Commodity market report
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49 Pages

Global steel long-term outlook Q1 2016

Global steel long-term outlook Q1 2016

Report summary

The current slowdown will be a drawn-out affair and over the next few years, the steel industry will have to learn to celebrate small and infrequent victories. The one material victory for steelmakers in Q1 has been a stronger than expected increase in steel prices. Having in most cases fallen below 2009-lows during the turn of the year, steel prices have since regained between 1% and 23%. However, we do not expect to see any further sustainable improvement till after 2018. Weak demand, persistent overcapacity and low raw material prices will continue to limit the possible recovery in prices.

As the year progresses so an increasing number of dreams for a speedy recovery for global steel consumption will be shattered. Overall as part of this update, we have revised down our global long-term steel demand forecast by a further 4.8% to 1,820 million tonnes in 2035. In line with this crude steel production has also been revised down by 4.7% to 1,955 million tonnes.

What's included?

This report includes 2 file(s)

  • Global steel long-term outlook Q1 2016 PDF - 1.24 MB 49 Pages, 4 Tables, 47 Figures
  • SMS LT Q1 2016(V2.4).xls XLS - 2.36 MB


As global demand weakens and commodity prices fall, we're seeing a challenging environment in the metals and mining industry. Mining companies are increasingly coming under pressure to reduce operating costs, causing many to shift their strategic planning, delay new investments and look to long-term future growth.

This Steel Long Term Outlook report provides a detailed breakdown of global supply and demand balances in this market, as well as price forecasts.

Mining companies, investment banks and investors can use this report to understand the future direction of the ferrous and base metals market. It will also help you assess the impact of key industry issues and events on market balances and pricing.

From acquisitions to investments, Wood Mackenzie helps you plan, forecast and benchmark in the metals markets. Our proprietary database and analyst expertise combines robust production, consumption and pricing data with detailed analysis to identify market opportunities.

We give you a holistic view of the ferrous and base metals markets so you have the confidence to make strategic decisions.

  • Executive summary
  • Market structure
  • China
    • Summary
    • Demand
      • Chinese construction to stagnate, then decline
      • Manufacturing sector – reforms will benefit long-term growth
    • Trade
      • Exports peaked in 2015 and will increase again in the long term
    • Production and capacity
      • Cutting capacity – a long way to go
      • Production – medium-term decrease but long-term increase
    • Steelmakers' margins to remain low
      • Hot metal, DRI and scrap
      • Japan
        • Japan's construction demand to expand in 2016…
        • …but manufacturing and destocking will offset growth
        • Japan steel trade balance will deteriorate
      • South Korea
      • Taiwan
      • India
        • Shattered hopes
        • Conservative demand prospects
        • Long-term growth prospects remain
        • India remains a difficult place to bring on new steelmaking capacity
        • Long-term outlook for steelmaking remains highly uncertain
      • Malaysia
      • Indonesia
      • Thailand
      • Vietnam
      • Philippines
      • Europe
        • EU construction growth will remain inconsistent
        • EU automotive demand strong
        • Europe production growth will be slow
        • Capacity reductions are not enough to increase utilisation rates
      • Turkey
        • Construction stock overhang weighs on steel demand
        • Consumer goods will keep steel consumption growing
        • Steel producers suffer from cheap competition
      • Other Europe
      • Middle East and North Africa
        • GCC steel demand depressed by low oil prices
        • Iran – the only driving force of steel demand growth in the next 2 years
        • Steel demand collapses in Libya offset gains in Egypt
        • Crude steel production will recover but risks persist
      • United States
        • The worst is over for the US steelmakers
          • Better steel demand expected
          • Steel imports should ease a little
          • The scope for steel price increases is limited
        • Diverging long-term sector demand
        • Total steel demand to remain below the pre-crisis peak
        • Steel production took a hit in 2015
        • Long-term steel production and capacity outlook is increasingly uncertain
      • Mexico
        • Further demand growth can be achieved
        • Imports weigh heavily on production
      • Canada
        • Demand outlook remains weak
        • Production outlook uncertain
      • Brazil
        • A lost decade for steel demand
        • Aggressive capacity reductions
        • Limited long-term steelmaking prospects
      • Other South and Central America
        • Weak steel demand growth
        • Poor prospects for steel production
      • Russia
        • Outlook remains weak
        • Construction growth will diverge across the sub-sectors
          • Commercial construction
          • Infrastructure construction
          • Residential construction
        • The worst is over for the automotive sector
        • Machinery demand to grow in the long term
        • Overall steel demand will grow, but slowly
        • Steel production supported by exports
        • Capacity response has been mixed
      • Ukraine
        • No recovery in sight
      • Kazakhstan
        • Slow growth prospects
      • Africa
  • Costs
    • Raw material prices pick up, but not for long
      • Coking coal prices could rise on tighter supply
      • Iron ore price recovery is fleeting
    • Recent scrap price rebound will be short-lived
  • Prices
    • Low steel prices are here to stay
      • The scope for price rises is mostly exhausted
    • A traditional price relationship will hold
    • Our long-term steel prices remain broadly unchanged
      • In China rebar prices will start to recover first
      • A slow steel price recovery in Europe
      • The relative US price premia will disappear

In this report there are 51 tables or charts, including:

  • Executive summary
  • Market structure
  • China
    • Key China forecast data
    • Key plans in the next five years
    • Chinese regional railway plans – more than 36,000 km of regional railways will be built by 2020
    • Steel demand in the construction sector
    • Steel demand in manufacturing-related sectors
    • Steel exports are expected to reach ~120 million tonnes in the long term
    • Increasing exports will support the growth of production in the long term
    • Government targets are still not enough to restore a healthy utilisation rate
    • Top steel makers ranked by profit and loss
    • Crude steel, hot metal production and % of EAF steel production
    • Japanese construction orders and starts
    • Tankan: fixed investment by sector in Japan
    • Japanese automotive production and exports
    • Japanese capacity adjustment
    • Domestic steelmakers under pressure from low-cost imports
    • Foreign direct investment for steel intensive sectors is small relative to the overall requirement
    • India has scope to grow – high population density requires more steel per square kilometre
    • Implied steelmaking capacity shortage to reach 70-90Mtpy by 2035
    • Market structure: Image 16
    • Market structure: Image 17
    • Market structure: Image 18
    • Market structure: Image 19
    • Turkey - house sales by type
    • Turkey - construction activity
    • Turkey - automotive production and exports
    • Turkey - steel content of automotive exports
    • Imports will continue to place pressure on crude steel production
    • A weak krone and low oil price reduces steel demand in Norway
    • MENA countries contribution to steel demand growth: 2015-2017
    • MENA steel demand growth: construction
    • MENA steel demand growth: manufacturing
    • MENA - DRI production and utilisation rates
    • MENA - scrap requirements
    • Almost half of all flat product imports fall under the three landmark trade cases initiated in 2015
    • Steel imports have eased both due to falling demand and the trade cases. Demand recovery will limit any further falls in imports
    • Rising share of imports from those countries not under the trade investigations – corrosion-resistant steels…
    • …and cold-rolled steels
    • Landmark trade cases launched in 2015
    • In Brazil, investment is essential for growth in steel demand
    • Due to a poor investment environment steel demand will not grow this decade
    • In Brazil there is no need for new capacity additions before 2035
    • Weak steel demand growth in the medium term
    • Exports will remain important for domestic steel production. Finished-steel share to increase
    • Demand growth remains subdued
    • Despite registering growth in 2015, 2016 is shaping up for a sharp decline in crude steel production
  • Costs
    • Iron ore, coking coal and scrap prices
    • Hot metal costs and scrap prices
    • Turkish scrap consumption, collection and imports
    • Scrap imports v. crude steel production
  • Prices
    • Rebar prices remain overvalued compared to HR coil
    • No immediate price recovery in sight
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