Low commodity prices indicative of slow economic growth
Furthermore it is said, that falling oil and gas related investments and the squeeze on government spending have affected steel demand in economies relying on oil based revenue. On the positive side, lower oil prices have alleviated inflationary pressure in oil importing countries, giving room for monetary stimulus to boost economic growth and providing opportunities for structural reforms. We believe that the commodity markets are at or near the bottom of this cycle, according to Worldsteel.
Slowing growth in global trade bites manufacturing growth
But the report also sees-with the deep integration of China in the global manufacturing supply chain-that this sector has slowed as a consequence of weak growth in global trade. Manufacturing exports in emerging economies, in particular in Asia, declined owing to slower Chinese demand. The same is true for developed countries experiencing a reduction in the exports of consumer goods and machinery.
Specifically, the mechanical machinery, metal goods and other transport sectors are weakening, but the automotive sector will maintain its growth momentum supported by strong demand in many countries, according to the worldsteel statements, the news release also states. Outside China the construction sector is expected to maintain its mild, but steady recovery momentum particularly in India, the MENA and ASEAN regions.
Emerging economies exposed to Chinaâs slow down and financial market volatilities
Based on the worldsteel data, steel demand in some emerging economies continues to perform below expectation. A worsening external environment in the form of weak exports, low commodity prices, capital outflows and currency devaluation add adversity to these economies. Geopolitical and internal national political tensions are present in many of emerging economies.
Furthermore it is said in the news release, that Brazil and Russia are struggling with their internal and structural issues. Steel demand in both economies is expected to contract strongly in the period ahead. In particular, the Brazilian economy with its political uncertainty has resulted in a severe contraction in steel demand of -16.7% in 2015 and will contribute to a
contraction of -8.8% in 2016 with a recovery of only 3.1% in 2017, based on the company data.
