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Global steel demand is likely to grow at a faster pace of 3.3 per cent this year, driven by rising demand for the commodity from India, Brazil, Russia, West Asia and North Africa, according to a report.
“Global steel demand is forecast to grow faster in 2014 at 3.3 per cent, with more demand growth expected outside China, including India, Brazil, and Russia, as well as emerging markets in the West Asia and North Africa,” an EY report said.
It also said growth is likely in key end-use sectors like infrastructure and construction, automotive and oil & gas.
“The Chinese economy continues to be a determining factor for the global steel market in the medium-to-long term,” the report said.
It also said if urbanisation projects continue, accompanied by a strong domestic economy and a growing middle class, it will shift demand to more sophisticated consumer products such as cars and home appliances which will benefit steelmakers with high-end, value-added products.
On future demand, the report said it will be majorly driven by developing nations like China, Brazil, Russia, India and some African countries.
“As demand continues to shift to developing nations, the steel sector is focused on China, Brazil, Russia and India. Moreover, as Africa experiences stability and accelerated economic growth, future scramble for African demand could further shift the landscape in years to come,” EY global steel leader Anjani Agrawal said in the report.
He, however, pointed out that while there are signs of improving demand outlook, excess capacity remains the biggest threat to the steel sector.
“Permanent shutdown of inefficient capacity is the only real solution to bring balance to the market but in the short term it is difficult to see this happening given state participation in many countries and additional incentive to retain employment, regardless of profitability,” Agrawal said.
According to EY estimate, around 300 million tonnes steel making capacity needs to be closed for the industry’s profit margin to reach a sustainable level.
