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

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  • 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
      • Japanese demand works its way through high inventories
      • Real consumption is expected to improve in H2 2015…
      • …but decline is the future for most sectors
      • Japan steel exports resist…
      • …supported by the international supply chain integration strategy
    • South Korea
    • Taiwan
      • A gradual change in policy stance – better than nothing
      • Why is infrastructure important for steel consumption
      • Near term pressures persist
      • The future of domestic steel production is uncertain
      • India remains a difficult place to bring on new steelmaking capacity
    • Vietnam
    • Indonesia
    • Malaysia
    • Thailand
    • Philippines
      • EU domestic demand to the rescue?
      • EU demand strong, though exports are falling
      • European construction will remain sluggish
      • EU demand for machinery will fall sharply in the long term
      • EU steelmakers will continue to struggle with oversupply
      • Construction to suffer from lower investment
      • Turkish manufacturing supported by exports…for now
      • Competition from cheap exports puts Turkey's mini-mills at risk of closure
    • Other Europe
      • Imports the key theme for 2015
      • Destocking
      • Slowing underlying demand
      • Implications for long term demand
      • Production and capacity shifting towards EAFs
      • Steel demand to grow supported by automotive and infrastructure
      • Steel production to rise
      • Demand outlook remains weak
      • The future of US Steel assets remains unresolved
      • Political turmoil and economic crisis dampen steel demand
      • Previous concerns remain in place
      • Domestic producers are export dependent
      • Appetite for new capacity additions slows
      • Weak growth for the rest of South and Central America
      • Outlook remains weak
      • Not all sectors are tainted with the same brush
      • Outlook for automotive is less upbeat, at least in the short term
      • Steel demand to grow in the long term
      • Steel production supported by exports
      • Capacity response has been mixed
      • The worst might be over
      • Slow growth prospects
      • Caught between low oil prices and an import flood
      • Relative stability has benefited infrastructure investment in Egypt
      • The global slow down will affect MENA governments' investment ability
      • Manufacturing remains small, but growth is expected to strengthen
      • Poor utilisation rates and power allocations may delay capacity expansions
      • No gas – no DRI!
    • Other Africa
    • Hot metal production costs dragged down by Chinese weaker growth
    • Risks stacked to the downside for iron ore and coking coal prices
    • Have scrap prices caught up?
    • Forecast outlook

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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