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Long-term global steel demand growth to be 1%; China has peaked: worldsteel's Basson

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Long-term global steel demand growth to be 1%; China has peaked: worldsteel's Basson

London — The World Steel Association expects global steel demand growth to stabilize over the long-term at a compound annual growth rate of around 1%, now that Chinese steel demand has peaked, worldsteel Director General Edwin Basson said Thursday.

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"Overall we see positive growth, shifting more to developing nations," Basson told reporters in London. "Structurally steel is a very robust market ... we don't see much to shift it from [current demand levels of] 1.7 billion mt/year," he said. Slow and steady growth will bring overall steel usage levels up to around 2 billion mt by 2040, Basson predicted.

Earlier in the week, worldsteel's short-range outlook forecast steel demand growth of 1.3% this year to 1.735 billion mt of finished steel, a markedly slower pace than last year's 2.1% growth in real terms, led by China. The Brussels-based association forecasts global steel demand growth slowing further to 1% in 2020, when a 1% decline is foreseen in Chinese demand.

"Steel demand in China has peaked ... [this means] no more rapid growth but sideways," Basson said.

However, production of steel in China is still growing: its crude steel output in March reached 80.33 million mt, up 10.0% on year, the country's National Bureau of Statistics reported Wednesday, and is expected to rise further in April, partly due to the end of winter output cuts and improved end-user demand. But government stimulus levels that may be heightened this year are expected to dissipate next.

"We will see a long flat peak in China," Basson said.

Recent production growth may lift China's crude steel output for this year to around 949 million mt, from 929 million mt in 2018, according to Basson, remembering that some 60 million mt of Chinese capacity has recently been included in official figures, coming "from the dark into the light" with enhanced regulation of the country's steel sector, involving displacement of unregulated induction furnace capacity.

Chinese finished products demand is seen at a peak of 860 million mt, Basson said. The gap between production and demand levels means that China will remain an exporter, but with relatively more stability than in the past, selling some 60 million mt to 80 million mt of steel products abroad this year, he said.

While "very fast" growth in steel demand is seen in India -- more than 7% in both 2019 and 2020 according to worldsteel's forecast -- "India is not strong enough to lift the markets," Basson said. "The difference will come when Africa enters the debate, but this won't be for the next few years," he said.

Rising protectionism in the steel industry globally is likely to lead to greater regionalization in steel trade and usage, Basson said.

The problem of steel sector overcapacity is being tackled by efforts including by the G20 Global Forum on Excess Capacity and by Chinese cuts programs and restructuring, Basson said. Over the past three years overcapacity has fallen from around 760 million mt to recent estimates of 540 million mt, he said.

-- Diana Kinch,

-- Edited by Richard Rubin,