U.S., Europe recovering; growth in China, developing countries slack The recovery in global demand for steel is continuing, but growth is stabilizing at a lower rate and with a large dose of volatility and uncertainty. That was the key conclusion in a recently released outlook report for 2014 and 2015 from the World Steel Association (Worldsteel). Volatility and uncertainty are the key variables because different areas of the world are experiencing varying and sometimes surprising economic conditions, all of which effect the demand for steel. Demand in the United States grew at a surprisingly brisk rate in 2014 following shrinking demand in 2013. India is also experiencing a strong bump-up in steel demand this year. The demand for steel in China is still growing, but at a much slower rate than in recent years. Other emerging economies have also been iffy. All of this combines to create a challenging environment for steel producers and shippers. Worldsteel’s most recent outlook forecasts that global steel use will increase by 3.1 percent to 15 billion tons in 2014 following growth of 3.6 percent in 2013. In 2015, Worldsteel forecasts that global demand will grow by 3.3 percent to reach nearly 16 billion tons. “In 2013 world steel demand grew higher than our previous forecasts due to a stronger than expected performance in the developed world in the second half of the year,” said Hans Kerkhoff, chairman of Worldsteel’s economics committee. “In particular, the recovery in the United States gained strength.” The downturn in the European Union also bottomed out and Kerkhoff expects that steel demand in the EU will move into positive territory in 2014. On the other hand, many emerging economies continue to struggle with structural issues and financial market volatility. In the United States, after a decrease of 0.6 percent in steel use in 2013, 2014 and 2015 are expected to see a return to growth and recovery. Steel use will grow by 4.0 percent to over 99 million tons in 2014 and by 3.7 percent in 2015, according to Kerkhoff. Steel use in Mexico is expected to grow by 3.4 percent to 19.2 million tons in 2014 and by 3.9 percent in 2015, according to Worldsteel. Increased domestic demand in the U.S. and slack international demand is reflected in growing U.S. steel imports and declining exports since the beginning of the year. (See sidebar on next colomn.) The deceleration of China’s demand for steel is the prime reason for Worldsteel’s slightly lower global growth rate forecast for 2014. “In 2015, growth in most parts of the world will accelerate thanks to a continuing steady recovery in the developed economies and an improvement in the situation for the emerging economies,” said Kerkhoff. “But China’s steel demand will further decelerate and this will prevent the broader recovery from registering a higher global growth rate for 2015.” China’s demand for steel grew by 6.1 percent in 2013, thanks to support from government infrastructure investments. But the growth of steel use in China is expected to slow to 3.0 percent in 2014 to 721 million tons. In 2015, steel demand growth in China is expected to further decelerate to 2.7 percent. “The Chinese government is trying to rebalance the economy and continues to restrain investment activities,” said Kerkhoff. “Issues also remain surrounding China’s debt and real estate bubble.” The situation in Europe also presents challenges. “The recovery in Europe is still only mild and constrained by high debt and unemployment,” said Kerkhoff. “Structural problems in the emerging economies are not likely to be resolved in the short term leaving them fragile and susceptible to external shocks. We are still seeing unexpected unstable political situations in many emerging economies.” Developments in Ukraine, for example, has raised a high downside risk for Worldsteel’s outlook for the Commonwealth of Independent States (CIS, the former Soviet Union). After a contraction of -0.2% in 2013, steel use in the European Union is projected to grow by 3.1 percent in 2014 to 143 million tons as the construction sector is expected to bottom out. “Trends at the national level will continue to differ, but it appears that Southern Europe has passed its lowest point,” said Kerkhoff. Steel use in Germany is expected to increase by 4.5 percent in 2014, Italy by 2.6 percent, France by 1.0 percent and Spain by 3.0 percent. Steel demand growth of 3.0 percent in the EU is projected for 2015. Steel use in the CIS region is projected to grow by only 1.1 percent to 60 million tons in 2014 due to slow investment, but will accelerate to a 3.7 percent growth rate in 2015 with steel demand in Russia growing by 4.4 percent. “Steel demand in Ukraine will continue to contract in 2014,” said Kerkhoff, “but the fall will be limited to 3 percent thanks to financial assistance from the International Monetary Fund.” In India, steel demand is expected to grow by 3.3 percent to 76.2 million tons in 2014, following 1.8 percent growth in 2013. “Growth rates in India are due to the improved outlook for the construction and manufacturing sectors, even though this will be constrained by high inflation and structural problems,” said Kerkhoff. Worldsteel projects demand to grow in India by 4.5 percent in 2015. Steel use in Japan grew by 2.0 percent in 2013 thanks to a moderate recovery brought about by governmental economic policies which included fiscal stimulus, monetary easing, and structural reforms. But Kerkhoff expects steel use in Japan to contract by one percent to 65 million tons this year due to a consumption tax hike which is having a negative affect on the construction and automotive sectors. In 2015, steel demand is expected to increase by 0.5 percent. In Central and South America, steel use is projected to grow by 3.4 percent to 51 million tons in 2014 down from 4.3 percent in 2013. “This is forecast to slow further to 2.7 percent in 2015,” said Kerkhoff, “due to contraction in Argentina and a sharp slowdown in Chile. In Brazil, steel demand growth will slow to 3.0 percent to 27 million tons in 2014 and 3.2 percent in 2015 as high inflation and interest rates continues to restrain economic growth.” In the Middle East and North Africa region, steel demand is expected to grow by 6.1 percent to 67 million tons in 2014 after a 0.9 percent increase in 2013. “Growth in the region is strengthening as political uncertainties moderate,” said Kerkhoff. “Strength in the non-oil sector in the Gulf Cooperation Council countries is expected to stretch into 2014 and the Egyptian economy as well.” In 2015, steel demand in the region is expected to grow by 9.4 percent. Overall, Kerkhoff sees steel use growth in the developed economies above two percent in 2014 and 2015. “However,” he added, “the developing and emerging economies will continue to grow faster than the developed economies despite their more subdued performances.”