The World Steel Association (worldsteel) expects steel demand to contract by 5.4 percent in 2020 to 1.654 billion metric tons. The latest Short Range Outlook forecasts a recovery to 1.717 billion tons in 2021, a 3.8 percent increase over this year.
Commenting on the outlook, Chairman of the worldsteel Economics Committee Al Remeithi said: “The COVID-19 crisis, with its disastrous consequences for public health, also represents an enormous crisis for the world economy. Our customers have been hit by a general freeze in consumption, by shutdowns and by disrupted supply chains. We therefore expect steel demand to decline significantly in most countries, especially during the second quarter. With the easing of restrictions that started in May, we expect the situation to gradually improve, but the recovery path will be slow.
“However, it is possible that the decline in steel demand in most countries will be less severe than during the global financial crisis as the consumption- and service-related sectors, which have been hit hardest, are less steel-intensive. In many developed economies, steel demand was already at a low level, having still not fully recovered from 2008.
“Let me underscore that this forecast is presented at a time of high uncertainty. As economies are reopening without a vaccine or cure in place, significant downside risks exist. If the virus can be contained without second and third peaks, and if government stimulus measures are continued, we could see a relatively quick recovery.”
As first to contract the pandemic and first to emerge from lockdown, China will outpace the rest of the world in steel demand recovery. All major-steel using sectors in China were back to near full production by the end of April, although export demand still languished. Steel demand in China is forecast to increase 1 percent in 2020, and new infrastructure projects started this year will support steel demand in 2021.
EU steel demand was expected to improve in 2020 after a 5.6 percent contraction in 2019. The COVID-19 crisis, however, pushed the manufacturing sector deeper into recession as widespread lockdowns devastated order books. Construction is expected to be fairly resilient while automotive takes the brunt of the impact.
The U.S. manufacturing recession is expected to reach its bottom in the second quarter. Energy will continue to see downward pressure due to oil prices. Residential construction will be impaired by consumer job losses and economic uncertainty. Worldsteel predicts nonresidential construction will have an overall decline in 2020 and a slight recovery in 2021.
The most severely impacted steel intensive industries during the pandemic were construction, mechanical machinery and automotive.
Construction projects were halted or postponed due to worker shortages during lockdowns and supply chain disruption. Government support for new construction projects is needed to bolster the sector, said worldsteel, but many governments have seen balance sheets plummet leaving little funding left to spend on new infrastructure.
Supply chain lead times were among the longest the mechanical machinery sector has experienced due to pandemic-related supply issues. Demand is expected to decline in 2020 as investment is put on hold or canceled, said worldsteel. Although the overall recovery for the sector is expected to be lengthy, agriculture and construction machinery are expected to recover faster than most.
The global automotive industry is expected to see sales down 20 percent in 2020. Worldsteel forecasts that pre-crisis levels will take several years to achieve, although some short-term demand for passenger cars may occur as consumers seek safer alternatives to public transportation.
“Furthermore, the supply disruptions may continue beyond the lockdown period as liquidity problems will deter the restart not only of car producers, but also of auto part suppliers. The transition to electric vehicles will continue and likely accelerate post-pandemic,” said worldsteel.
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