World steel demand growth is astounding

By Staff -- Purchasing, 8/10/2000

World demand for finished steel will rise to 746 million tonnes in 2000 from 699 million tonnes in 1999, and will continue to rise to 771 million tonnes in 2001, suggests analyst Mike Gambardella at Merrill Lynch in New York. His outlook is ahead of the 719 million tonnes forecast earlier for 2000 by economists at the International Iron & Steel Institute in Brussels.

Key factor: North American demand has been setting records, at least through midyear. Metal Bulletin Research (MBR) in London says that's because the U.S. motor-vehicle industry has been absorbing steel at a rate 10% above the level of 1999, and has provided the main source of growth in steel demand from the manufacturing sector. Orders from some other steel-intensive sectors, including industrial equipment and machinery, have been flat or, in the case of appliances, have fallen.

Note that steel experts have grown bullish about year-2000 mill shipments despite the much ballyhooed midsummer slowdown caused by seasonal steel inventory adjustments at service center and end-user levels. A recent survey of 17 market analysts by Locker Associates in New York found a new and higher consensus of 107 million tons in mill shipments. That forecast compares with 105 million tons actually shipped in 1999, which was the second-highest single-year shipping rate of the past decade (after 105.5 million tons in 1997).

Gambardella sees European Union steel consumption rising from 135 million tonnes in 1999 to 140 million tonnes in 2000 and 144 million tonnes in 2001. MBR agrees that general European economic growth is vigorous and steel demand is stronger than expected. Reason: The French economy continues to be the strongest on the Continent, with high levels of activity in construction and manufacturing. German steel demand is strong and growing, especially from industrial equipment companies and automotive. Steel manufacturing also is thriving in the U.K. and Italy. Upshot: Merrill Lynch sees steel production of 147 million tonnes in 2000 in Europe, rising to 152 million tonnes next year.

In Asia, the picture remains clouded. MBR says "Japanese steelmakers have been hoping for a long time now for the best in their domestic market and have been disappointed. So, any indications home consumption is strengthening have to be viewed with a good deal of skepticism, but this does seem to be happening at last." There now is market evidence suggesting that demand in 2000 will at least match last year's 68 million tonnes.

South Korea's steel demand and production are on the rise, fueled by industrial growth and auto production. So, South Korean and Chinese use now is sure to exceed last year's 187 million tonnes, and not slip, as had been projected earlier. According to the Chinese State Bureau of Metallurgical Industry, steel output in the January-May period increased 3.5% to 50.8 million tonnes from 49.3 million tonnes in the same period of 1999. Upshot: Gambardella suggests China's production will be 122 million tonnes this year and then rise to 124 million in 2001.