World steel demand to shrink 6.4%

(Posted on 15/06/20)

The World Steel Association (worldsteel) has released its Short Range Outlook (SRO) for 2020 and 2021. In 2020 worldsteel forecasts that steel demand will contract by 6.4%, dropping to 1,654 Mt due to the COVID-19 crisis. In 2021 steel demand is expected to recover to 1,717 Mt, an increase of 3.8 % over 2020.

This year’s reduction in global steel demand will be mitigated by an expected faster recovery in China than in the rest of the world.

The forecast assumes that most countries’ lockdown measures continue to be eased during June and July, with social distancing controls remaining in place, and that the major steelmaking economies do not suffer from substantial secondary waves of the pandemic.

Commenting on the outlook, Mr Al Remeithi, Chairman of the worldsteel Economics Committee said, “The COVID-19 crisis, with its disastrous consequences for public health, also represents an enormous crisis for the world economy. Our customers have been hit by a general freeze in consumption, by shutdowns and by disrupted supply chains. We therefore expect steel demand to decline significantly in most countries, especially during the second quarter. With the easing of restrictions that started in May, we expect the situation to gradually improve, but the recovery path will be slow.

However, it is possible that the decline in steel demand in most countries will be less severe than during the global financial crisis as the consumption- and service-related sectors, which have been hit hardest, are less steel-intensive. In many developed economies, steel demand was already at a low level, having still not fully recovered from 2008.

Let me underscore that this forecast is presented at a time of high uncertainty. As economies are reopening without a vaccine or cure in place, significant downside risks exist. If the virus can be contained without second and third peaks, and if government stimulus measures are continued, we could see a relatively quick recovery.”

As most countries have been gradually reopening from their lockdowns since mid-May, recovery of economic activities is expected in the third quarter.

Even though all steel-using sectors are affected by the lockdown measures, the mechanical machinery and automotive sectors are highly exposed to a prolonged demand shock, as well as to disruption in global supply chains. Changes in working procedures in the steel-using sectors to fulfil the requirements of social distancing have been carried out. This change in the working environment will potentially lead to lower productivity and an extended production cycle.