Global steel long-term outlook Q4 2018

Quick read: 6 things you need to know about the long term outlook for the global steel market

1. Demand and production rebasing in China have resulted  in a steel market larger than we thought and characterised by slower long-term growth.
2. Conceptually, our long-term view remains unchanged. Between 2022 and 2040, we expect the pace of global steel demand and production growth to ease to an average 0.5% a year, as China completes its phase of fast growth and transitions away from aggressive growth targets in steel-intensive sectors. Changes to our forecast have occurred almost entirely in 2019 and 2020 and are largely explained by revisions to China production in 2017 and 2018.
3. As an engine of global growth, India is next in line, though the scale and consistency of its growth are doubtful. We don't expect that the very strong 2018 demand growth will be replicated anytime soon, and in our forecast, India’s demand growth accelerates to around 5% a year only after 2021.
4. Elsewhere key long-term trends in demand include light-weighting in automotive and the progressive transfer of steel-intensive manufacturing towards emerging markets.
5. Looking at steel production, a crucial long-term trend is the rise of EAF steel in the total production mix. Globally – and despite the offset in India – we expect EAF production to increase to 32% of total steel production by 2040, up from our estimate of 28% in 2018. This is mostly down to higher scrap availability and consumption in China, but also higher utilisation rates of EAF assets globally.
6. Our unchanged long-term prices hover around US$570-600/tonne for EU hot-rolled coil, US$620 to US$660/tonne for US hot-rolled coil and around US$450 to US$460/tonne for Chinese rebar. These are the ranges that guarantee margins for average-cost steelmakers comparable to historical trends. Also we maintained a relatively high – by historical standards – gap between prices in China and in importing markets in recognition of higher future freight costs.

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