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Steel Industry Outlook: US Shows Resilience, China Lags


Per the latest data available from the World Steel Association, global steel production increased 2.1% to 1,231 metric tons (Mt) in the first 9 months of 2014. China churned out 50% of the total at 550 Mt, an increase of 2.3% year over year (yoy). Production in the European Union rose 2.9% to 128 Mt. United States shared the podium holding the third position, with production climbing 2.3% to 91 Mt. Japan nudged up 0.8% to 83 Mt.

Given the weaker-than-expected performance in the emerging and developing economies in the first half of 2014, the World Steel Association has trimmed its short-range outlook for global steel usage, which is now expected to increase 2% in 2014, down from its prior forecast of 3.1%. For 2015, world steel demand is projected to grow at the same pace and reach 1,562 Mt. A slowdown in China, due to the structural transformation of the country’s economy, was mainly instrumental in bringing down the outlook.

Economic slowdown in China -- the largest steel consumer, accounting for almost half of global steel consumption -- has dealt a massive blow to the global steel industry. In stark contrast to the high demand levels in China in the past years, steel usage is the country is expected to cool down and rise only 1% in 2014, while declining further to 0.8% growth in 2015.

In Central and South America, falling commodity prices and delayed structural reforms will affect steel demand. In Brazil, apparent steel usage will decline as high inflation, overvalued currency, high labor costs and infrastructure bottlenecks are curtailing investment activities. In the Commonwealth of Independent States (CIS, also known as the Russian Commonwealth), geopolitical tensions will constrain demand.

Recent reports of weakness in the Euro-zone economy, particularly its leading economy Germany, signal a slowdown in the much awaited recovery in the region. Companies like ArcelorMittal,which generates almost half of its revenues from the region will be affected. Even United States Steel Corp. has significant operations in Europe.

However, the picture is not so bleak everywhere. Steel demand is expected to grow in the U.S., riding on the back of an improving global economy, strong momentum in the automotive markets, demand in the energy sector and a turnaround in the construction sector. India will also pick up the pace driven by its construction and manufacturing sectors, and structural reforms from the new government.

Much hope is pinned on India to act as the next growth driver, given its high population and rapid urbanization. Demand in Japan will be up in 2014, aided by governmental economic policies.


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