Message from Secretary General_Oct 2018

Posted on 01 November 2018

Source: SEAISI
The month of October saw the release of two reports which provide a good glimpse of the short term global economic growth prospects as well as global steel demand.
The International Monetary Fund (IMF), in its latest World Economic Outlook report, cuts its global economic growth forecasts for 2018 and 2019, attributing to the growing trade tensions between the U.S. and its trading partners which have started to hurt economic activity worldwide. Global economy is now projected to grow at 3.7% in both 2018 and 2019, down 0.2 percentage point from its earlier July forecast.
In advanced economies, IMF noted that economic activity lost some momentum in the first half of 2018 after peaking in the second half of 2017. Nevertheless, economic growth is expected to remain at its earlier projected rate of 2.4% in 2018, before softening to 2.1% in 2019. 
Growth in emerging market and developing economies is forecast to maintain at a steady pace of 4.7% in 2018 and 2019, though down by 0.2 and 0.4 percentage point respectively compared to the earlier forecast. IMF noted that rising interest rates are pressuring some emerging markets with capital outflows, particularly in Argentina, Brazil, Turkey, South Africa, Indonesia and Mexico.
Growth in China is expected to remain strong but is projected to decline gradually. IMF maintained its projection of a 6.6% growth rate for China in 2018 but cut down its estimate for 2019 to 6.2%, down 0.2 percentage point from its July forecast. The country is projected to experience somewhat weaker growth in 2019 following the recently announced trade measures.
Growth projection for India for 2018 has also been maintained at 7.3% and is expected to inch up to 7.4% the following year, placing India as the fastest growing major economy in the world. According to IMF, India’s near-term growth prospects remain strong, benefiting from ongoing structural reform and favourable demographic developments.
For ASEAN-5 (Indonesia, Malaysia, Philippines, Thailand and Vietnam), IMF has predicated a strong growth rate of 5.3% in 2018, before softening to 5.2% in 2019. The downward revision to the 2019 forecast reflects largely the economic cost of recent trade measures. 
Going forward, IMF mentioned escalating trade tensions and the potential shift away from a multilateral, rule-based trading system as key challenges to global economic growth.
The World Steel Association (worldsteel), which also released its Short-Range Outlook (SRO) in the month of October, painted a more upbeat picture of the global steel market in 2018, with global finished steel demand projected to grow by 3.9% in the year to 1,657.9 million tonnes. However, with the global economy showing signs of peaking, worldsteel expects global steel demand growth to slow down to 1.4% year-on-year in 2019 to reach 1,681.2 million tonnes.
China’s steel demand received a boost from the mini stimulus in real estate and the strong global economy in the first half of 2018. As a result, worldsteel expects steel demand in the country in the year to expand by 2.1% in real terms to 781 million tonnes. However, China’s steel demand is expected to decelerate due an absence of stimulus measures as well as the country’s continued economic rebalancing efforts and toughening environmental regulations. Thus, worldsteel foresees zero growth in China’s steel demand in 2019.
For the other emerging Asian economies, India’s steel demand is expected to revert to a higher growth track, supported by improving investment and infrastructure programmes. worldsteel accordingly forecast India to register a high growth rate of 7.5 % in steel demand in 2018 to 95.4 million tonnes. The country’s steel demand is expected to expand by a further 7.3% in 2019 to reach 102.3 million tonnes. 
For ASEAN, worldsteel listed sluggish construction activity and stock adjustments as the main reasons for the slow growth in steel demand in the region in 2017 and 2018. Steel demand in ASEAN-5 dipped 4.3% in 2017 to 71.0 million tonnes but is expected to see a moderate recovery in 2018, registering a growth rate of 3.8% to 73.7 million tonnes. Steel demand in the region is expected to resume its growth momentum backed by infrastructure programmes in 2019 and beyond. Steel demand in ASEAN-5 is projected to grow by 6.2% year-on-year in 2019 to reach 78.3 million tonnes.
Looking ahead, worldsteel identified rising trade tensions between U.S. and China, currency volatilities and political instability as the main risks to ASEAN steel demand growth. 

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