Global steel outlook brightens, but Chinese output growth to halve

Global steel use is expected to grow 3.1% this year to 1.47 billion tonnes and to expand 3.3% in 2014 to 1.52 billion compared to just 2% growth recorded in 2012 according to a new report by The World Steel Association.

However amid the generally rosier forecast the industry body is warning that China, which forges almost as much steel as the rest of the world combined, will face a dramatic slowdown in output growth in 2014.

Hans Jürgen Kerkhoff, Chairman of the Worldsteel Economics Committee said that the key risks to the global economy – the eurozone crisis and a hard landing for the Chinese economy – have "continued to stabilize" over the past six months:

"Our underlying assumption remains that the US will resolve its fiscal constraint soon. The correction in the eurozone has been more severe than we forecasted but the improvement seen recently is now expected to continue for the rest of 2013. Major emerging economies, particularly India and Brazil have not performed as hoped mainly due to key structural issues.

"These factors have led to a lower steel demand performance than predicted across the world, with China being the one exception. Steel demand in 2013 is now forecasted to grow in China by 6.0%. Thus, despite steel demand growing by only 0.7% in the rest of the world, total global steel demand will grow by 3.1%.

"In 2014, we expect to see continued recovery in global steel demand with the developed economies overall returning to positive growth. At the same time we expect slower growth in China. With risks within the developed world receding there is some uncertainty emerging from developing countries due to unresolved structural issues, political instability and volatile financial markets. All in all, despite economic conditions for the global steel industry remaining uncertain and challenging, we are forecasting further growth for steel demand in 2014.

"Following a 2.9% increase in 2012, apparent steel use in China is expected to grow by 6.0% in 2013 to 699.7 Mt reflecting the impact of the government’s stimulus measures focused on infrastructure. However, steel demand in 2014 is expected to slow to 3.0% growth as the Chinese government’s efforts to rebalance the economy continues to restrain investment activities."

The strength in the global steel industry has been reflected in the prices of the main raw materials for blast furnaces.

The benchmark CFR import price of 62% iron ore fines at China's Tianjin climbed to $131.70 a tonne on Tuesday, up 19% from levels reached this time last year according to data provided by SteelIndex.

The price of metallurgical coal price has recovered from steep declines during the first half of 2013 with benchmark Australian premium coking coal trading for $148.80 a tonne on Tuesday, up from multi-year lows of $131 at tonne struck in early July .