IISI downgrades world steel supply forecast
By Staff -- Purchasing, 6/3/1999
Steel market supply prospects for 1999 "have been blighted by a carryover of excessive inventories from last year," according to Ian Christmas, secretary general of the International Iron and Steel Institute (iisi). World consumption of steel products in 1999 is now expected to total 673 million tons, some 18.8 million tons (2.7%) below 1998 volume of 692 million tonnes. Early this year, the iisi had predicted 1999 apparent supply at 695 million tonnes. (Note: The terms apparent consumption or apparent supply represent local mill shipments minus exports plus imports.)"Despite the collapse of Asian markets, steel production remained high through most of 1998, with steel products destined for those markets being diverted to other consuming regions," Christmas says. "Although steel production slowed in the latter part of 1998 and early 1999, inventories remain high, and their reduction will depress the steel market through at least the first half."
In the U.S., apparent supply of steel products had been expected to remain near last year's 119 million tonnes. However, the swing from a surge in inventories last year to a moderate reduction in 1999 stocks means new supply will fall 7% to 110.8 million metric tonnes. Reflecting this change, total nafta (North American Free Trade Agreement) steel demand is expected to fall 5.5% this year to 136.3 million tons.
Looking elsewhere in the Americas, Christmas suggests the Brazilian economy will be in recession this year, with steel consumption shrinking 3% to 14.1 million tonnes. "The fall in steel consumption will be mitigated by better prospects for the export of steel-containing manufactured goods, following the sizable devaluation of the real," Christmas suggests. Still, he thinks Brazil's problems will have repercussions in Argentina, where steel supply is expected to fall 4.8%.
Korea could see a 12% recovery this year to 28.1 million tonnes, following a dramatic 34% fall in 1998 from 38 million tons to 25 million. However, "other major Asian markets give little cause for optimism," notes Christmas. After falling 14% in 1998, Japanese consumption is expected to erode further in 1999, although the positive effects of a government stimulus package could become apparent before year end. Government measures to reduce oversupply in China are likely to reduce that country's apparent consumption this year by about 7 million tonnes, or 6.2%. Taiwan's steel demand is expected to remain on par with 1998. Total consumption in the Asian region is expected to fall 1.7% this year to 4.8 million tonnes.
Apparent consumption in the European Union is expected to total 130.2 million metric tons, a 4.3% decline from 1998. "As in the United States, this fall could be attributed to changes in inventories, although real consumption in the United Kingdom will be down due to slowing economic growth and the impact of sterling strength on the manufacturing sector," Christmas says. The iisi exec thinks steel demand in the rest of Europe will gain 4.1% to reach 36.6 million tons, fueled by 7% growth in the Turkish market.
Christmas suggests that steel demand in the Commonwealth of Independent States (Russia and Eastern Europe) will remain stagnant, at an estimated 29.4 million tons as exports from the region have been reduced by the collapse in Asian markets and measures taken by many countries to restrict the inflow of Russian and Ukrainian steel.
Egypt's steel consumption is expected to fall by 1.2 million tonnes (more than 20% this year). Combined with a 5% expected decline in South Africa, the continent's total consumption is expected to fall 9.1% to 1.4 million tonnes.
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