Steel con­sump­tion in In­dia to go up 6% in 2015

Project Monitor - - FRONT PAGE - DR. M.S. KA­PA­DIA Hans Jür­gen Kerkhoff, Chair­man, worldsteel Eco­nomics Com­mit­tee

Global ap­par­ent steel use will in­crease by 2 per cent to 1,562 mil­lion tonnes in 2014, slow­ing from growth of 3.8 per cent in 2013, ac­cord­ing to the short range out­look for 2014 and 2015 re­leased by World Steel As­so­ci­a­tion (worldsteel) on Oc­to­ber 6. For 2015, it has fore­cast that world steel de­mand will grow by another 2 per cent to reach 1,594 mil­lion tonnes. The fore­cast rates are down­ward re­vi­sions from 3.1 per cent for 2014 and 3.3 per cent given in last April’s SRO.

Hans Jür­gen Kerkhoff, Chair­man, worldsteel Eco­nomics Com­mit­tee, has said: “The pos­i­tive mo­men­tum in global steel de­mand seen in the sec­ond half of 2013 abated in 2014 with weaker than ex­pected per­for­mance in the emerg­ing and de­vel­op­ing economies. As a con­se­quence we are is­su­ing a lower steel de­mand growth fig­ure than our fore­cast re­leased in April this year. The slow­down in China’s steel de­mand re­flect­ing the struc­tural trans­for­ma­tion of the econ­omy has con­trib­uted sig­nif­i­cantly to our lower global growth pro­jec­tion. We have also seen ma­jor slow­down in South Amer­ica and the CIS coun­tries due to fall­ing com­mod­ity prices, struc­tural con­straints and geopo­lit­i­cal ten­sions. In con­trast, the de­vel­oped economies fared well this year. Re­cov­er­ies in the EU, United States and Ja­pan are ex­pected to be stronger than pre­vi­ously thought, but not strong enough to off­set the slow­down in the emerg­ing economies. In 2015, we ex­pect steel de­mand growth in de­vel­oped economies to mod­er­ate, while we project growth in the emerg­ing and de­vel­op­ing economies to pick up.”

This out­look is prone to risks com­ing from var­i­ous fronts. The US in­ter­est rates in­crease ex­pected in 2015 is likely to im­pact global cap­i­tal flows cre­at­ing in­sta­bil­ity in the vul­ner­a­ble emerg­ing mar­kets. At the same time the out­look in emerg­ing mar­kets is con­strained both by the need for struc­tural re­forms and geopo­lit­i­cal ten­sions and as a re­sult en­ergy prices, glob­ally, have emerged as a new risk fac­tor. In China, the re­bal­anc­ing and tran­si­tion to­wards a con­sump­tion-driven econ­omy is not with­out chal­lenges and uncer­tain­ties. Lastly, the re­cov­ery in the Euro-Area is still con­strained by house­hold and gov­ern­ment delever­ag­ing.”

Ap­par­ent steel use in China is ex­pected to slow to 1 per cent growth in 2014 to 748.3 mil­lion tonnes with rapid cool­ing of the real es­tate sec­tor as the gov­ern­ment’s ef­forts to re­bal­ance the econ­omy cur­tails in­vest­ment and weak­ens business sen­ti­ment. The weak growth mo­men­tum will con­tinue into 2015 and China’s ap­par­ent steel use will grow by 0.8 per cent to reach 754.3 mil­lion tonnes in 2015.

In­dia’s out­look is im­prov­ing fol­low­ing the elec­tion of a new gov­ern­ment which is promis­ing pro-business re­forms. In 2014,

AP­PAR­ENT STEEL USE (FIN­ISHED STEEL PROD­UCTS) the coun­try’s steel de­mand is ex­pected to grow by 3.4 per cent to 76.2 mil­lion tonnes in 2014, speed­ing from 1.8 per cent in 2013. In 2015, struc­tural re­forms and im­prov­ing con­fi­dence will support a fur­ther 6 per cent growth in steel de­mand. El­e­vated in­fla­tion and fis­cal con­sol­i­da­tion re­main key down­side risks to the out­look. Both pro­jec­tion rates are bet­ter than those in April’s SRO.

In Ja­pan, fol­low­ing a 2.1 per cent in­crease in ap­par­ent steel use in 2013, steel de­mand in 2014 is re­vised up­ward to in­crease by a fur­ther 2.3 per cent to 66.8 mil­lion tonnes. How­ever,

as the pos­i­tive im­pact of ‘Abe­nomics’ fades away and with another ex­pected con­sump­tion tax hike steel de­mand is likely to de­cline by 1.5 per cent in 2015.

In USA, after a de­crease of 0.4 per cent in ap­par­ent steel use in 2013, steel de­mand is seen in­creas­ing by 6.7 per cent to 102.2 Mt in 2014, a large up­ward re­vi­sion, helped by strong growth in the au­to­mo­tive and en­ergy sec­tors. Steel de­mand is ex­pected to in­crease by 1.9 per cent in 2015.

In Brazil, ap­par­ent steel use will con­tract by 4.1 per cent in 2014 and will re­bound only by 1.5 per cent in 2015. Prob­lems such as high in­fla­tion, over­val­ued cur­rency, high labour costs and in­fra­struc­ture bot­tle­necks are cur­tail­ing in­vest­ment ac­tiv­i­ties in the coun­try.

The re­cov­ery in the EU has gained fur­ther mo­men­tum in 2014 and steel de­mand out­look has im­proved con­sid­er­ably to grow by 4 per cent to 145.9 mil­lion tonnes after in­creas­ing by 0.8 per cent in 2013. The im­prove­ment re­flects a pickup in steel us­ing sec­tors in most coun­tries, but no­tably the UK and Poland and those coun­tries that un­der­went struc­tural re­forms. Ap­par­ent steel use in 2015 is pro­jected to grow by 2.9 per cent. Ap­par­ent steel use in Ger­many is ex­pected to show 3.2 per cent growth in 2014 and 2.3 per cent in 2015.

The out­look for ap­par­ent steel use in CIS ex­pects 3.8 per cent de­cline in 2014, against 2.8 per cent growth in 2013 due to the cri­sis in Ukraine. In 2015, as­sum­ing a sta­bil­i­sa­tion of the po­lit­i­cal sit­u­a­tion, CIS steel de­mand will grow by 1.9 per cent.

World Steel As­so­ci­a­tion rep­re­sents around 170 steel pro­duc­ers (in­clud­ing nine of the 10 largest steel com­pa­nies), na­tional and re­gional steel in­dus­try as­so­ci­a­tions, and steel re­search in­sti­tutes. Worldsteel mem­bers rep­re­sent around 85 per cent of world steel pro­duc­tion.

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). 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.

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