Steel demand is projected to decline by 6.4pc to 1.6bn mt in 2020 due to the COVID-19 crisis, however, it’s expected recover in 2021 by 3.8pc to 1.7bn mt, according to the World Steel Association’s (worldsteel) short range outlook this month.
Decline in steel demand in most countries hasn’t been as severe as was anticipated during the pandemic because China recovered from the crisis sooner than rest of the world. Moreover, the most affected hardest-hit sectors are less steel intensive, and worldsteel doesn’t expect major damage to steelmaking economies.
worldsteel, however, forecasts some uncertainty as economies open without a COVID-19 vaccine having been distributed, opening the door to potential second and third waves of the pandemic, which would affect the steel industry.
Among steel-using segments, the mechanical machinery and automotive sectors have been upended the most. With investment projects on hold, the mechanical machinery sector has seen demand fall. Automotive sales are expected to decline by 20pc because of the pandemic, and returning to pre-pandemic levels for these sectors could take a fe years.
The construction sector seems to have been fared relatively well compared to the aforementioned sectors, however, challenges, like social distancing, could hinder timelines as countries emerge from the pandemic-induced lockdowns. Additionally, many investment projects might be shelved because of slow economic activity and, by extension, deteriorating balance sheets.
worldsteel expects Chinese demand to rise by 1pc this year, as the country’s economic recovery began in and has almost reached normal production levels. During the lockdown period, China’s GDP declined by 6.8pc, with the automotive sector showing a 44.6pc decrease in Q1 2020.
All steel consuming sectors, like construction and machinery, have been running at full productivity. However, the Chinese manufacturing sector has seen a drop in exports. as the other parts of the world reopen their economies. As of now, the Chinese government has not released a stimulus package to bring the nation’s economy back to normal, but if the global economy remains unresponsive the Chinese government might take action to buoy its economy.
Steel demand in developed economies is expected to fall by 17.1pc this year. Last year, the US had a 5.6pc decline in steel demand because of a recession in the manufacturing sector, which, while initially slated to recover, has been further hampered by pandemic-related lockdowns. The EU automotive sector has een the worst hit, although steel demand in the construction sector has fared relatively well.
The US also suffered a major loss in demand in its manufacturing sector due to the pandemic. The country is followed by Japan, where a major slump in steel demand that began in H2 2019 has been exacerbated by the pandemic. The automotive and machinery sectors are the most adversely impacted, while Japan’s construction sector has only been slightly impacted. South Korea has also witnessed a major decline in its steel-using sectors because of dropping exports and a weak economy.
Steel demand in developing economies, save China, is expected to decline by 11.6pc this year, however, worldsteel projects it to recover by 9.2pc in 2021. India has been most the affected by strict lockdown measures, and the nation anticipates an 18pc drop in steel demand this year, as all industrial and construction operations have been halted. worldsteel nevertheless expects India to recover by 15pc next year.