Global Steel Forecast for October 2023

Steel Industry Outlook 2023-2024: Growth Forecasts and Economic Trends

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The World Steel Association (worldsteel) has just unveiled its latest update on the Short Range Outlook (SRO) for 2023 and 2024, and the future of steel is looking bright. In 2023, we can anticipate a robust 1.8% growth in steel demand, bringing the total to 1,814.5 million tonnes. This follows a 3.3% contraction in 2022. The positive trend continues into 2024, with an additional 1.9% increase in steel demand, reaching a total of 1,849.1 million tonnes.

Mr. Máximo Vedoya, Chairman of the worldsteel Economics Committee, shared his insights on the outlook, stating, “Steel demand has faced challenges due to factors like high inflation and interest rates. Since the latter half of 2022, many sectors and regions have experienced a cooling-off in steel-related activities, as both investment and consumption weakened. This trend has persisted into 2023, particularly impacting the EU and the US. We expect the recovery of steel demand in advanced economies to be gradual in 2024, owing to the delayed effects of tightening monetary policies. On the other hand, emerging economies are poised for faster growth, with emerging Asia displaying remarkable resilience."

Vedoya also mentioned that the Chinese property market is expected to stabilize later in the year, potentially resulting in slight positive growth in China's steel demand. However, he acknowledged the uncertainty surrounding China's economic transition and potential regional conflicts, like those in Russia and Ukraine, Israel and Palestine, which could contribute to rising oil prices and economic fragmentation.

Notably, despite the slowdown in construction activities due to high-interest rates, infrastructure investments are on an upward trajectory in many regions, including advanced economies, as they align with decarbonization efforts.

In the global economic landscape, monetary tightening has posed challenges to consumption and investment, but there is hope on the horizon as inflation moderates in 2023. This trend may pave the way for the conclusion of monetary tightening cycles in 2024. However, the battle against inflation remains ongoing and faces threats from persistent core inflation, a tight job market, and rising oil prices.

The construction sector has grappled with high interest rates and elevated costs, especially in the residential segment. Nevertheless, infrastructure investment continues to provide a silver lining, partially offsetting the impact. The manufacturing sector has faced headwinds due to weakening demand, particularly affecting consumer durables. However, the auto industry is poised for a rebound in 2023, fueled by order backlogs and supply chain improvements, especially in many regions. Still, the sector is expected to decelerate in 2024.

In China, the prolonged property market depression in 2023 has cast a shadow on the economy, leading to an unexpected slowdown. Falling housing sales have created financial challenges for major real estate developers, raising concerns about China's economic health. However, the situation is anticipated to stabilize in the latter part of 2023, as the Chinese government has taken measures to shore up the economy since July. Most steel-using sectors have exhibited signs of weakness since the second quarter, and key real estate indicators have continued to decline, affecting construction activities and steel demand in 2024.

On a brighter note, infrastructure investment has maintained its momentum in 2023, thanks to government initiatives. There may be additional infrastructure projects in the pipeline, contributing to moderately positive infrastructure investment in both 2023 and 2024. While manufacturing growth has slowed, it remains moderate in 2023, with positive developments in auto production and strong growth in home appliances. However, the manufacturing sector's momentum may further weaken due to challenges in external markets.

In 2023, steel demand is expected to increase by 2.0%, supported by infrastructure investments and property sector stabilization. The outlook for 2024 is uncertain, with real estate and exports posing negative pressures on steel demand. However, the introduction of government support measures could help sustain steel demand at 2023 levels, with the caveat of potential downside risks if the stimulus effect falls short of expectations.

Turning to developed economies, steel demand is forecasted to contract by 1.8% in 2023, following a 6.4% decline in 2022. Europe, in particular, has felt the impact of monetary tightening and soaring energy costs. However, 2024 is expected to bring a technical rebound, with a 2.8% growth in steel demand.

Within the European Union (27) and the United Kingdom, resilience has been demonstrated in the face of energy crises brought about by the Russia-Ukraine conflict. Nevertheless, high interest rates and energy costs are weighing on manufacturing, while the auto sector continues its recovery. Residential construction is impacted by high interest rates, materials costs, and labor shortages, but infrastructure investment remains stable. Germany faces a challenging situation with a manufacturing recession and housing crisis. While 2024 may not see a real demand rebound due to tight monetary policy, a technical rebound is anticipated as destocking cycles conclude.

After a 7.8% decline in 2022, steel demand is projected to decrease by 5.1% in 2023 but rebound with 5.8% growth in 2024.

In the United States, the economy has displayed resilience in the face of steep interest rate hikes, although steel-using sectors have been affected. Residential construction is expected to contract in both 2023 and 2024, while the commercial building sector benefits from reshoring activities. The infrastructure sector also gains momentum from recent legislation. Manufacturing has experienced a slowdown, but the automotive sector is set to continue its post-pandemic recovery, albeit with potential risks in 2024 due to the lagged effects of tight monetary policy.

Following a 2.6% decrease in 2022, steel demand is projected to decline by 1.1% in 2023 but then grow by 1.6% in 2024.

In Japan, labor shortages and rising costs have hampered construction activities. However, manufacturing steel demand is expected to show moderate growth in both 2023 and 2024, supported by the recovery of automotive production. External factors, such as a weak yen or global market conditions, have limited influence on steel-using sectors, given Japan's supply-side-constrained economy.

After a 4.2% fall in 2022, steel demand is anticipated to decrease by 2.0% in 2023 before experiencing 0.6% growth in 2024.

South Korea, after recovering from flood damages in 2022 and witnessing modest growth in construction following years of contraction, is expected to see a moderate recovery in steel demand in 2023. Weakness in manufacturing, except for the automotive sector, contributes to this modest growth.

Following an 8.5% contraction in 2022, Korea's steel demand is forecasted to grow by 3.3% in 2023 and 1.1% in 2024.

In emerging and developing economies, excluding China, steel demand dynamics continue to diverge. Developing Asia, excluding China, remains resilient despite global challenges. After a 0.6% decline in 2022, these economies are set to experience robust growth of 4.1% in 2023 and 4.8% in 2024.

India's economy remains stable amidst high-interest rates, with steel demand expected to maintain its strong growth momentum. Infrastructure investments, government spending, and a recovery in private investment are driving growth in

 the construction sector. Capital goods and automotive sectors also exhibit healthy growth. Although the consumer durables sector has faced constraints from higher inflation and interest rates, improvement is expected in 2024 with festive season spending and progress in the Production Linked Investment (PLI) Schemes.

After growing by 9.3% in 2022, steel demand is projected to experience healthy growth of 8.6% in 2023 and 7.7% in 2024.

In the ASEAN region, steel demand is driven by domestic demand and infrastructure investment, despite inflation and challenging external conditions. Slower exports have impacted manufacturing performance, especially in Vietnam. Political factors have led to delays in infrastructure investment in some countries.

After a 0.2% decline in 2022, ASEAN's steel demand is anticipated to grow by 3.8% in 2023 and 5.2% in 2024.

Other Europe, including Turkey, is poised for significant growth in steel demand. Turkish steel demand is expected to surge by 19.0% in 2023 and continue growing in 2024. The construction activities related to earthquake recovery and changes in monetary policy contribute to this positive outlook.

After a 2.5% fall in 2022, steel demand in Other Europe is projected to increase by 14.9% in 2023 and 5.1% in 2024.

In the Middle East and North Africa (MENA) region, steel demand is expected to contract in 2023, particularly in the GCC and North Africa. Sluggish construction activities in Saudi Arabia and Qatar contribute to this decline. However, a healthy rebound is forecasted for 2024, driven by mega projects and pent-up demand for housing. The UAE is expected to perform better among the GCC countries due to a thriving real estate sector and investments in non-oil sectors. Egypt's steel demand remains impacted by various factors, but some improvement is expected in 2024.

Following a 9.4% growth in 2022, total steel demand in the MENA region is forecasted to decrease by 3.5% in 2023 and increase by 3.5% in 2024.

In Russia and other CIS countries, along with Ukraine, the steel industry is showing signs of stabilization and improvement despite ongoing challenges. Russia is expected to experience slight positive growth in 2023, aided by oil revenues and economic adjustments. However, 2024 may bring a more challenging economic environment, marked by currency depreciation, labor shortages, and supply chain disruptions. Ukraine, on the other hand, is gradually stabilizing, with upward trends in steel-using sectors since March 2023, driven by factors such as business relocations, housing construction for internally displaced persons, infrastructure restoration, and new logistics routes. Forecasts for 2023-2024 have been revised upward for both countries, though they remain contingent on the course of the ongoing conflict.

In Latin America, the region has taken proactive measures to address inflation through interest rate adjustments, resulting in a slowdown in the economy. As a consequence, steel demand has faced challenges, with many countries experiencing contractions in 2023. While construction is expected to grow marginally in 2023 and 2024, there are several economic and political risk factors at play, including China's economic slowdown, high debt levels, financial market volatility, and political instability.

Steel demand in Latin America is projected to increase by 1.4% in 2023 and then by 2.1% in 2024, following an 8.3% decline in 2022.

Brazil's steel demand is anticipated to contract again in 2023, primarily due to sluggish manufacturing and a weakening real estate sector. However, government investment and a newly launched GDP acceleration program are expected to bolster construction in the coming years, leading to moderate steel demand recovery in 2024.

In Mexico, the economic outlook is more positive, driven by strong consumer sentiments, nearshoring activities, and government spending related to elections. Steel-intensive manufacturing sectors, particularly the automotive industry, are performing well. While residential construction is contracting, nearshoring and public investment support construction activities.

The steel industry continues to adapt and respond to evolving global conditions, with each region facing its unique challenges and opportunities. Despite the complexities of the global economic landscape, the steel sector remains resilient and poised for growth in various parts of the world.

Source : worldsteel association