World Steel Association says it is ‘cautiously optimistic’ on the demand growth situation.
If the consistent rise in iron ore and coking coal prices wasn’t enough, the growth in demand for steel is showing signs of slowing down. So much so that the World Steel Association (WSA) has said it is ‘cautiously optimistic’ on the steel demand growth situation.
Iron ore and coking coal are the two prime ingredients for making steel.
According to the short-range forecast provided by WSA, the apparent steel use will increase by a mere 6.5 per cent in the current year. Industry experts hail this as a ‘healthy’ number. However, it is dwarfed when compared with the demand growth figure of 2010, when it grew by a whopping 15.1 per cent. The picture of 2012 is more worrying as WSA predicts steel demand will grow by 5.4 per cent. An analyst with a foreign research firm who is not allowed to speak to the media said: “Yes, the demand growth is slowing down, but it is not a major worrying factor, as there is no decline in demand. Companies are still selling more steel year after year.”
An official from one of the leading global steelmakers said, “In 2008, when the economic slowdown had hit, companies were forced to shut down blast furnaces and cut production. That is not the case today. Even though demand is slowing down, there are still areas and geographies that are growing. Companies are trying to optimise their production according to the demand. So, there might be production cuts in some regions but at the same time, an increase in production in other areas.”
It is safe to say the global social and economic developments like the euro sovereign debt crisis, political unrest and the Japan earthquake, are taking a toll on the sentiments which in turn is affecting the steel demand.
The analyst from the international research firm said, “The central banks in emerging economies are tightening money supply. This affects the growth momentum in all sectors, also steel.”
Daniel Novegil, chairman of the World Steel Economics Committee said, “Today the global economy is facing increased uncertainty over how the ongoing turmoil in the financial markets will evolve and how it will affect the real economy. Our current forecast for 2012 assumes that developing economies continue to drive global growth and the policy response to the European sovereign debt crisis prevents increased volatility in the equity and financial markets. In light of this global economic uncertainty, our forecast should be considered as “cautiously optimistic”.”
INDIAN STEEL STORY
The India steel story is not looking rosy and can be worrying to some. The Indian steel sector has been saying that the steel demand in India will continue to grow at 8-10 per cent for some years to come. However, WSA predicts that the steel use in India is expected to grow by 4.3 per cent in 2011, half of what the Indian industry expects. The growth rate in 2012, too, is expected to be at 7.9 per cent, just a shade under the lower end of the demand growth forecast by the Indian steel sector.
In the April-August period, India’s steel consumption grew by a mere 1.3 per cent. Jayant Acharya, director (sales and marketing), JSW Steel, on September 8 had shown concern over the demand growth. He had said, “We are hopeful that the auto demand will pick up with the festive season coming up. Infrastructure continues to lag and we are watching it closely.”
Rakesh Arora, head of research, Macquire Capital Securities India, had told Business Standard that the festive season might be able to prop up the demand for steel. He said, “The consumption might grow to four per cent at the most by the end of the financial year.”
THE WORLD OVER
Steel apparent demand growth in China is expected to grow by 7.5 per cent in 2011 as against 8.5 per cent in 2010. It is expected to drop further to six per cent in 2012.
WSA expects US to show a 11.6 per cent demand growth rise in 2011 which would go down to 5.2 per cent in 2012. “In Central and South America, apparent steel use is forecast to grow by 4.7 per cent in 2011 to reach a historical high of 47.8 million tonnes. In 2012, the region’s apparent steel use is forecast to grow by 9.8 per cent to reach 52.4 million tonnes, almost 28 per cent higher than the 2007 level,” WSA noted.
