South East Asian Iron & Steel Institute said that many sectors suffered from the unpredictable volatility of economic situation in the last few years. OECD, at its recent Steel Committee meeting in Paris, forecasted stabilized economic condition for the period 2010-2012.
There are many factors supporting this prediction. Fiscal policy is shifting from stimulus to contraction. Financial condition indices in many countries are showing signs of stabilization. Business investment is expected to continue to recover through 2012. OECD also noted that residential investment has bottomed out in 2008. Despite the difficult financial situation in 2009, residential investment has started to pick up. Consumers’ household saving rates are also stabilizing. Unemployment has been falling gradually in 2010 and is expected to continue to decline at a satisfactory rate in 2012. Monetary policy in developed countries such as US, UK, Euro area and Japan is set to remain accommodating.
Real GDP growth rate in emerging countries like BRICs are expected to be robust from 2010 to 2012. China’s GDP growth rate will remain at above 8% till 2012. India’s GDP growth rate is expected to peak in 2010 and will remain at a high level till 2012. For Brazil, its growth rate is projected to decline significantly in 2011 from the peak in 2010, before seeing a sustainable increase in 2012. Russia’s economy appears sustainable till 2012.
The global steel market situation follows closely the economic growth. Global steel demand recorded a rapid growth rate especially in the second quarter of 2010, led by Asia, EU and North America. Demand, however, decelerated in the third quarter of 2010 with positive contributions of CIS, North America, EU and negative pace in Asia. However, OECD expected that global steel demand will grow further till 2012, in line with the strong growth in the major steel consuming sectors.
The World Steel Association forecast that apparent steel use in the developed economies will increase by 4.6% to 375 million tonnes in 2011. The apparent steel use in emerging & developing economies without China will grow by 9.2% to 365 million tonnes in 2011. Meanwhile, China’s apparent steel demand is projected to register 741 million tonnes, up by 6.8% YoY.
According to Oxford Economics, growth rate of construction sector will pick up significantly in 2011, at 5.2% and further increase to 6.5% in 2012, after the sharp decline in 2009 (-6.7%) and a moderate growth rate of 1.6% in 2010. Motor vehicle sector experienced a deep decline of 20.7% in 2009, but picked up significantly at 25% in 2010. Oxford Economics predicted that the sector’s growth will be sustained at 6.4-6.9% for the next two years. Engineering and metal goods sector grew substantially in 2010, at 14.4%, but growth is expected to moderate to 10% and 8.7% in 2011 and 2012, respectively.
As for the supply side, OECD predicted that world steelmaking capacity will rise by an average compound growth rate of 4.2% per annum from 2009 to 2,027 million tonnes in 2012. Most of capacity additions will come from China and India while some growth is also expected for Iran, Brazil and Russia.