core sector communique

worldsteel Short Range Outlook

London, 27 April 2012 – The World Steel Association (worldsteel) today released its April 2012 Short Range Outlook (SRO) for 2012 and 2013. worldsteel forecasts that global apparent steel use will increase by 3.6% to 1,422 Mt in 2012, following growth of 5.6% in 2011. In 2013, it is forecast that world steel demand will grow further by 4.5% to around 1,486 Mt.

Commenting, Hans Juergen Kerkhoff, Chairman of the worldsteel Economics Committee said, “Despite the market weakening in the fourth quarter of 2011, world steel demand achieved solid growth of 5.6% in 2011 due to the recovery momentum seen in the first half of the year. Though we saw a series of negative events in 2011 (including Japan’s earthquake, political turmoil in MENA and flooding in Thailand), their impact proved to be contained mostly locally. The exception was the euro zone debt crisis which did have global impact and is the main cause behind the deterioration in this new forecast from our previous one issued in October 2011. Signs of stability are now emerging and we expect the recovery to resume in the second half of this year, leading to a higher growth forecast for 2013.

Although the global impact of the euro zone debt crisis has been limited so far, uncertainties continue to exist and this remains the key downside risk to our current outlook. High oil prices and geopolitical tensions in the oil producing regions are also important downside risk factors. The possibility of a hard landing for the Chinese economy cannot be ignored but at this point we do not attach high probability to this. It should be noted that the most important development in our revised forecast is the continuing slowdown of Chinese steel demand driven by the Chinese government’s efforts to restructure the economy. However, part of China’s projected slower growth is offset by improvement in other emerging markets and the strengthening recovery of the US.”

China’s apparent steel use in 2012 is expected to increase by 4.0% to 648.8 Mt following 6.2% growth in 2011. In 2013, steel demand will again grow by 4.0% as the economy enters a less steel intensive growth phase, with the government’s efforts to rebalance the economy and contain the real estate bubble. This projection brings China’s apparent steel use in 2013 to 674.8 Mt, 61% higher than the 2007 level.

India is expected to resume its high growth trend (after a sluggish performance in 2011). In 2012, India’s steel use is forecast to grow by 6.9% to reach 72.5 Mt. In 2013, the growth rate is forecast to accelerate to 9.4% on the back of urbanisation and surging infrastructure investment.

Apparent steel use in the US is forecast to grow by a healthy 5.7% in 2012. In 2013, the steel use in the US is expected to grow by 5.6% to 99.5 Mt, bringing it to 92% of the 2007 level. For NAFTA as a whole, apparent steel use will grow by 5.2% and 5.1% in 2012 and 2013 respectively.

In Central and South America, apparent steel use is forecast to grow by 6.8 % in 2012 to reach a historical high of 49.1 Mt with Brazil returning to a positive growth of over 5%. In 2013, the region’s apparent steel use is forecast to grow by 6.7% to reach 52.5 Mt, 28% higher than the 2007 level.

The recovery of steel demand is expected to stall in most of the EU in 2012 as the sovereign debt problems continue to act as a major drag on economic activities in the area, but with some differentiated pictures across the regions. In particular, the financially troubled countries of the region are expected to see their apparent steel use decline further.

Overall, apparent steel use in the EU is forecast to slide by -1.2% to 150.9 Mt in 2012, but a modest recovery of 3.3% is expected in 2013. These projections will bring steel demand in the EU to 155.8 Mt in 2013, only 79% of the 2007 level.

Japan’s steel use is expected to decline by -0.6% to 63.7 Mt in 2012 due to the impact of exchange rate appreciation, despite the reconstruction efforts following the March 2011 earthquake. In 2013 apparent steel use in Japan is forecast to continue to decline by -2.2% to 62.3 Mt, which is 77% of the 2007 level.

In the CIS, apparent steel use is forecast to grow by 4.1% in 2012 and then by 5.1% in 2013. These projections will bring the region’s apparent steel use in 2013 to 59.1 Mt, a record for the region.

Steel demand in the MENA region is expected to rebound by 5.7% in 2012 following a -2.0% drop in 2011 due to the impact of the political turmoil in the region. The growth of steel use in MENA is forecast to accelerate further to 8.4% in 2013. These projections will bring the region’s apparent steel use to 68.5 Mt in 2013. This is a record for the region and 26% over the 2007 level.

Our forecast suggests that by 2013, steel use in the developed world will still be at 14% below the 2007 level whereas in the emerging and developing economies, it will be 45% above. In 2013, the emerging and developing economies will account for 73% of world steel demand in contrast to 61% in 2007.

Notes :

• The World Steel Association (worldsteel) is one of the largest and most dynamic industry associations in the world. worldsteel represents approximately 170 steel producers (including 17 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.