Demand in Asian region driving global steel growth: World Steel Association

The World Steel Association (WSA) has revised the October 2018 forecasts of country-wise steel consumption and these figures are being formally announced in April 2019 meeting. The global demand for finished steel at 1,711.6 million tonnes (MT) in 2018 is slated to reach 1,734 MT (+1.3%) and 1,750 MT in 2020.

The volume growth in steel consumption during 2018 was 54 MT and the anticipated growth in consumption for the current year is around 53 MT. This growth in global demand would originate largely from the Asian region in such a manner that the demand in Asia forms 69% of the total global steel consumption in 2019.

In Asia, the revision in China’s demand growth has made all the difference. It is felt that falling GDP growth in China, resulting from consumption-led growth as opposed to the investment-led one, would not decrease steel consumption. Thus, it has been estimated that Chinese demand for steel in 2018 has increased by 54 MT from the substantial investment in real estate that has boosted steel demand.

India has been projected to consume 96 MT of steel in 2018 which would rise up to 102.8 MT in the current year and would grow up to 110.2 MT in 2020. The latest steel demand estimates for India are not much of a revision of the earlier ones made in October 2018.

Infrastructure growth would continue to remain India’s primary driver of demand for the commodity in the next few years. Slowdown in the pace of construction in roads, rail and Metro rail connectivity, dedicated freight corridors, industrial corridors, upgradation of existing major airports and the construction of minor ones, ports upgradation and mechanisation, shipbuilding, rural and urban infrastructure, real estate, etc, in the next few months would imply a hindrance to the projected demand volume of steel for a short period and then picking up the pace again.

This feature has been a regular phenomenon in the economic growth of many countries. This only implies that the incremental consumption growth of 14MT of finished steel in the next two years may not follow a uniform pattern of growth. This may overshoot if the pace of construction is speeded up after the election process completes.

Indian economy is exhibiting a substantial growth and it is heartening that gross fixed capital formation as a percentage of GDP (current prices) has moved up to 29% in April-December 2018 from 28.7% in the corresponding period of last year. India is, however, facing a wider current account deficit at $16.9 billion at the end of the third quarter of FY19 that stands at 2.6% of GDP. The global steel market is seized with trade uncertainty fueled by the US-China conflict. Europe is not immune to steel imports diverted from the US market with internal demand showing little signs of upward movement. While India needs to enhance its steel exports, meeting the domestic demand should be the basic determinant of capacity augmentation efforts.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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