The World Steel Association predicts that after a slight decline in steel demand in 2020, steel demand in 2021 will increase by 5.8% to 1.87 billion metric tons. The rebound in demand from the automotive industry is the main factor driving the growth of the steel market.
The World Steel Association predicts that global steel demand will increase by 5.8% to 1.87 billion metric tons in 2021, and then it will increase by 2.7% to 1.92 billion metric tons in 2022. The needs of the automotive and construction industries provide the best market growth momentum. However, the actual demand in 2020 will slightly drop by -0.2% compared with a year ago. Major consumer industries such as automobiles and construction are suffering from the spread and restriction of the Covid-19 epidemic and supply chain disruption, which affects the demand boom of the market.
According to World Steel, if the Covid-19 epidemic will stabilize in the second quarter of 2021, it will help the markets of major steel-using countries to gradually return to normal.
The Chairman of the World Iron and Steel Economic Council said: The global steel industry will have only a small contraction in steel demand by the end of 2020. Mainly due to the strong recovery of the Chinese market, an increase of 9.1%. In the rest of the world, the demand for the steel industry fell by 10.0%. "
China's economic recovery:
The Covid-19 epidemic started to affect all parts of the world from China in February 2020. China started the economic shutdown first. Almost all manufacturing and economic industries (except retail) were shut down, and production resumed in May 2020. Governments of various countries have formulated relevant measures, including infrastructure projects and relaxation of taxation and regulatory measures to stimulate consumer spending.
After contracting 6.8% in the first quarter of 2020, the Chinese economy will reach an annual growth rate of 2.3% in 2020. China’s GDP growth is expected to reach 7.5% or higher in 2021, and then slow to 5.5% by 2022. China’s steel demand is expected to grow by 3.0% in 2021, and then slow to 1.0% by 2022.
U.S. steel demand:
As fiscal stimulus measures support consumption, the US economy has gradually recovered from the impact of the epidemic in March 2020, which will help the durable goods manufacturing industry to stabilize the economy. However, total U.S. steel demand for the entire year of 2020 will fall by -18.0% year-on-year. According to World Steel's statement, "the new infrastructure plan may not be able to move, in the long term, it may have the potential to increase steel demand", but the short-term rebound in steel demand will be limited by the weakness of non-residential buildings and the energy sector.
On the other hand, it is expected that the US auto industry market will recover significantly, and the EU steel consumer economy will suffer a serious setback. However, due to government intervention and suppressed demand, manufacturing activities rebounded stronger than expected afterward. Therefore, the steel demand of the European Union and the United Kingdom will fall by -11.4% in 2020, and the steel demand of Italy and France will fall even more. This is because their governments have adopted more stringent blockade measures and a tourism economy that lacks tourism. The recovery of the steel industry in the EU economy in 2021 and 2022 will be driven by the recovery of the automotive sector and public construction plans.
The Japanese economy has been hit by the pandemic due to widespread economic activity interruption and lack of confidence, which further increased the impact of the increase in consumption tax in October 2019. The decline in automobile production is an important reason for the decline in Japanese steel demand by -16.8%. In 2020, Japanese steel demand will drop by 16.8%.
Japan's steel demand will tend to moderate, mainly due to the recovery of exports of automobiles and industrial machinery as global capital expenditures increase.
Steel demand in developing countries (excluding China) has fallen by -7.8% in 2020. India’s steel demand fell by -13.7% in 2020, but it is expected to increase by 19.8% in 2021, exceeding the demand in 2019.
Steel demand in the developing market-ASEAN market in 2020 has fallen by -11.9%. Vietnam and Indonesia saw a smaller decline in steel demand. According to World Steel, the recovery of the region will affect the recovery of construction projects and tourism.
The epidemic has dealt a heavy blow to the Latin American economy. In 2020, steel demand in most parts of the region will experience a double-digit contraction. Mexican steel demand has been hit hard by the decline in car production and investment. The rapid recovery of the automotive industry and the strong US economy will boost Mexican steel demand in 2021.
The Brazilian economy rebounded after the second quarter of 2020, so steel demand rose slightly in 2020. According to data from World Steel, the Brazilian economy will continue to recover healthily in 2021 and 2022.
For specific steel consumption industries, World Steel predicts that the global demand for construction-grade steel will depend on logistics-related developments and long-term "green recycling" and infrastructure plans. It seems that global construction activities will resume from 2022 to 2019.
In contrast, driven by pent-up demand, increased personal transportation use, and increased personal savings, the auto industry will see a strong recovery in 2021.
It is predicted that the recovery of the automobile industry is particularly strong in the United States, and by 2021, US automobile production will exceed the level of 2019. The global automotive industry is expected to return to 2019 levels in 2022. The industrial machinery industry has suffered a reduction in capital investment during 2020, and supply chain disruption is another important factor. World Steel pointed out that the improvement of the flexibility and reliability of the supply chain and the accelerating trend of digitization and automation will promote the growth of industrial machinery demand in 2021.
Compared with consumer electronics, shipping, and other industries, steel is a slowly recovering industry in the post-epidemic era. Although Sinosteel began its third quarter of 2020, its product prices have turned from falling to rising, but it did not officially turn losses until November. For-profit, the stock price also started to rise with the international iron ore, scrap steel, and even steel circulation prices. According to the short-term forecast report issued by the World Steel Association Board of Supervisors (WSD), the growth rate of global steel demand will increase from -0.2% in 2020 to 5.8% in 2021, reaching 1.874 billion tons.
The green energy trend has also brought new variables to the steel industry. China, which has had the greatest impact on global steel prices in the past, has set new targets for carbon peaks by 2030 and carbon neutrality by 2060, which will drastically reduce steel production capacity. Since the beginning of the month, the steelmaking town of Tangshan, Hebei Province, has strictly implemented emission reductions and production restrictions, with a maximum reduction of 50%. This has caused the global steel supply to be tight. In the past, China's low-priced steel should destroy market conditions.
However, also because of international requirements for carbon reduction, and the upcoming carbon tax in Europe, Sinosteel estimates that in the future, each ton of steel will increase the cost of US$30 to US$60. Although the proportion of Sinosteel's sales to Europe is only about 2%, many of Taiwan's mid-and downstream customers sell as much as 40% of their exports to Europe. Therefore, Weng Chaodong also reminded downstream manufacturers to respond early.
On the other hand, international iron ore is currently about 177 US dollars per ton, which is a new high price range in the past ten years. It has more than doubled compared with the same period last year. The increase in coking coal used in steelmaking is also alarming. Global steel mills are facing high costs Increased problem. Although China Iron & Steel's ore 7 has become a long-term contract and 30% of the spot, it is expected that the new purchase contract signed in April will begin to reflect the new coal and iron costs. Rising demand, green energy, and raw materials are the three major reasons that prop up the fundamentals of the steel industry. Therefore, we can realize that the era of high steel prices has come.