Global Steel Demand and Steel Capacity Expansion

Posted on 06 July 2012
 

Source: SEAISI
According to the World Steel Association, global steel demand is expected to grow by 3-6% y-o-y in 2012, down from 5-6% in 2011. China’s steel demand growth rate is expected to reduce from 6.2% in 2011 to 4% in 2012.  India, which saw its steel demand slowed down to 4.3% y-o-y in 2011 from the double digit growth rate of 12% y-o-y in 2010, is expected to see a stronger growth rate of 6.9% y-o-y in 2012. Steel demand in Asia and Oceania is projected  to expand by 3.7% in 2012, down from the 5.3% growth rate in 2011.

According to OECD, global steel market experienced a significant slowdown in the first quarter of 2012. The slowdown was most visible in Europe and Asia. Steel consumption growth rate in EU27 declined by nearly 10% in the first quarter of 2012, led by the slowdown in Spain, at more than 25% y-o-y. Steel consumption in Asia registered a growth rate of only 2% in the first quarter of 2012.

On the supply side, global steel capacity continues to grow significantly, resulting in a large gap in capacity and demand of more than 500 million tonnes. According to OECD, world steel capacity expansion grew by 15.4% in 2011. However, the growth rate is expected to moderate to 4% in 2012. India will maintain its growth momentum, at double digits of 24%, 30% and 14%, in 2011, 2012 and 2013, respectively. China’s steel capacity expansion surged significantly by 22% in 2011 but will slow down to 3-4% in 2012 and 2013. Capacity expansion in ‘other Asia’ is expected to slow down to 5% in 2012, compared to the high growth rate of 17% registered in 2011. However, the expansion rate will surge by 10.5% in 2013. Overall steel production capacity in Asia increased by 22% in 2011 but the growth rate is expected to moderate to 6% and 4% in 2012 and 2013, respectively.

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With the gap in capacity and demand, there could be a large increase of steel export from Asia if there are no mill shutdowns or capacity utilization adjustment in the region. What will be the impact then?



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