Demand growth of 5% next year will be pushed by emerging markets

By Staff -- Purchasing, 11/2/2006

Apparent steel consumption in such major global markets as the European Union, North America and Japan may be relatively flat next year but emerging and developing markets should continue their strong growth, according to International Iron and Steel Institute (IISI) projections of 5% world growth to 1.18 billion metric tons.

Ian Christmas, IISI’s director general tells reporters at the organization’s 40th annual conference recently that world steel demand in 2006 is improving from 1.03 billion metric tons in 2005 to 1.12 billion this year, an increase of 9%.

The steelmaking group’s annual update and forecast suggests that China and Asia again have dominated the world market for steel because of steadily increased expenditures on infrastructure and factory construction. Apparent steel use in India is seen growing 10% in 2006 to an estimated 41.9 million metric tons from 38.1 million metric tons in 2005. The subcontinent’s 2007 consumption is projected to grow 9% to 45.7 million tons. The strongest growth in apparent steel use for 2006 comes from China with a 14% increase to 374 million metric tons from 327 million in 2005. Looking ahead, China’s apparent consumption is expected to grow 10% to 413 million metric tons next year.

Looking at the so-called NAFTA Region (named after the North American Free Trade Agreement), the IISI sees U.S., Canada and Mexico increasing steel use this year by almost 9% to 151.8 million metric tons from 139.7 million last year. But, looking at 2007, the forecast is a slight decline (0.7%) to 150.8 million metric tons. Japanese steel consumption is seen rising this year by just 0.8% to 78.6 million metric tons (from 78 million a year ago) because of a stagnant manufacturing economy. Looking at 2007 and slightly improved construction and manufacturing, the IISI outlook for Japanese steel use is a 2.8% improvement to 80.8 million metric tons.

Steel use in the 25-member European Union for 2006 has been strong, with the construction, machinery and equipment and durable goods industries leading the way. However, after rising 8% this year to 171.5 million metric tons from 158.8 million in 2005, the outlook for 2007 is a 1.1% decline to 169.6 million metric tons. On the other hand, the non-EU “other European” nations will increase purchasing by 6% to 34 million metric tons next year, after rising about 10% this year to 37.1 million metric tons.

Demand in the CIS, (the 11 former Soviet republics known in Europe as the Commonwealth of Independent States), is likely to increase by 9% to 50.9 million metric tons in 2007 from the likely 2006 level of 46.5 million metric tons. The IISI estimates that South American consumption will be up about 12% this year to 36 million metric tons above the 2005 level of 32.3 million. For 2007, the IISI foreÓcast is 38.6 million tons, a 7% increase.

African steel consumption is projected at 24.6 million metric tons, up 10% from 22.4 million in 2005. Consumption is expected to grow another 4% to 25.7 million metric tons in 2007. In the Middle East, consumption totaled 34 million metric tons last year and is expected to grow 10% to 37.3 million this year and another 9% to 40.6 million in 2007. Current and projected Australian usage is flat, down slightly from 7.9 million metric tons last year to 7.8 million this year, but is projected to rise back to 7.9 million next year.