By: Anthony_David
Massive infrastructure growth in the developing nations and a more modest growth in developed nations promise to push global steel demand by 6.5–7% this year. Lakshmi Mittal, the chief executive of ArcelorMittal recently said that the demand for steel is expected to continue rising in 2011. In 2010, global steel demand rose by 10% from 2009 levels and touched a record high of 1.4 billion tons.
By 2020, over 250 million people in the developing nations are expected to move to urban areas and that would create a huge demand for housing and other infrastructure. Mittal hopes the strong growth curve continues to rise over the next five years and the steel industry reaches pre-financial crisis levels by 2015.
Chairman of the World Steel Economics Committee, Daniel Novegil, said, “2010 saw a steady recovery of steel demand which began in the second half of 2009 driven by stimulus packages globally, the resilience of emerging economies and an overall market recovery. In 2011, we expect to see a further 5.9% growth in world steel demand.”
Developments in China, which is the world’s largest consumer of steel, have been a major driver of this meteoric rise in demand. China’s demand for steel is expected to grow by 5% this year as well as in 2012, and reach 635 million tons in 2012.
India is another major contributor to the growing steel demand. In 2010, India produced the fifth highest quantity of steel in the world. According to the last World Steel Association (worldsteel) report, India is expected to see the world’s highest growth in steel demand this year, a massive13.3%. In 2014, demand in India is expected to grow by 14.3% and touch 79 million tons per year. However, an important question put forward by an analyst asks, “The question is how much of this demand growth will be met by the local steel mills and how much will be met by imports?” India was a net importer of steel in 2010 and since no significant capacity addition is expected in 2012 either, the country is likely to remain a net importer in 2014 as well.
Central and South America is another leading steel market and consumption in the region is expected to grow by 6.6% and 8.3% in 2011 and 2012 respectively. Consumption this year is expected to reach almost 49 million tons.
In the Western world, the US is expected to lead the demand curve with a 13% growth this year. Consumption of steel in the EU is forecast to increase by almost 5% this year. Germany and France are expected to lead the demand growth with countries such as Spain, Portugal, Ireland and Greece following slowly.
Japan is the world’s largest exporter of steel and business in Japan is almost back at levels before the devastating tsunami and earthquake of March 2011. However, all reports quickly point out that given the current trend of rising prices, the expected growth in the global steel industry may not happen as early or as consistently as expected.
For example, in China, domestic prices of steel have been falling sharply and the government’s power rationing policy is worsening the situation with steel makers having to reduce production. While Q1 and Q2 of 2010 saw record production figures, Q3 and Q4 are expected to be the exact opposite. Housing projects will continue to demand steel rebar but China is more often than not, short of the product causing further price hikes.
India too is witnessing a fall in demand because of increasing interest rates, which is affecting demand for houses and automobiles. Further, delays in land acquisition and environment clearances are holding up projects. In fact, the growth of the domestic steel industry is expected to fall from 10% to 8% year-on-year by end September.
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