World Steel Association (worldsteel) has forecasted a 2.4pc decline in global steel demand to 1.72bn mt in 2020 in its short-range outlook but expects demand to rise by 4.1pc to 1.79bn mt in 2021, due to a strong recovery in China.
The agency noted that despite a strong rebound in steel demand after COVID-19 related shutdowns were lifted across the globe, many industries that utilize steel are still operating below pre-pandemic levels.
Regional impact of the pandemic
Chinese steel demand could rise by 8pc in 2020, despite a 6.8pc contraction in GDP in the first quarter, according to worldsteel. Recovery has been aided by government investment in infrastructure and construction projects. However, this stimulus will be retracted once the economy stabilizes, leading to flat demand in the Asian nation in 2021.
worldsteel remains less optimistic about steel recovery in the US as the country continues to struggle with the pandemic and does not expect the automotive and construction industry to recover fully next year. It expects a similar condition in the EU where the auto industry, a major steel consumer, has seen double-digit contractions across its member nations, especially in Italy and Spain.
Declining exports are slated to hold back recovery in Japan and South Korea despite their success in curbing the pandemic. India and Brazil have been severely affected by the pandemic and even a partial recovery is not expected soon. The former is expected to witness the steepest decline in steel demand in decades due to the stringent lockdowns imposed until July.
Steel consuming industries
Construction: Many governments have stimulated this sector by infusing capital. However, construction in Turkey, Mexico, and Brazil faces severe declines in steel consumption, owing to the countries entering recession and financial struggles. China, however, seems to be on top of this, with state funding. Oil industry infrastructure investments also remain subdued due to a negative outlook.
Automotive: Excluding China, the world has seen a 30pc contraction in car production due to a slow demand recovery. India was one of the worst affected countries, as production completely shut down during April-June. However, the rise of electric vehicles is restructuring the industry and shows a positive outlook for 2021.
Machinery: This sector saw major disruptions in Q2 2020. The worst-hit countries are China, followed by the EU, the US, and Japan. Lack of investors’ confidence, due to lower profits, is touted to create a sluggish recovery in demand in the medium-term.