In 2022, steel demand will see a further increase of 2.2% to 1,896.4 Mt. The current forecast assumes that, with the progress of vaccinations across the world, the spread of variants of the COVID virus will be less damaging and disruptive than seen in previous waves.
Commenting on the outlook, Mr Al Remeithi, Chairman of the Worldsteel Economics Committee, said, “2021 has seen a stronger than expected recovery in steel demand, leading to upward revisions in our forecast across the board except for China. Due to this vigorous recovery, global steel demand outside China is expected to return earlier than expected to its pre-pandemic level this year.
Strong manufacturing activity bolstered by pent-up demand is the main contributor. The developed economies have outperformed our earlier expectations by a larger margin than the developing economies, reflecting the positive benefit of higher vaccination rates and government support measures. In the emerging economies, especially in Asia, the recovery momentum was interrupted by the resurgence of infections.
While the manufacturing sector’s recovery remained more resilient to the new waves of infection than expected, supply-side constraints led to a levelling off of the recovery in the second half of the year and are preventing a stronger recovery in 2021. But with high backlog orders combined with a rebuilding of inventories and further progress in vaccinations in developing countries, we expect steel demand will continue to recover in 2022.
Persistent rising inflation, continued slow vaccination progress in developing countries and further growth deceleration in China all pose risks to this forecast.”
China
The Chinese economy sustained its strong recovery momentum from 2020 into the early part of 2021. However, it has slowed since June. There have been marked signs of deceleration in the steel using sector’s activity since July, leading to a steel demand contraction of -13.3% in July and then -18.3% in August. The sharp deceleration is partly attributable to occasional factors such as the recent adverse weather and small waves of infections through this summer, however more substantive causes include the slowing momentum in the real estate sector and the government cap on steel production. Real estate activity has weakened due to tough government measures on developers’ financing introduced in 2020. At the same time, infrastructure investment has not picked up in 2021 due to a depletion of investment opportunities and limited local government financing ability. Furthermore, the strong manufacturing recovery across the world has reduced the export market.
From a high base last year and with a continued negative trend in the real estate sector, Chinese steel demand will have negative growth for the rest of 2021. As a result, while the January to August apparent steel use still stands at a positive 2.7%, overall steel demand is expected to decline by -1.0% in 2021.
No growth in steel demand is expected in 2022, with the real estate sector remaining depressed in line with the government policy stance on rebalancing and environmental protection. Some restocking activities might support apparent steel use. Recent government action to push for a transition away from the real estate-dependent growth model is likely to continue.
Developed economies
More targeted and localised lockdowns helped to minimise the impact of the latest infection waves on economic activities in 2021. However, supply chain bottlenecks and the services sector still lagging behind are preventing a more robust recovery.
A reduction in supply chain bottlenecks, continued pent-up demand and rising business and consumer confidence, will strengthen the recovery momentum in 2022.
After falling by -12.7% in 2020, steel demand will increase by 12.2% in 2021 and 4.3% in 2022, reaching its pre-pandemic level.
In the US, the economy continues its robust recovery, driven by pent-up demand and a vigorous policy response. The level of real GDP exceeded its previous high in the second quarter of this year.
Steel demand was aided by the strong performance of the automotive and durable goods sectors, but shortage of some components is undermining this recovery. The momentum in the construction sector is weakening with the end of a residential construction boom and sluggish non-residential sector activities. The recovery in oil prices is supporting a recovery in energy sector investment.
There could be more upside potential if President Biden’s infrastructure stimulus programme is enacted, but this would not feed through until late 2022.
In the EU, the recovery in steel demand that started in the second half of 2020 is gathering pace, with all steel-using sectors exhibiting a positive recovery despite continuing waves of infection.
Germany’s steel demand recovery is supported by exports, which underlie its strong manufacturing performance. However, supply bottlenecks, particularly in the automotive sector, are causing a loss of momentum. Steel demand in 2022 will benefit from a high order backlog in the manufacturing sector while the construction sector is expected to continue to grow after showing relatively high growth performance throughout the pandemic.
Italy, one of the hardest hit by the pandemic in the EU, is recovering faster than other EU countries, with strong recovery in construction. Several steel using sectors, including construction and domestic appliances, are expected to recover to a pre-COVID level in 2021.
In developed Asia, the COVID situation worsened in 2021, exacerbated by slower vaccination progress, but steel demand recovery was not interrupted and the forecast has been revised up, helped by the strong rebound in global trade and government infrastructure programmes.
In Japan, steel demand is recovering gradually with increasing exports, investment and consumption. Manufacturing, especially automotive and machinery, is leading the recovery. Civil construction continues to underpin steel demand, while private construction remains subdued, with the exception of warehouses and distribution centres. In 2022, recoveries in consumption and investment are expected to support positive growth in all steel using sectors.
South Korea is expected to see its steel demand recovering to the 2019 level in 2021, supported by improving exports and investment in manufacturing facilities. The construction sector will be supported by public civil engineering programmes and residential construction recovery, switching to positive growth in 2021/22. South Korea saw a jump in new shipping orders in 2021, which will boost Korea’s steel demand for the coming years.
