It is rather reassuring to know that steel industry has been faring better in the past six months as the short range outlook for global steel demand in 2017 that was placed at 1535.2 MT in April’17 has been revised to 1622.1 MT in October’17, an increase of 87 MT in the current year. For 2018, the forecast at 1548.5 MT in April’17 has been revised to 1648.1MT in October 2017, an increase of 100 MT. The implicit growth in steel demand is substantial. Last year the global steel consumption was at the level of 1515.9 MT. Thus in the current year, the global steel demand is likely to grow by 7%. Last year China comprised 45% share in global steel consumption. In the current year, the projected steel consumption in China at 765.7 MT takes around 47.2% share in global consumption. Compared to actual consumption of 681 MT of steel by China in the previous year, the current year’s projection puts the growth rate at 12.4% on nominal basis. At this point a major correction has been made in the production figures of China in view of closure of most of its illegal Induction Furnace route of production in 2016 to the extent of around 65 MT which was not included in the actual reported CS production of China. However, the demand catered to by this sector has gone to the kitty of the SOEs. Thus the technical effect of underestimated base of the previous year has resulted in the jump of Chinese demand. WSA has analysed the movement of steel using sectoral growth and arrived at 3% growth in the total steel consumption in 2017 by China dominated by construction and domestic appliance sectors.
By adding 65 MT of CS production (hitherto unreported) to Chinese production, the total CS production in 2016 comes to 873 MT. The additional steel yields a finished steel equivalent of 62.4 MT and adding to reported level of steel consumption of 681 MT, the actual finished steel consumption by China in 2016 comes to 743.4 MT which yields a growth rate of 3% in 2017 at 765.7 MT. Also the addition of 62.4 MT to the total steel consumption in 2016 brings down the growth rate of projected Global steel consumption from 7% to 2.8%. Thanks to WSA that this type of adjustment of unreported production by China in the previous year has been undertaken to arrive at a more realistic picture of demand growth. It is possible to revise the steel production and consumption figures of China in the previous years in consultation with CISA to calculate the trend growth rate of the industry and as closure of capacities by China has been taking place in other years also (reported or unreported), the issue needs to be addressed without delay.
The global economy has been projected with a fair amount of “cautious optimism”. US economy is projected with near-solid fundamentals with firming up of recoveries in Germany, France, Spain and East Europe and ongoing reforms in the developing economies that would bring in higher growth and development opportunities. In spite of continuing structural adjustment in Chinese economy, the country is poised to reaccelerate its GDP growth. Barring the frequent political crisis at various parts of the world, some of whom ending with violent outbursts, the global economic growth (3.5-3.7%) in the current year would create an enabling environment for growth in steel consumption to meet the massive infrastructural deficits in the emerging and developing economies and revival of manufacturing and processing industries (predominantly high end and light engineering) in the advanced and developed countries. The risk factors involved relate to rising proportion of private and public debts as a percentage of Global GDP to 220% in 2017, uncertainties in US economic policies and rising trade protectionism threatening movement of goods. It has also been officially acknowledged by WSA that steel intensity per unit of GDP has been on the decline due to preference for light weight high performance steel and a conscious shift from volume to value. It is also well known that this phenomenon would vary country wise depending on the stages of economic development it is passing through.
India consumed 83.5 MT of steel in 2016 and is projected to consume 87.1 MT and 92.1 MT of steel at annual rate of 4.3% and 5.7% in the current year and next. USA with an annual steel demand of 96.2 MT and 97.3 MT in 2017 and 2018 would continue to occupy the second position in steel consumption after China till 2018. Indian economy projected to grow at 7.3% and 7.5% in 2017 and 2018, respectively would continue to bank on Infrastructure and construction sector growth of 3.6% (annual average), automobile growth rate of 8.1% (annual average) and Engineering and Fabrication growth rate of 2.9% (annual average). The Government has recently announced a slew of measures involving Roadways, Bharatmala, Railways, Defence procurement, Affordable Housing and other sectors. Steel consumption therefore, is slated to grow more than what is projected by WSA in 2018. (Views expressed are personal)