Jan 21 2009
The speed of collapse in steel demand throughout the world surprised the producers, consumers, distributors and analysts, including MEPS researchers. In our last issue, we did predict a slowdown in the rate of growth in production which had been reported for the first eight months of 2008. However, the quarter on quarter reduction in the final three months, at close to 65 million tonnes, will be an unprecedented figure in the history of the industry.
MEPS now expects global steel production in 2008 to be finalised at close to 1328 million tonnes. This equates to a 16 million tonne (1.2 percent) decrease on the year earlier outturn. Blastfurnace iron making will also be lower in 2008 compared to 2007. A reduction of more than 20 million tonnes is foreseen - down by 2.2 percent. In contrast, direct reduced iron production in 2008 will be reported at near 68.5 million tonnes. This represents an increase approaching 7 percent on the 2007 result. A small reduction is predicted for 2009.
The steel market is forecast to remain weak during the first half of 2009 in all parts of the world. Demand for motor vehicles, home appliances and residential properties is likely to remain poor. However, a degree of inventory building should occur but to levels well below those in the first half of 2008.
Many governments are embarking upon plans to stimulate their economies through investment in large infrastructure projects. This is good news for the steel industry in the medium and long term. Unfortunately, this type of spending takes time to become effective.
We believe that global iron and steel production in 2009 will be lower than the figure recorded in the previous twelve months. The difficult time will be the first quarter as many plants remain closed or on restricted working patterns. This should be followed by a period of slow growth as mill order books show modest improvement from some restocking by end users and distributors as credit eases somewhat.
Total EU-27 steel output in 2008 is now predicted to be 200 million tonnes - 3 percent below the previous year’s figure. Several integrated mills shuttered their plants in the final trimester in an effort to rebalance supply and demand in the region. A further reduction in output is forecast for 2009. Demand from the construction and auto segments has collapsed and is not likely to pick up in the near term.
The EU-15 nations are expected to report a 6.25 million tonne decrease in steel output in 2008. Substantial production cuts took place in France and Germany in the final quarter, leaving the period four outturn almost 20 percent down on the equivalent 2007 figure. Similar output curbs are predicted for the first quarter of 2009. An economic recession is looming in many of these member states. As a result, a further 13 million tonne reduction is anticipated in 2009.
The MEPS prediction for crude steel production in non EU Europe has been revised downwards for the year 2008 due to the massive production cuts in the final quarter. We now expect the outturn at 31.4 million tonnes. Difficult local market demand and trading conditions lead us to forecast a lower output in 2009.
Steel output in the CIS in 2008 will be substantially down on the outturn in the previous year. Regional demand has weakened as credit seized up. Revenue from commodities have fallen and unemployment is rising. The outlook for 2009 is not encouraging. Oil prices will remain well below the peak values achieved last year. Exports of steel products and other metals will be lower.
North American steel manufacturing fell in the final trimester in 2008 to end the year at approximately 114 million tonnes, well below the 2007 outturn and 8 percent down on the year earlier figure. A further reduction is predicted for 2009 at 103.2 million tonnes.
Canadian steel output will be below 16 million tonnes in 2008. The situation in 2009 is likely to be worse. Output curbs will continue for most of the first trimester. Any pick up in the following nine months is expected to be sluggish. Mexican production in 2008 should be reported at near the volume in the previous twelve months. However, we foresee a decline in output in 2009 as export sales decrease and domestic demand slows.
Steel making in the United States in 2008 will turn out to be almost 7 percent below the prior year’s result. Demand from many of the traditional industrial and building sectors is expected to be lower in 2009. The import threat could intensify. This leads us to forecast a further reduction in output compared to 2008.
South American steel making in 2008 will be marginally above the figure recorded in the previous year. At the eleven month stage, a positive result was recorded but weakening market conditions limited the improvement for the full year. A reversal of the 2008 situation is predicted for 2009. Regional demand is forecast to decline as economic conditions deteriorate.
Crude steel production in Africa reduced significantly in 2008 - falling by approximately one million tonnes on the previous year’s outturn. A similar downgrade is predicted for 2009 as economic conditions worsen.
Crude steel output in the Middle East in 2008 will be reported at a figure slightly above the level in the previous year. The steady increase in production which has occurred over the past ten years is likely to be arrested in 2009, however, as oil prices stay low.
Our prediction for total Asian steel production in 2008 is downgraded to 764 million tonnes. This still represents a near 10 million tonne increase on the year earlier figure. Savage production cuts were put in place in the final quarter of 2008 in all countries as the global economic crisis developed.
Source: MEPS - World Steel Outlook.