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Home > MEPS Steel News - 06.11.2018

MEPS Expects Global Steel Production to Increase by 4.6 Percent in 2018


Global crude steel production is forecast to rise by 4.6 percent, year-on-year, to reach 1.79 billion tonnes, in 2018. This strong expansion is due, in part, to an estimated gain of 6.3 percent in China’s steel output.

Following the closure of unapproved capacity, the Chinese authorities are now able to capture a more accurate figure for the country’s total steel production, for inclusion in the official statistics. Consequently, China’s output growth, in real terms, is below the reported 6.3 percent suggests. Notwithstanding the statistical discrepancies, Chinese steel demand has been relatively buoyant, this year, and this has enabled mills in the country to lift their production.

Growth in world crude steel output, excluding China, is forecast at approximately 3 percent, in 2018. This follows an increase of 4.8 percent, last year. Global steel demand growth has remained firm in 2018. However, after hitting the bottom in late 2015/early 2016, the cyclical recovery in the steel market appears to be reaching its zenith. Indicators suggest that the economic upturn is losing momentum. Marginal downgrades to GDP forecasts have been undertaken by a number of global institutions, in recent months. MEPS predicts that little or no growth will occur in global steel production and consumption, in 2019.

In 2018, a substantial escalation of trade tensions has developed. The rising tide of protectionist measures weighs heavily on the outlook for 2019 for both steel consumption and the wider economy. Trade barriers are expected to disrupt global supply chains and inhibit end-user demand for steel-containing goods. Furthermore, they are projected to adversely affect business confidence and investment.

The steel price recovery, and associated strong mill profit margins, in the past three years, have allayed fears of overcapacity in the steel sector. However, market participants are becoming more cautious, with expectations of slowing steel demand growth, in the medium term. Consequently, the previous uncertainties regarding overcapacity are re-emerging.

New steelmaking capacity installations are planned across the world. Many of these are in regions where demand currently exceeds supply, such as Southeast Asia, Africa and the Middle East. Indian steel producers also have plans to substantially expand production capability. Nonetheless, despite the number of planned projects, worldwide, MEPS predicts that a proportion of these will encounter delays or be cancelled. This is due to a range of factors, including financial constraints, availability of raw materials, lack of adequate infrastructure and import pressure. Consequently, the problems of structural overcapacity may remain, but not intensify, in the years ahead.

The extended period of excess supply and unprofitability, prior to the recent recovery in the steel market, is likely to remain fresh in the mind of steel producers, in the medium term. Mills, in many parts of the world, are expected to operate in a manner which would prevent a repeat of those unfavourable conditions.

 

Source: MEPS - World Steel Outlook - Q4 2018 Issue

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