Last week WSA - World Steel Association released a new SRO - Short Range Outlook with forecast that expected consumption of steel will decrease in 2015 and 2016.
The October short-term forecast is much more pessimistic than the positive trends published by WSA for the same period in April this year. According to the first report, there should have been growth recorded in global steel consumption by 0.5%, but in the new report this item is corrected, and now a decline of -1.7% is expected, which means that 26 million tons of steel will be spent less than in 2014. The forecast for 2016 is also corrected - instead of the 1.4% growth, WSA is hoping that steel consumption will rise by at least 0.7%, which would still be below the consumption of steel products recorded in 2014.
According to this report, consumption of finished steel products will decrease mostly in Brazil, by-12.8%, followed by Russia -10.4%, Japan -5.4%, China -3.5% and the United States -3.0% . The increase in steel consumption is expected in the European countries that are not members of the EU by 8.6%, Turkey 10.2% and India 7.3%. India is the only country in which the consumption of steel products should be stable and continuously growt in the next decade.
WSA commented this correction as follows: “It is clear that the steel industry has, for the time being, reached the end of a major growth cycle which was based on the rapid economic development of China. Combined with China’s slowdown we also face low investment, financial market turbulence and geopolitical conflicts in many developing regions. The steel industry is now experiencing low-growth which will last for the time it takes for other developing regions of sufficient size and strength to produce another major growth cycle.
We expect the current headwinds to moderate in 2016 but this is based on a belief that the Chinese economy will stabilise. Of particular concern is the vulnerability of the emerging economies to external shocks though we are also expecting some, like India, to show resilience to the global slowdown. On a positive note, the recovery of steel demand in the developed economies, even though the momentum has weakened a little, remains on track.”
WSA expects that steel consumption in China will decrease by 25 million tons compareing to 2014, by the end of the year. It is the first time since 1995 for China to have a decrease in the steel consumption. The main cause of it is the effort of the Chinese government to make their economy more market-focussed, which affected their real estate market. As there is no indication that there will be some significant change in the near future, it is realistic to expect that China's steel consumption also decrease in 2016. The restructuring of the Chinese economy is an inevitable step for the next phase of development, but it will take time. Meanwhile, their surpluses will continue to cause tension over the world market.