Commodity market report

Global steel long-term outlook Q3 2015

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Report summary

Lingering uncertainty on the global economic outlook as we reach the end of the commodity cycle has had a detrimental impact on steel with an almost universal downward revision to our steel demand and production numbers. The weakness of the Chinese property market has now spread like wildfire to the non residential construction sector and the manufacturing industries. This weakness will have a broader impact particularly in Asia and other commodity exporting regions which rely on Chinese growth. However there are also other factors to consider. Wood Mackenzie's economics team have lowered their overall forecasts for 2017 2018 on the back of an expected exit of Greece from the Eurozone and monetary policy tightening in the United States. This has resulted in a downwards revision to steel consumption of 9Mt in Europe and 2.5Mt in North America in 2035. Apart from widespread economic weakness there are several other critical themes that have emerged over the summer

What's included

This report contains

  • Document

    SMS LT Q3 2015(V2.1).xls

    XLS 2.22 MB

  • Document

    Global steel long-term outlook Q3 2015

    PDF 604.80 KB

  • Document

    Global steel long-term outlook Q3 2015

    ZIP 1.37 MB

  • Document

    Executive summary

    PDF 80.67 KB

  • Document

    Market structure

    PDF 400.86 KB

  • Document

    Costs

    PDF 96.08 KB

  • Document

    Prices

    PDF 96.08 KB

Table of contents

  • Executive summary
  • Market structure
  • Costs
  • Prices

Tables and charts

This report includes 47 images and tables including:

Images

  • As Chinese net exports have soared since 2013, utilisation rates have plunged in the rest of the world
  • China's slowdown pushed global utilisation rates below 70%
  • Steel consumption is expected to rise in the Balkans as the region resolves its economic stagnation
  • Crude steel production will remain insufficient to satisfy regional demand in the medium and long term, attracting imports
  • Demand growth remains unstable and feeble
  • South African production to slump next year
  • Chart 1: Turkish EAFs supported scrap prices until they became uncompetitive
  • Chart 2: Scrap prices have finally bridged most of the gap with hot metal production costs
  • Turkish EAF's output has been the worst hit from high scrap prices…
  • …but weak steel production in Turkey will remove support for scrap prices
  • HR coil prices have adjusted much faster to changes in the cost structure, and are now typically lower than rebar
  • In part supported by sticky scrap prices, rebar is expected to experience a sharp adjustment, in the USA, converging with China and Europe
  • Chinese steel trade: exports are expected to drop in the medium term but to rise again in the long term
  • Crude steel production forecast: net exports will account for a higher share in the long term
  • In H2 2015 we expect the construction sector to make up some of the ground lost in the first half
  • Compared to the long run average, steel stocks remain too high for comfort
  • Policy changes have helped to support steel consumption in India
  • Private investment has become increasingly important for infrastructure growth…
  • …as the government continues to tackle high deficit
  • Steel stocks continue to contribute to overall growth
  • A surge in steel imports has constrained domestic production
  • Steel demand from construction is exposed to greatest uncertainty in the medium term
  • Crude steel production is under increasing threat from cheap imports and closures
  • Turkish EAF capacity is highly fragmented and small, export oriented mills will be at risk of closures
  • Net export are no longer expected to support crude steel production growth
  • Destocking and imports have dragged on domestic steel shipments
  • Growth has slowed across many steel of the consuming sectors
  • The condition of US roads and bridges is poor
  • Diverging trends across steel consuming sectors
  • Demand from steel consuming sectors is exceptionally weak…
  • …but exports have continued to support crude steel production
  • Steel demand is heavily reliant on consumer spending and investment
  • Construction is the only end-use sector with an upward revision in this forecast cycle
  • Although a small contributor to total steel consumption, manufacturing is expected to rise fast in the medium term
  • The lifting of the sanctions on Iran will support investment in the automotive sector
  • Domestic producers capture at least some of the growth in Iran...
  • ... and in the UAE
  • In Saudi Arabia most of the growth has been captured by imports
  • and in Egypt production has contracted under pressure from imports and from power cuts
  • Gas allocations are unlikely in the long term, and gas availability will remain sketchy in the medium term
  • The drop in housing demand is driven by lower urban migration, declining upgrading demand...
  • ...and lower new demand from young adults
  • China construction forecast (floor space completion)
  • Steel demand in the construction sector
  • Annual steel production growth by region (2011-2015), %

Tables

  • China demand, trade and production forecast
  • China metallics balance

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