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Global steel long-term outlook Q3 2016

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30 September 2016

Global steel long-term outlook Q3 2016

Report summary

2016 is shaping up to be a better year for steel than we had expected. The secret of its success? As ever, China. Trapped between the immediate need of reviving a slowing economy and the structural necessity of reforming excess capacity in the steel sector, the Chinese government ended up stimulating the construction sector. As a result, steel prices shot up in China from US$270/tonne in December 2015 to US$400/tonne in April. Prices have since retracted, and between sluggish demand growth and lingering overcapacity we expect them to remain practically flat in the medium term. It is only in the long term that we expect demand growth and costs structure to support a sustainable price recovery.

Table of contents

  • Executive summary
  • Market structure
    • Summary
    • Demand
      • Property construction: demand revised up in the medium term but down in the long term
      • Infrastructure: slow growth in 2016 and the medium term
      • Manufacturing sector: medium-term gain, long-term pain
    • Production and capacity
      • Capacity cuts: there are still problems for this year and the medium term
      • Production: revised up in 2016 and the medium term
    • Trade
      • Exports: peak postponed to this year
    • Hot metal production
    • Demand in the construction sector has been revised up
    • but the manufacturing sector will shrink
    • Steel exports will be challenged in the long term
    • Japan needs to cut more capacity
  • Taiwan
    • Growth continues to disappoint
    • Indian construction sector is under pressure
    • Little change to medium and long-term steel demand growth
    • State-by-state steel demand growth
    • How will India meet its steel demand?
    • Steelmaking capacity outlook remains highly uncertain
  • Malaysia
  • Indonesia
  • Thailand
  • Vietnam
  • Philippines
    • Differing outlook for EU members in the construction sector
    • EU automotive sector is still growing, but for how long?
    • All other sectors: volatile growth
    • EU production declines
    • Trade: EU exporters are losing custom
    • Resilient capacity despite the sluggish outlook for demand
    • Construction in Turkey: growth in 2016 will be followed by weaker years
    • Turkish automotive, machinery and appliances: growth sectors
    • Trade
    • Production
    • Steel demand growth will remain sluggish
    • Competition from imports continues to weigh on steel production
    • and so will the threat of anti-dumping duties
    • Conflict impacts steel demand growth in Iraq and Syria
    • Iran: gains from the lifting of sanctions dulled by low oil prices
    • Iran: steel exporters will face stiff competition
    • GCC: low oil prices tip steel demand into contraction
    • Saudi: medium-term construction growth will benefit from government support
    • Other GCC: long term, there is little room to grow
    • GCC: low demand (and high imports) continues to depress production
    • North Africa: steel demand grows only slowly
    • Egypt: steelmakers continue to seek government protection
    • MENA DRI: production remains low
    • In the end, it is all about trade, stocks and prices
      • Underlying steel demand has continued to grow in the US
    • Near-term demand is determined by stocks
    • Little change to our long-term view
    • Automotive will trend down
    • Construction will trend up
    • Some revisions to our model
    • Steel production outlook is uncertain
    • Little interest in upstream capacity expansion
    • Steel production to recover but increasingly on the back of EAFs
    • Mexico: demand flat in 2016, growth from 2017
    • Mexican production to grow from 2017
    • Canada: A weak outlook for steel demand
    • Canadian production rises despite bankruptcies
    • Brazilian steel demand to bottom out in 2016, a slow recovery to follow
    • Growth in all sectors beginning 2017
    • Brazilian net exports to peak in 2016, declining from 2017
    • New Brazilian capacity comes online in 2016, utilisation rates to drop
    • Flat steel demand growth
    • Poor prospects for steel production
    • Near-term outlook is now less pessimistic
    • Construction activity has been stronger than expected
    • Infrastructure – an important driver in the medium term
    • A smaller decline is forecast for the construction sector
    • Automotive and machinery sectors to grow in the long term
    • Overall steel demand will grow, but slowly
    • Steel production supported by exports
    • Capacity improvement and expansion are ongoing
    • Growth has turned positive but recovery will be slow
    • Slow growth prospects
    • Weak demand outlook, limited production growth
    • Volatility in raw material prices is here to stay
      • Rationalisation in coking coal has run its course
      • Iron ore volatility merely reflected gyration in Chinese steel prices
      • Scrap prices
    • Steel prices had an eventful first half 2016
      • Steel price recovery in China is not in sight, but volatility will remain
    • US price premia will linger in the medium term but disappear in the long term
    • EU steel prices will remain more exposed to low-cost producers

Tables and charts

This report includes 57 images and tables including:

  • Market structure: Image 18
  • Market structure: Image 19
  • Key China forecast data
  • Hot metal production and shares of BOF and EAF steel production
  • Both automotive production and exports will decline
  • ...Demand in other major end-use sectors will also decrease in the long term
  • Japan needs extra capacity cuts in the forecast period to maintain typical utilisation rates
  • Steel demand is highly dependant on investment
  • Growth in the construction industry has slowed
  • Steel demand – increase in consumption 2016-2035, Mt
  • Steel capacity – increase between 2016-2035 including not-committed-to expansions, Mt
  • Cars in Romania: room to grow, but growth will be slow
  • A decreasing population and increasing age of cars limits auto growth
  • Market structure: Image 22
  • Market structure: Image 23
  • Cars in Turkey: room to grow with low vehicle ownership and a growing population
  • Households with sufficient income to own a car will increase at a faster rate than the working age population.
  • Scrap/billet spreads: EAF based mills will continue to take advantage of the most economical source
  • Finished steel imports to Turkey have increased year to date particularly from South Korea
  • Rest of Europe steel imports remain high
  • Rest of Europe steel production to decline in 2016
  • MENA steel demand growth and armed conflict
  • Iran steel import dependency declines
  • GCC and peers: per-capita steel in construction
  • Saudi and other GCC steel consumption outlook
  • North Africa steel demand by sector
  • North Africa long-term demand drivers
  • MENA DRI capacity expansions likelihood
  • MENA implied scrap requirements
  • Stocks have finally started to rise
  • Demand will improve in H2 2016
  • Reversal of the stock cycle will support apparent demand in H2 2016 and 2017
  • In the long term, we forecast falling automotive demand and a healthy growth in construction
  • Utilisation will reach a nadir in 2016, correlating with the output of the three largest South American producers
  • Although still in decline, 2016's contractions in vehicle production and industrial production are less than in 2015. Growth is expected in 2017.
  • Steel production is supported by exports
  • Despite widespread trade cases, finished steel exports continued to rise in 2016
  • Subdued steel demand growth – particularly in the larger consuming countries
  • Crude steel production: revised down
  • US HR coil premium
  • EU HR coil premium
  • Total building completion revised up in the medium term but down in the long term
  • China's new long-term plan for railway construction
  • Wealthier households will promote car demand in the future
  • Western regions will lead the increase in car penetration in the long term
  • Changes to crude steel capacity, 2010-2020
  • Changes to hot metal capacity, 2010-2020
  • Crude steel capacity cut by provinces, 2016
  • Hot metal capacity cut by provinces, 2016
  • Provincial capacity-cutting targets in 2016 and the medium term
  • China's steel exports will increase in the long term
  • ...supporting crude steel production accordingly
  • Scrap prices and hot metal costs
  • Turkey scrap consumption by origin
  • Costs: Table 1
  • Chinese rebar prices to remain volatile
  • US and EU HR coil prices benefited from AD duties

What's included

This report contains:

  • Document

    Global steel long-term outlook Q3 2016.xls

    XLS 2.36 MB

  • Document

    Global steel long-term outlook Q3 2016

    PDF 918.05 KB

  • Document

    Global steel long-term outlook Q3 2016

    ZIP 1.72 MB

  • Document

    Executive summary

    PDF 83.98 KB

  • Document

    Market structure

    PDF 704.17 KB

  • Document


    PDF 103.70 KB

  • Document


    PDF 115.05 KB

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