Global Steel Outlook in 2013

Posted on 09 May 2013

Source: SEAISI
The World Steel Association, in its October short range outlook report, predicted that global steel demand would grow by 2.9% while the figure for World excluding China was 2.4%. However, CRU was more optimistic with a forecast of average of 5% growth rate globally and growth rate for global steel demand excluding  China at 3%. Apparently, non-China steel demand has flattened since 2010, at below 800 million tonnes per year while demand in China picked up by nearly 80 million tonnes from 2010 to 2013.

The World Steel Association has also predicted that China’s demand will grow by 3.5% in 2013, a significant decline compared to the growth rates of 6-7% in previous years. Meanwhile, CRU predicted growth rate in China’s steel demand at above 6% in 2013. For the three major steel using sectors in China, CRU forecasted that the automotive sector will grow by 8.1%, applicances 12.8% and construction 8.6%.

As for the other countries, USA’s industrial production growth rate remained in relatively good shape while conditions in Japan are improving. The automotive sector in USA is expected to expand by 3.9% in 2013 and the growth rate for the construction sector is 6.3% in the same year. Japan’s automotive sector is expected to decline significantly, by 8.4%. On the other hand, its appliances sector and construction sector are projected to register positive growth rates of 3.2% and 0.3%, respectively in 2013.
Among the major automotive producing countries, China’s light vehicle production increased significantly since 2009 with an average growth rate of 19% from 2004 to 2012, followed by India, with an average growth of 15%. Thailand and Indonesia, the two major vehicle producing countries in ASEAN, also enjoyed a significant growth rate of 11% and 8% respectively in the same period.

Source: J.D. Power Asia Pacific

Thailand is fast becoming a hub for Eco cars and pick-up trucks, benefiting mainly from Japanese automakers that are moving their manufacturing operations overseas in an effort to avoid high labour costs and strong Japanese yen. Meanwhile, Indonesia is trying to promote the country as an alternative to Thailand for Japanese investment. The market is expected to have higher domestic focus due to its stricter investment policies.

In comparison, India, with its lower cost of production, is likely to become a small car production hub not only for OEMs, but also for suppliers. China, on the other hand, has a huge domestic demand but yet will move forward to have higher exports. However, China is losing out its low cost advantage to India and its stricter government policies will limit their inflow of foreign investment.

Demand for cars is becoming more important in this era. Asia has become a major production hub for vehicles in the global market. However, changing technology and market requirements are having substantial impact for steel players, especially on choices of materials. Customer’s demand for high fuel efficiency will lead to increase in the purchase of smaller cars or lighter vehicles. Producers tend to change designs and look for steel substitution materials such as plastics, aluminium and magnesium as these materials help in weight reduction, aesthetic improvement, safety vibration and noise control.

Materials in Vehicle Production
Source: J.D. Power Asia Pacific

J.D Power Asia Pacific has predicted that the portion of steel usage in vehicle production will reduce from 52% of total material in 2000 to 40% in 2035. On the other hand, usage of other materials such as plastics, aluminium, magnesium etc will increase from 48% in 2000 to 60% in 2035.

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