Washington, 11 October (Argus) — The World Steel Association today lowered its forecast for global steel demand for this year and next, citing a sharper-than-expected slowdown in China and uncertainty related to the European debt crisis.
The report came the same day an analyst gave an improved near-term outlook for steel input prices.
The association reduced its 2011 growth forecast to 2.1pc and 1.3bn t in demand from a 3.6pc growth forecast in April, and cut the 2013 outlook to 3.2pc growth from the previous 4.5pc.
Steel use grew by 6.2pc in 2011.
“The economic situation deteriorated during the second quarter of this year due to continued uncertainty arising from the debt crisis in the euro zone and a sharper-than-expected slowdown in China,” said Hans Juergen Kerkhoff, chairman of the Worldsteel Economics Committee.
“These factors have weighed heavily on business confidence and manufacturing activities around the world. Momentum in both the developed and emerging part of the world weakened considerably.”
Steel demand in the 27-member European Union is forecast to decline by 5.6pc in 2012, with steel use in Spain and Italy, among the countries worst hit by the sovereign debt crisis, seen contracting by 11.9pc and 12.6pc, respectively, the Brussels-based association said.
In Germany, the biggest and most-resilient European economy, steel use will likely fall by 4.7pc. Demand in the EU area will recover next year, rising an estimated 2.4pc, said the association, whose members produce about 85pc of the world's steel.
Steel demand in China, the biggest market for steel and coking coal, is forecast to grow by 2.5pc to 639.5mn t in 2012 after growing 6.2pc last year. China's apparent steel use is seen rising 3.1pc to 659.2mn t in 2013. The steel association in April had forecast Chinese demand growth of 4pc for both 2012 and 2013.
Even so, increased demand for iron ore and shipping in the past two months, fueled by a breakout in Chinese steel margins, may lead to higher demand and stronger pricing for coking coal in the near term, Dahlman Rose said in a research note.
Chinese spot steel margins have reached their highest levels since 2009, with the implied margin rallying more than 30pc from a late July bottom, Dahlman Rose said.
The run was the result of the collapse in spot prices for iron ore and coking coal in late July and August. A second, ongoing phase began in early September with Chinese rebar price gains prompting a “meaningful widening” of implied spot steel margins relative to their average for the year.
“Meaningfully higher implied steel margins, brought on by increased Chinese rebar pricing during the second leg of the trend, has enabled input commodities to experience an increase in pricing power,” Dahlman Rose said.
“China imports upwards of 70pc of their iron ore needs versus roughly 15pc of their met coal needs; thus, a move first in iron ore is understandable,” the note said.
India's demand for steel is projected to grow by 5.5pc to 73.6mn t in 2012 and 5pc in 2013, the association said. That compares with a prior forecast of 6.9pc this year and 9.4pc next year.
Japan's steel use is forecast to rise by 2.2pc to 65.5mn t this year, aided by post-earthquake reconstruction and government stimulus. That compares with a prior forecast of a 0.6pc contraction.
Demand for steel from the North American Free Trade Agreement area, made up of the US, Canada and Mexico, is forecast to rise by 7.5pc to 130.4mn t this year, driven by recovering automotive and construction industries.
Steel demand in the Commonwealth of Independent States, which comprises most states of the former Soviet Union, is forecast to rise by 0.8pc to 55.2 mn t this year and by 3.9pc in 2013. That compares with growth of 13.8pc in 2011.
Steel demand in Central and South America should rise by 3.8pc this year and by 6.3pc next year to reach 50.4mn t.
Demand in developing economies, ranging from China and India to smaller countries like Colombia and Bolivia, will grow by 3pc this year and 3.7pc next year, the association said.
Steel demand in the developed world, from the US to the euro zone and Japan, will contract by 0.3pc this year and then grow by 1.9pc in 2013.
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