Abu Dhabi, UAEFriday 15 November 2019

China drives global steel demand growth in 2019 despite economic headwinds

Deceleration in China's economy is expected to impact demand growth for 2020 which is expected to slump to 1 per cent

Global demand for steel took a hit last year following the White House's imposition of 25 per cent tariffs on steel. Courtesy Emirates Steel
Global demand for steel took a hit last year following the White House's imposition of 25 per cent tariffs on steel. Courtesy Emirates Steel

China will remain a hotspot for growth in demand for steel in 2019, buoyed by a strong real estate sector, and will continue to drive global demand, according to the commodity's top trading association.

Global steel demand will grow 3.9 per cent this year to 1,775 million tonnes. Demand from China will grow by 7.8 per cent to 900.1m tonnes, or just over half of the total. Demand from the rest of the world is expected to be tepid, registering 0.2 per cent growth to reach 874.9m tonnes, according to the World Steel Association's short run outlook. Demand growth from China this year is largely being fuelled by expansion in the real estate sector, but is forecast to lose steam next year as the world's second-biggest economy decelerates.

Chinese steel demand in 2020 is expected to slow to 1 per cent, with the rest of the world catching up, growing at 2.5 per cent, fuelled by a 4.1 per cent expansion in emerging and developing economies, excluding China. Overall global steel demand growth for 2020 is expected to be 1.7 per cent, reaching 1,805m tonnes.

Global demand for steel took a hit last year following the White House's imposition of 25 per cent tariffs on steel to protect domestic producers. The protectionist policy of the US administration has affected global producers of steel such as India, who imposed retaliatory tariffs, leading to a depressed market for the commodity. Global economic growth is now wobbling, weighed down by trade disputes. The International Monetary Fund revised its forecasts lower for the fifth time in a row on Tuesday , forecasting global growth of 3 per cent this year.

"While the global economic outlook is highly unpredictable, we expect to see further growth in steel demand in 2020 of 1.7 per cent, with emerging and developing economies excluding China contributing more," Saeed Al Remeithi, the association's chairman and Emirates Steel chief executive said in a statement.

"This forecast faces significant downside risks if the current level of uncertainty prevails," he added.

The Chinese real estate sector reported the strongest performance in five years for the first seven months of the year, due to a relaxation of government policy on construction in lower-tier cities.

However, the outlook for other sectors such as manufacturing and the automotive industry looks bleak. China's automotive sector has contracted for 13 months in a row, the report added, with the association expecting the Chinese economy to weaken during the latter part of 2019.

Demand from developed economies, meanwhile is expected to contract by 0.1 per cent this year, after growing at a rate of 1.2 per cent in 2018. Manufacturing in these economies slumped due to a poor environment for export and investment, the association added.

Developing economies, other than China are also expected to see a slowdown due to contractions in Turkey, the Middle East and North Africa region as well as Latin America. However, growth is expected to rebound to 4.1 per cent next year, largely due to infrastructure investments, the report said.

Updated: October 15, 2019 05:41 PM

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