World steel outlook 2016-2017

Platts Steel Markets Asia Conference, Mumbai, 17 November 2016

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Mounting uncertainties cloud growth prospects

 Regional uncertainties continue

 Geopolitical conflicts, terrorism
 Brexit will affect investment decisions
 Uncertainty about efficacy of monetary policy in developed
countries
 Uncertainty about implementation of structural reforms in
emerging markets

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Global economic growth remains weak

 Modest recovery in the developed economies continues

 Emerging economies are struggling to grasp momentum
 Low oil prices restructured budgets of oil-exporters
 Global trade remains anaemic hitting growth in developing world

GDP growth, % Imports of goods, % to GDP

Source: IMF

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Global steel demand
Steel demand, finished steel (SRO October 2016)

2015
1 498.7 million tonnes, -3.0% growth

2016 (forecasts)
1 501.3 million tonnes, 0.2% growth

2017 (forecasts)
1 509.6 million tonnes, 0.5% growth

Source: worldsteel

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Regional steel demand
Steel demand, finished steel (SRO October 2016)
million tonnes (Mt) %
2017 as
2015 2016 2017 15/14 16/15 17/16 % of 2007

World 1 498.7 1 501.3 1 509.6 -3.0 0.2 0.5 123.4

European Union (28) 153.6 154.8 156.9 2.9 0.8 1.4 77.3

Other Europe 40.4 42.1 43.7 9.6 4.1 3.7 143.6

CIS 50.5 49.6 50.7 -9.8 -1.6 2.1 89.9

NAFTA 133.7 133.6 137.4 -8.2 -0.1 2.9 97.5

Central & South America 45.6 40.8 42.5 -6.7 -10.4 4.1 103.0

Africa 38.7 39.5 41.1 3.5 2.2 3.9 180.3

Middle East 52.9 53.0 53.1 -1.2 0.3 0.1 121.7

Asia & Oceania 983.4 987.9 984.3 -3.3 0.5 -0.4 143.6

China 672.3 665.6 652.3 -5.4 -1.0 -2.0 155.9

Source: worldsteel

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The China deceleration continues
 GDP growth in H1 of 2016 hit a 7-year low with continuous deceleration of
investments
 Increasing contribution of consumption and service sector to growth
 In 2016, Government stimulus boost infrastructure investment and real estate
sector
 However, stimuli are limited and the rebound may not be sustainable
GDP and FAI growth, % Real estate and infrastructure investments growth, %

Source: NBS

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Will India drive global growth?
 So far the economy reporting a solid performance
 improving macroeconomic fundamentals
 government infrastructure projects
 series of consumption and investment friendly reforms
 but industrial production growth remains weak, share of investment in GDP
was reduced

 India is not a “one speed” economy kg

200
ASU per capita estimations, kg

States have different development 180

160
140
prospects due to different 120
100
macroeconomics, demographics, politics, 80
60

geography and logistics 40

20

 ASU per capita differs significantly between

0

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13
states, due to varied activity level in steel
Gujarat Haryana
using sectors Maharashtra Rajasthan
Chhattisgarh Jharkhand
Orissa West Bengal
Source: worldsteel

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Growth momentum to remain weak
 Global steel demand recovery momentum started to falter after 2013
when Chinese steel demand peaked
 Recovery momentum in the developed world is stagnating
 China‘s share has contracted since 2014 after reaching 48% in 2013

Steel demand, finished steel, 2007=100 Regional share in world steel demand, %

Source: worldsteel

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Long term view: steel industry at another inflection point

Evolution of steel demand, 1950-2017

Mt Golden era Stagnation China driven boom China post peak?

CAGR 2008-2013 CAGR 2014-2017
1 800 -0.3%
+3.7%
1 600 CAGR 2001-2007

1 400 +6.7%
CAGR 1976-2000
1 200 +1.1%
1 000
800 CAGR 1950-1975 RoW
+5.0%
600 China
400
former USSR
200
US, EU, Japan
0
1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015
Source: worldsteel, steel demand crude steel equivalent

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Steel demand is facing new challenges

 Risk of secular stagnation in developed countries

 Rising income inequality threatening growth and middle class
base

 Deceleration of population growth and ageing population

 Premature deindustrialisation of newly developing countries
 Spreading circular economy concept and impact on steel
demand

 Digitalisation trend and impact on steel use

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Indirect trade in steel is becoming increasingly important

 Globalisation and the specialisation of manufacturing contributed to

growth of indirect exports by 87% worldwide in the period 2000-2014
 Emergence of manufacturing hubs in some developing countries

World direct and indirect exports of steel Indirect trade in steel, selected net exporters by sectors
Mt Turkey, metal prod. Mt Thailand, automotive
2.0 2.5
Mt
Direct exports Indirect exports 2.0
500 1.5
1.5
450 1.0
1.0
400 0.5 0.5
350 0.0 0.0

2005

2007

2009

2011

2013

2015

2005

2007

2009

2011

2013

2015
300
250 Mt Turkey, dom. app. Mt Mexico, automotive
0.6 9
200 0.5
8
7
150 0.4 6
5
0.3
100 4
0.2 3
50 2
0.1 1
0.0 0
0

2005

2007

2009

2011

2013

2015
2005

2007

2009

2011

2013

2015
2000 2005 2014

Exports Imports Net exports

Source: worldsteel

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Summary and conclusions

 Global steel demand growth momentum remains weak, but

emerging Asia continues to be the bright spot

 Uncertainties remain heightened but the effects are still

contained at regional level so far

 Long-term forces affecting steel demand needs careful study and

crafted responses

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Thank you for your attention.

For further information contact:

Adam Szewczyk | Head, Economic and Statistical Analysis

World Steel Association
szewczyk@worldsteel.org | T: +32 (0)2 701 96 68 | worldsteel.org

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