Steel demand in emerging and developing economies‚ excluding China‚ is expected to grow by 4% this year according to forecasts by the World Steel Association. This demand is expected to increase by a further 4.9% in 2018.

Steel demand production increasingSouth Africa, however, is not feeling the benefits of increased demand and is lagging behind global growth. Global steel production increased by 4.7% in first five months of this year, but South African steel production fell by 0.8% in the same period. While this is an improvement over the 4.2% decline last year, the country’s steel production fell by 3.5% year on year in May to 561 000 tonnes.

Despite this, the World Steel Association believes that the current state of the steel market indicates that overall economic growth should be above last year’s 0.3% increase, as steel production is an important indicator of economic health.

World crude steel production reached 143.3-million tonnes in May, a 2% year-on-year increase. South Africa’s output lowered output did not affect bulk exports out of Saldanha, which are mostly iron ore. These jumped by 24.2% in the first quarter of 2017 to 17.4-million tonnes.

China, which accounts for 30% of the total steel market worldwide, saw production grow by 1.8% to 72.8-million tons. The increase in Chinese steel output has been prompted by high margins due to tighter supplies of construction steel. This follows an announcement by the Chinese government that it would restrict low-quality furnaces.

Reports indicate that China cut approximately 65 million tonnes of steel capacity in 2016 and aims to cut another 50 million tonnes of outdated capacity this year. This will not include low-quality steel, resulting in increased steel margins and high production.

Chinese steel futures, seen as a global benchmark, have dropped slightly, leaving the industry concerned that steel supply might yet exceed demand and weigh on prices.

“The recovery in steel production indicates that the increase in global economic growth forecasts for 2017 by the International Monetary Fund and the World Bank have substance, based on evidence, such as the highest annual growth in world trade volumes since April 2011 being recorded in March 2017,” the World Steel Association says.

Image credit: Copyright: sutsaiy / 123RF Stock Photo


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