Global steel long-term outlook Q1 2016 Report

Commodity Market Report 31 March 2016

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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.

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
- 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
- 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

Tables and charts

This report includes 46 images and tables including:

Imports will continue to place pressure on crude steel production

A weak krone and low oil price reduces steel demand in Norway
Demand growth remains subdued
Despite registering growth in 2015, 2016 is shaping up for a sharp decline in crude steel production
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
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
Turkey - house sales by type
Turkey - construction activity
Turkey - automotive production and exports
Turkey - steel content of automotive exports
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
Turkish scrap consumption, collection and imports
Scrap imports v. crude steel production