Global steel long-term outlook Q3 2018 Report

Commodity Market Report 01 October 2018

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Report summary

Almost everywhere, steelmaker margins have returned to pre-crisis levels, reigniting an appetite for investment in steelmaking capacity. Something that outside of India, the Middle East and Southeast Asia has not been discussed with any degree of seriousness for over a decade. However, while underlying demand drivers are undoubtedly strong, they alone are not strong enough to justify the current steel boom. A prominent catalyst is government intervention in the shape of wide-ranging supply-side reforms in China, trade barriers in the US, and government-fuelled infrastructure and housing-construction expansion in India. In our long-term outlook, we discuss how long can these unusually good times last.

China
- Demand
- Infrastructure construction
- Property construction
- Machinery
- Production
- What has changed?
- China's steel capacity will see a net reduction of 145 Mt between 2016 and 2020.
- EAF expansion will contribute to 70% of the net capacity increase between 2020 and 2025. However, the BOF share will hold above 85% in the long term.
- China's steel capacity will be more concentrated in the contestable market. BF and BOF capacity will increase in the market between 2020 and 2025.
- Map: China's contestable and non-contestable market segmentation
- Medium and large blast furnaces will make up around 75% of hot-metal capacity by 2025.
Japan
- Near-term steel demand holds some promise
- ...But long-term fundamentals remain weak
- Steel production is heavily reliant on exports
South Korea
Taiwan
Indonesia
Vietnam
India
- The time to grow is now
- Steel demand is finally taking off
- For now, infrastructure fuelled by FDI is playing a pivotal role
- Foreign direct investment is not a permanent solution
- Infrastructure expansion is finite
- Infrastructure is an enabler not a driver of growth
- Steel production
- BF-BOF steelmaking will become increasingly prevalent
- EAF to re-emerge after 2035
Europe
- Steel demand had another good year...
- ...but we expect a deceleration in the medium term
- Capacity expansions are small
- Steel demand fails to take off
- Demand recovery in the GCC is weak and patchy...
- but construction rebounds in Egypt
- Iran new woes dampen the medium term...
- ...but it is structural reforms that will make or break the long term
- Steel production: it's (nearly) all about Iran
United States
- Steel prices remain high
- Steel capacity investment experiences a renaissance
- Risks to investment in steel are huge but so are the potential gains
- The current surge in investment is temporarily
- Steelmaking reverts to long-term trends as BF-BOF falls out of favour
- The future of US manufacturing is uncertain
- Long-term steel demand growth will be driven by construction
Mexico and Canada
- The NAFTA is intricate and cannot be reversed without mutual losses, 2017 trade flows
- Mexico
- Canada
- Costs have chased steelmaking margins
- High-grade raw materials will not fall from favour
- Long term: polarised and uncertain

Tables and charts

This report includes 29 images and tables including:

China's cumulative steel demand changes by sector
China's newly built railway per year
China's steel capacity by technology

China's steel production by technology
China's hot metal capacity by blast furnace size*
China's hot metal capacity mix*
Crude steel capacity rationalisation continues as demand keeps falling
Infrastructure is only a fraction of total demand
Project cost overruns and delays are falling
EAF production to re-emerge in the long term
EU demography is unfavourable to long-term demand growth
Steel demand unlikely to return to the recent peak, even in the long term
More adaptable to market fluctuations and less polluting, EAF is the technology of choice for moderate capacity expansion.
Iranian investment could be downgraded further
Construction in Egypt rebounded strongly. Even so, volatility is pervasive.
Iran and a handful of countries have become net steel exporters
Iran, Egypt and Algeria have the strongest near-term prospects
Better steelmaker profitability
Manufacturing cost inflation
BOF steelmaking declines...
...as EAF steelmaking rises
Indirect steel trade in 2017
Long-term steel demand drivers
Hot-rolled coil cost
Long-products cost