WSO Revises Steel Demand From 3.6% To 2.1% In 2012

The World Steel Organisation (WSO) has released its short-range demand outlook for 2012 and 2013, the half-year revision from its April 2012 statement. As per this outlook, the global steel usage will grow by 2.1 per cent in 2012, which is considerably lower than the growth of 6.2 per cent achieved in 2011. Earlier in April this year it projected growth of 3.6 per cent in 2012. For 2013 it expects the steel demand to improve and has projected a growth of 3.2 per cent with the possibility of recording a high of 1,455 million tonnes.

In its latest press release, the organisation has stated that the recovery in global economy has remained against the expectation. Earlier this year there was some sign of recovery from the slowdown of the December quarter of 2011 after which it was expected that the second half’s performance in 2012 would remain better. However, the situation has deteriorated during the second quarter (June quarter) of this year due to the continued uncertainty arising from the debt crisis in the Eurozone and a sharper than expected slowdown in China. These factors have weighed heavily on business confidence and manufacturing activities around the world.

As a result, the momentum in both the developed and emerging part of the world weakened considerably. In terms of specific countries, the report states that China will continue to post muted demand growth in the year 2012. It has projected a steel demand growth of 2.5 per cent to 639.5 million tonnes, which is far below the 6.2 per cent growth reported in the year 2011. However, in 2013, if the Chinese government announces any stimulus measures, one can expect a moderate improvement in the economic situation. This follows sluggish exports resulting from the global economic slowdown. Thus China’s apparent steel use is expected to rise by 3.1 per cent and will reach 659.2 MT in 2013.

The Eurozone will continue to face problems in the year 2012. The debt crisis in this region will weigh high on the economic activities which will impact the apparent steel usage in EU 27. The WSO expects the steel demand to decline by 5.6 per cent in 2012. In particular, the apparent steel usage in Spain and Italy in 2012 is expected to fall by -11.9 per cent and -12.6 per cent respectively. The most resilient country, Germany, will also experience a decline of -4.7 per cent in 2012. However, it expects the demand to rebound in 2013 by 2.4 per cent.

On the domestic front it has stated that due to both unfavourable domestic and external economic conditions, India’s steel demand growth has been lowered from 6.9 per cent to 5.5 per cent in 2012 and from 9.4 per cent to 5 per cent in 2013. The apparent steel usage will reach 73.6 MT in 2012 and 77.3 MT in 2013.  Domestic steel consumption has remained steady till the June quarter but with the revival of the monsoon and persisting economic problems we may see a decline in consumption in the September quarter.

As mentioned earlier in our updates, the demand for steel will continue to remain subdued across the globe and in India while the high interest rates, high iron ore price and the increase in freight charges will dent the margins of the domestic steel companies in the September quarter 2012.