November 20, 2008

Steel demand and capacity will continue to advance - OCED

According to Organization for Economic Cooperation and Development, global steel demand growth continues to be led by emerging economies, to meet the requirements of expanding industrial sectors and infrastructure growth. The organization said that demand growth for steel in many mature economies has slowed in line with weaker economic activity.

Mr Risaburo Nezu chairman of the OECD Steel Committee said that “In the mature steel markets of North America, the European Union and Japan, steel demand growth will remain modest in the near term, reflecting the economic slowdowns in the these countries. Housing market weakness is one factor limiting consumption growth in North America and Japan. Consumption growth in the EU is firmer, though it is beginning to slow noticeably.”

The OECD outlook expresses the same bullish tone as the International Iron and Steel Institute forecast of April, which suggested that 2008 will show apparent steel use worldwide rising to 1.28 billion metric tons from 1.20 billion tonne in 2007, an increase of 6.7%.

Mr Nezu said that Chinese growth in machinery and automotive manufacturing, shipbuilding and construction are likely to continue to support steel demand above the 408 million tonnes of 2007, which was 13% more than was used in 2006. He also believes that a growing industrial sector and expanding infrastructure building “should continue to support steel use in India” above the 51 million metric tons of 2007, which was 11.3% stronger than in 2006.

The OECD Steel Committee's outlook continues by noting that apparent steel use in Russia of almost 40 million tonne in 2007 will be bolstered this year by the oil and gas industry as well as rising household incomes. Brazilian steel demand is increasing significantly from its 2007 level of 22 million tonne, reflecting the buoyant domestic construction, automotive and capital goods sectors.

The Middle East and Africa are experiencing very strong growth in steel demand to meet the requirements of investments in oil and gas projects and expanding construction activity. Apparent use reached 25 million tonne in Africa and 44 million tonne in the Middle East in 2007.

The OECD Steel Committee said that, global steelmaking capacity continues to expand rapidly a trend that is being supported by generally higher producer profitability and positive demand prospects. This development has been enhanced by increased flows of foreign direct investment, as steel companies expand their operations in emerging economies where steel consumption is increasing rapidly.

Mr Ku Taek Lee chairman of the IISI Executive Committee reviewed the forecast at its meeting in St Petersburg said that “The underlying assumption behind this forecast is that although some weakening in the US and European Union economies is expected, demand for steel will remain healthy thanks in part to the emerging markets which will maintain their own dynamism.”