Global steel long-term outlook Q1 2020 Report

Commodity Market Report 01 April 2020

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Report summary

After a global contraction this year, our working assumption is for steel demand growth to resume from 2021. Peak steel demand in China has been pushed back a year to 2021. Thereafter, India will be the source of a large portion of global growth alongside developing Southeast Asian nations. Elsewhere in the world there is little demand growth potential. As environmental concerns grow, how will steelmaking technology evolve? In China, scrap based EAF production will take an increasing share of the market. India's demand growth will be supplied by additional integrated BF-BOF facilities. Europe is leading the way with emissions free steel production technology. The Middle East and North Africa has scope to raise DRI production. The Global steel market long-term outlook provides detailed supply and demand analysis and price forecasts for the steel market out to 2040.

Executive Summary
- Our view for 2020 is risked – we forecast falls in steel demand globally this year.
- Long-term price forecast
- Steelmakers are in for a rough ride this year. But what awaits those that survive?
- China – peak steel demand pushed back to 2021
- Can India be the new engine of global growth?
- Other contributors to global growth – big rates, but smaller tonnages
- Limited demand growth potential elsewhere
- Supply
- Growers
- Adapters
- Stagnaters
China
- Long-term: China’s aging population and slowing rate of urbanisation tempers steel demand
- Long-term: despite lightweighting, automotive stock still has much room to grow
- Medium-term: infrastructure will prevent steel demand from falling off the cliff
- Short-term: steel demand will fall 2.2% in 2020 before it peaks again in 2021
- Short-term: foreign demand declines will reduce Chinese exports of steel and steel containing goods
- Steel supply: moderate drop in crude steel production
India
- Demand
- Infrastructure sector: a key focus area
- Housing sector demand growing despite the sluggish economy
- Automotive will grow better in the long term, with a steady outlook for the medium term
- Supply
Japan
South Korea
Indonesia and Vietnam
Rest of Southeast Asia
EU and the UK
- Automotive
- Construction
- European steelmaking is evolving, slowly, to bring down emissions
- Falling production is bringing down emissions in the near term
- Steelmakers will have to act to limit future emissions
Turkey
- Steel demand is fragile but should not contract further
- Supported by exports, Turkish production has fared better
Middle East
North Africa
Egypt
- Demand outlook is fragile
- Egyptian steel production will recover quicker than demand
- DRI production will increase in Egypt
Algeria
- Algerian production to grow despite weak domestic demand
Russia
- Russian automotive industry is under further pressure
- National projects are driving construction activity
- Steel production in Russia will outpace demand
Other CIS and Ukraine
- Ukrainian steel production will not return to its former glory
- Central Asian countries have strong growth prospects
Brazil
- Construction
- Automotive
- Production
South America
- Demand slowdown to accelerate, but there is hope ahead
USA
- Infrastructure: a new plan for old needs
- Automotive: revised up post-2020, but long-term slowdown is (still) inevitable
Canada and Mexico
- Mexico’s golden days are still ahead
- and Canada’s may never be seen again
- Near to medium term
- Metallurgical coal
- Iron ore
- Long term
- Hot metal versus scrap costs
- India and China cost convergence
- Energy transition and carbon abatement
- Where to from here?
- Scrap demand and prices stagnate
- Will converging price premia prevail?
- Indian price premia will continue to disappear

Tables and charts

This report includes 22 images and tables including:

Middle East steel demand by country
Middle East steel demand by sector
10% of global semis exports go to North Africa but exporting to the region will become increasingly difficult...

with the region potentially adding as much as 8Mtpa of capacity
China's aged population is a risk to steel demand
Urbanised population by decade
The development of automobile industry in major economies
Infrastructure will be the only growing steel demand sector in 2020
Indian bank credit growth
Indian automotive growth
Indian automotive steel demand growth forecast
Indian steel production and trade forecast
Key emission reducing projects in Europe
National projects: investment shares by sector
Russian exports should increase to close the emerging global supply gap after 2030
Brazil's crude steel production is set to recover post-2020 on the back of higher exports and improved demand
After three consecutive years of steady growth, Brazilian auto production is set to contract in 2020. Beyond that, we expect the sector to recover its growth trajectory, eventually reaching a production level of 3.4 million units by 2025
Democrat's Moving Forward Framework has a big focus on combating climate change, but the bulk of the plan's investment will be steered towards rescuing highways and transit networks
The Highway Trust Fund and 2015 Fixing America’s Surface Transportation (FAST) Act have done little to boost much-needed investments in infrastructure
Major proposed investments in assembly plants and parts operations announced in 2019
NAFTA versus USMCA