Asian demand drives global steel production growth

Recently, the World Steel Association (WSA) revised its steel consumption projections for the region and these figures were officially announced at the April 2019 meeting. Global demand for finished steel in 2018 amounted to 1,711.6 million tonnes, while this year it is projected at 1,734 million tonnes (+ 1.3%) and 1,750 million tonnes in 2020.

This growth in global demand will come primarily from the Asian region, such that Asian demand will account for 69% of total global steel consumption in 2019.

In Asia, the revision of Chinese demand growth has had a decisive impact. It is believed that a drop in GDP growth in China, driven by increased consumption rather than increased investment, will not lead to a decline in steel consumption. Thus, it was estimated that Chinese steel demand increased by 54 million tons in 2018 due to significant real estate investments that increased steel demand.

India is projected to consume 96 tonnes of steel in 2018, which will grow to 102.8 tonnes this year and rise to 110.2 tonnes in 2020.

The latest estimates of steel demand in India are not something of a revision of previous estimates made in October 2018.

Infrastructure growth will remain the main driver of raw material demand in India over the next few years. Slowing down the pace of construction of roads, railways and subway lines, dedicated cargo corridors, industrial corridors, modernization of existing large airports and construction of secondary ones, modernization and mechanization of ports, shipbuilding, rural and urban infrastructure, real estate, etc. then it will pick up steam again.

This feature has been a regular occurrence in the economic growth of many countries. This only means that the increase in consumption of 14 million tons of finished steel in the next two years may not correspond to a single growth model. This can happen if the pace of construction accelerated after the completion of the electoral process.

The Indian economy is experiencing significant growth and it is encouraging that gross fixed capital formation as a percentage of GDP (current prices) rose to 29% in April-December 2018 from 28.7% in the corresponding period last year. At the same time, India faces a broader current account deficit of $ 16.9 billion at the end of the third quarter of FY19, which is 2.6% of GDP.

The WSA report summarizes steel use in GDP by country by dividing steel use by millions of real GDP in US dollars. According to this, China still has the highest intensity of steel contribution to GDP with an average of 59.6 (excluding Vietnam, a country with a low GDP level) and well above the global average of 20.7.