our first SRO forecast after the economic crisis in April 2009 suggested 8.4% growth in steel demand for 2010. We have now revised this figure up to 13.1%. This improved outlook is due to a better than expected forecast for the developed economies particularly EU, NAFTA, and CIS, as well as the continued strong rebound in most emerging economies. This suggests a steady and stable steel recovery, and our current forecast does not foresee a double dip economic recession as feared by some.”

 

“Despite the better than expected forecast for 2010, we are still cautious. Steel demand in the developed economies in 2011 will still be well below the pre-crisis peak level. The recovery so far has been mainly driven by the inventory cycle and government stimulus packages whose effects are now fading out. But, whether consumer and corporate spending will now pick up and continue the recovery momentum is yet to be seen. Recent economic indicators are sending mixed signals and developments during the remaining part of this year and early next year must be watched carefully.”

 

China’s apparent steel use in 2010 is expected to increase by 6.7% to 579 mmt after the strong increase of 24.8% in 2009. While China showed an increase of 9.2% in apparent steel use during the period of January to August in 2010, it is forecast that China’s apparent steel use growth will slow considerably in the remaining part of this year due to the Chinese government’s effort to cool down the real estate sector and ongoing steel production control. In 2011, the growth rate will further slow to 3.5% with a weak real estate sector and the phasing out of stimulus packages.

 

While the forecast for China is for a fairly low growth rate compared to other countries, its apparent steel use in 2011 will be 42% above the 2007 level. China will account for about 45% of world apparent steel use in 2011.

 

India’s steel demand grew 7.5% during the crisis and is expected to grow by 8.2% and 13.6% in 2010 and 2011, respectively. With 68 mmt of apparent steel use in 2011, India will become the third largest steel using country in the world after China and the US. India’s steel use will be 32% above its 2007 level.

 

In the NAFTA region, the US had a 36.2% reduction in apparent steel use in 2009. Aided by stock building activities and a recovery in manufacturing, apparent steel use in the US is expected to grow by 32.9% in 2010 and then 9.4% to 86.1 mmt in 2011, bringing it back to 79.7% of the 2007 level. For NAFTA as a whole, apparent steel use will grow by 31.3% and 8.7% in 2010 and 2011 respectively.

 

In Central and South America, apparent steel use recorded a -23.6% fall in 2009, but the region’s steel demand is coming back strongly thanks to recovering commodity prices, exports and renewed capital inflows. The region’s apparent steel use will grow by 28.2 % in 2010 aided by a strong rebound of 34.6% in Brazil. In 2011, the region’s apparent steel use will grow by 9.1% to reach 47.6 mmt, a historical high for the region and 14% higher than the 2007 level.

 

The EU economies had a -35.7% reduction in their apparent steel use in 2009 with Spain, Italy, and the UK especially hard hit due to the collapse of their construction sectors. The recovery in the EU is turning out to be stronger than expected as the region’s manufacturing exports, especially Germany’s, gets a boost from the global recovery. In 2010, the region will see an increase of 18.9% in its apparent steel use on the back of inventory rebuilding and strength in the export sector. In 2011, increase in real use is expected to drive the region’s steel demand to grow by 5.7% to reach 147.4 mmt, bringing it back to 75% of the 2007 peak.

 

Japan, which experienced a fall of -32.3% in apparent steel use in 2009, will see its steel use increasing by 19.1% in 2010, much higher than expected, due to the fiscal stimuli and strong export growth. But in 2011, its steel demand is expected to retreat by -1.4% due to tight fiscal policy, strong Yen, and weakening of its major steel using sectors. This brings Japan’s apparent steel use in 2011 to 62.0 mmt, 76% of 2007 level.

 

The recovery in the CIS region is surprisingly robust. Apparent steel use in the region fell -28.3% in 2009 with a fall of -43.0% in Ukraine. In 2010, apparent steel use in the CIS region is expected to grow by 26.5% and then by 11.1% in 2011. This brings the region’s apparent steel use in 2011 to 89% of the 2007 peak.

 

Turkey, which experienced a -16% decline in apparent steel use in 2009, will see a strong recovery of 20.5% in 2010, followed by a further 10.7% growth in 2011 to reach 24.1 mmt, which will bring its apparent steel use back to the 2007 peak level.

 

The MENA region was stable in 2009 despite the fall in oil prices and collapse in the construction market which was offset by an expansionary fiscal stance in the GCC countries, Egypt, and Iran. The region recorded a 0.4% growth in 2009 and is expected to show a 5.9% and a 5.3% growth in apparent steel use in 2010 and 2011 respectively. This will bring apparent steel use in the MENA region to 65.7 mmt, which is 17% above the 2007 level.

 

 

Notes:

 

·   The World Steel Association (worldsteel) is one of the largest and most dynamic industry associations in the world. worldsteel represents approximately 180 steel producers (including 19 of the world's 20 largest steel companies), national and regional steel industry associations, and steel research institutes. worldsteel members produce around 85% of the world's steel.

·   The projections forecast by worldsteel consider both real and apparent steel use. Apparent steel use reflects the deliveries of steel to the marketplace from the domestic steel producers as well as from importers. This differs from real steel use, which takes into account steel delivered to or drawn from inventories.

·   The Short Range Outlook is provided by the worldsteel Committee on Economic Studies which meets twice a year. The Committee membership consists of chief economists from more than 40 of the worldsteel member companies. The Committee considers country and regional demand estimates to compile a global overview on apparent steel use (ASU). The Short Range Outlook is presented to the Board for their final review before publication.