STEEL MARKET DEVELOPMENTS - OECD · STEEL MARKET DEVELOPMENTS 4 consumption rising by 3.5%. In Africa, Central and South America, and the regional aggregate Other Europe, growth rates

STEEL MARKET DEVELOPMENTS

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Steel Market Developments provide up-to-date information on global and regional steel markets. Reviewed and approved by the OECD Steel Committee, they are disseminated approximately twice a year to allow policymakers, industry, media and academia to keep abreast of the main trends and recent developments taking place in steel markets.

The reports provide an overview of recent supply and demand developments and, when available, forecasts from publicly available sources. Topics of special interest are occasionally covered, such as developments in steel-related raw material markets, steelmaking capacity trends or updates on specific regions that are important for the global steel market.

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2ND QUARTER 2013

by Laurent Daniel

OECD, Paris

Note for Israel The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. © OECD/OCDE, 2015 Applications for permission to reproduce or translate all or part of this material should be made to: OECD Publications, 2 rue André-Pascal, 75775 Paris, Cedex 16, France; e-mail: [email protected]


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TABLE OF CONTENTS

STEEL MARKET DEVELOPMENTS .......................................................................................................... 3

Global summary ........................................................................................................................................... 3 The economic background ........................................................................................................................... 4

Macroeconomic developments ................................................................................................................. 4 Economic activity in key steel-using sectors ........................................................................................... 6

Steel market developments ........................................................................................................................ 13 Global steel demand ............................................................................................................................... 13 Production and capacity ......................................................................................................................... 14 Steel prices ............................................................................................................................................. 15 Steel trade developments ........................................................................................................................ 17

Prospects for the global steel market ......................................................................................................... 20 Indicator-based forecasts of steel production in the short-term ............................................................. 20 Steel demand forecasts for the medium-term and the long-term ........................................................... 22

ANNEX: Recent economic and steel data for individual economies ............................................................ 24


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Global summary

Global steel consumption growth has moderated, from a year-on-year rate of 5.4% in the last quarter of 2012 to 4.2% in the first quarter of 2013, according to the Commodity Research Unit (CRU). However, growth in the beginning of 2013 was still higher than the 1.7% recorded in the third quarter of 2012. The relatively higher steel consumption growth rates seen in the last quarter of 2012 and the first quarter of 2013 reflect a sharp increase of apparent steel consumption in China, by 12.4% year-on-year in the last quarter of 2012 and 10.1% in the first quarter of 2013. In contrast, steel consumption in the rest of the world decreased by 1.7% year-on-year in the last quarter of 2012 and by 1.9% in the first quarter of 2013. In the first quarter of 2013, many significant steel-producing economies experienced a yearly contraction of steel consumption, notably the European Union (-6%), the United States (-7%), Japan (-8%), Korea (-7%) and Brazil (-7%).

Industrial production in advanced economies increased by 0.5% in 2012 compared to a growth rate of 1.9% in 2011. The weak growth of industrial production in advanced economies in 2012 is linked to the contraction of industrial activity in the euro area and in Japan, whereas the United States registered a 3.6% increase in industrial production. Industrial production growth in emerging economies has also been slowing from 7.2% in 2011 to 5.0% in 2012. In fact, every emerging region with the exception of Africa and the Middle East experienced lower industrial production growth in 2012 relative to 2011. In emerging Asia, industrial production accelerated in the last quarter of 2012 compared to the previous quarter, whereas it slowed in all other emerging regions.

According to Oxford Economics, construction activity (measured in terms of the sector’s value added) in advanced economies increased by 1.2% in 2012, marking a slight improvement from growth of 0.6% in 2011. The mild acceleration of construction value added growth was driven by a strong performance in the U.S., led by residential investment activity, and to a lesser extent by reconstruction works in Japan that were necessary following the March 2011 earthquake. In contrast, construction sector value added in the EU fell in 2012 in a setting of low economic growth and weak consumer confidence. In emerging economies, growth in construction activity decreased to 4.7% in 2012 from 5.8% in 2011, driven by slower activity in China, Brazil and Russia.

In the first quarter of 2013, global steel production reached 1,554 million metric tonnes (mmt) in annualized terms, representing an increase of 2.3% compared to the first quarter of 2012. Chinese steel production increased by 9.2% year-on-year in the first quarter of 2013, reaching a new all-time high of 767 mmt in annualized terms. In the world excluding China, steel production was 787 mmt, in annualized terms, in the first quarter of 2013, down 3.7% compared to the same period in 2012.

According to the most recent Short Range Outlook released by the World Steel Association in April 2013, world apparent finished steel use is expected to increase by 2.9% in 2013 and by 3.2% in 2014, following a growth rate of 1.2% in 2012. In 2013, apparent steel use is expected to increase by 0.4% in developed economies, which would be a slight improvement following a demand contraction of 1.9% in 2012. In emerging markets, apparent steel use is expected to grow by 3.9% in 2013, with Chinese steel


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consumption rising by 3.5%. In Africa, Central and South America, and the regional aggregate Other Europe, growth rates in 2013 are expected to be 8.1%, 6.2% and 6.1%, respectively.

The economic background

Macroeconomic developments

In its 93P

rdP Economic Outlook released on 29 May 2013, the OECD revised its GDP forecasts

downwards for most OECD member countries, with the notable exception of Japan. The OECD’s GDP growth rate is expected to be 1.2% in 2013, down slightly from 1.4% in 2012. GDP growth rates are expected to be lower in 2013 than in 2012 in the United States (1.9% after 2.2%), in the euro area (-0.6% after -0.5%) and in Japan (1.6% after 2.0%). For the world as a whole, the OECD expects GDP to grow by 3.1% in 2013, a rate of expansion similar to the 3.0% recorded in 2012. According to the forecast, the slowdown in the OECD area in 2013 would be offset by higher growth in the rest of the world compared to 2012, notably in Brazil and in India. Chinese GDP growth is expected to be 7.8% in 2013, the same rate as in 2012.

Table 1. GDP growth forecasts

In per cent

2012 2013 2014

United States 2.2 1.9 2.8

Euro area -0.5 -0.6 1.1

Japan 2.0 1.6 1.4

OECD 1.4 1.2 2.3

Non-OECD 5.1 5.5 6.2

World 3.0 3.1 4.0

Source: OECD Economic Outlook 93 released on 29 May 2013.

The OECD expects growth in advanced economies to strengthen gradually after the middle of 2013 and through 2014, supported by accommodative monetary policies, improving financial market conditions and a gradual restoration of confidence. However, fiscal consolidation and weaknesses in credit markets are expected to continue to weigh on the economic activity in the euro area.

The Purchasing Managers Index (PMI) composite indicator for the United States has been oriented downwards over the past few months, declining from 55.8 in January 2013 to 52.1 in April 2013 but remaining above the threshold reading of 50 indicating further GDP growth in 2013. In Japan, the PMI composite indicator rebounded strongly from 45.0 in December 2012 to 51.8 in April 2013, supported by the fiscal and monetary stimuli. In contrast, this indicator for the euro area has been below 50 since August 2011 and reached 46.9 in April 2013, indicating that economic activity in the euro area continued to contract in the beginning of the second quarter of 2013.


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Figure 1. Business confidence

PMI indicators

Source: Markit.

In Russia, yearly GDP growth rates decreased in each quarter of 2012, the result of weakening external demand despite relatively strong private domestic consumption. The OECD expects Russian GDP growth to fall to 2.3% in 2013 from 3.4% in 2012. In Brazil, GDP growth increased to 1.4% year-on-year in the last quarter of 2012 from 0.9% in the third quarter. But the GDP growth rate in 2012 was only 0.9%, the worst performance since 2009 when GDP decreased by 0.3%. Prospects are better for 2013, with the OECD forecasting that Brazilian GDP growth will accelerate to 2.9%. Chinese and Indian yearly GDP growth rates have been on a slowing trend since 2010. In India, the slowdown in external and domestic demand, resulting also from fiscal tightening, have led to weaker GDP growth. However, Indian GDP growth is expected to pick up from a rate of 3.7% in 2012 to 5.7% in 2013, driven by more accommodative monetary policy. Chinese GDP growth is expected to accelerate in 2014 to 8.4%, up from 7.8% in 2012 and 2013, supported by higher world trade growth.

Table 2. GDP growth forecasts

In per cent

2012 2013 2014

Brazil 0.9 2.9 3.5

Russia 3.4 2.3 3.6

India 3.7 5.7 6.6

China 7.8 7.8 8.4

Source: OECD Economic Outlook 93 released on 29 May 2013.

Recent movements in the OECD’s leading indicators are generally supportive of the economic forecasts for these four large emerging economies in 2013. The leading indicator for China has increased recently, pointing to a gradual improvement in GDP growth rate in the coming quarters. In Brazil and

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Russia, the leading indicators suggest that GDP growth rates in these economies might stabilize in the coming quarters. For India, the GDP growth rate would continue to slow down early 2013 according to the OECD leading indicator.

Figure 2. OECD composite leading indicators

Source: OECD.

Economic activity in key steel-using sectors

Industrial production

The industrial production growth rate of advanced economies slowed to 0.5% in 2012 from 1.9% in 2011, with the contraction of industrial activity in the euro area partly offset by a slower pace of contraction in Japan in 2012 compared to 2011, and a steady and relatively strong growth rate in the United States.


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Table 3. Yearly growth rates of industrial production in advanced economies (in percent)

Advanced

Economies Euro Area Japan United States

Q1 2011 3.8 6.8 -1.8 4.8

Q2 2011 1.0 3.6 -6.7 2.9

Q3 2011 1.9 3.1 -0.9 2.6

Q4 2011 1.0 -0.4 -0.1 3.3

2011 1.9 3.2 -2.4 3.4

Q1 2012 1.3 -1.7 2.4 4.0

Q2 2012 1.9 -2.0 4.9 4.5

Q3 2012 -0.2 -2.3 -4.4 3.3

Q4 2012 -1.1 -3.0 -6.5 2.7

2012 0.5 -2.2 -1.0 3.6

Sources: CPB, Datastream.

Figure 3. Industrial production in advanced economies (index 100 in 2005)


Industrial production growth in emerging economies slowed down from 7.2% in 2011 to 5.0% in 2012. Yearly growth rates decreased in 2012 compared to 2011 in every emerging region except Africa and the Middle East. Industrial production in emerging Asia accelerated in the last quarter of 2012 compared to the previous quarter, whereas it slowed further in all other emerging regions.

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Table 4. Yearly growth rates of industrial production in emerging economies

In percent

Emerging Economies

Emerging Asia

Central/ Eastern Europe

Latin America

Africa & Middle East

Q1 2011 8.7 11.6 8.6 5.1 1.8

Q2 2011 7.0 10.1 6.7 3.4 -0.8

Q3 2011 7.5 10.9 5.6 3.2 0.1

Q4 2011 5.6 7.7 5.0 1.9 1.2

2011 7.2 10.0 6.4 3.4 0.6

Q1 2012 5.6 7.5 3.3 0.8 3.9

Q2 2012 5.0 6.5 2.4 0.2 5.3

Q3 2012 4.2 5.8 1.9 0.8 2.7

Q4 2012 5.3 8.6 0.1 0.5 0.3

2012 5.0 7.1 1.9 0.6 3.0

Note: The CPB defines advanced economies as OECD countries excluding Turkey, Mexico, Korea and Central European countries. Emerging economies are those in Asia, Central and Eastern Europe, Latin America, and Africa and the Middle East.


Figure 4. Industrial production in emerging economies (index 100 in 2000)

Source: CPB.

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Construction

According to Oxford Economics, construction value added in advanced economies increased by 1.2% in 2012 after posting 0.6% growth in 2011. The mild acceleration of construction value added growth was driven by a strong performance in the United States, led by residential investment, and to a lesser extent by reconstruction works in Japan in response to the March 2011 earthquake. In contrast, construction value added in the European Union fell by 4.5% in 2012, because of low economic growth and weak consumer confidence stemming from rising unemployment. According to Oxford Economics, difficulties accessing credit, private sector indebtedness and spare building capacity also weighed on construction activity in some European countries.

Construction value added growth in emerging economies slowed to 4.7% in 2012 from 5.8% in 2011. This development resulted from moderating activity in China, where the sector’s value added growth slowed to 7% in 2012 from 9.6% in 2011, in Brazil (1.8% in 2012 after 3.7% in 2011) and Russia (1.3% in 2012 after 3.6% in 2011). Construction growth in India stabilized at 6.3% in 2012.

Table 5. Construction value added, share of the world total and annual growth rate

In percent

Share of world total 2006-2010 2011 2012e 2013f 2014f

EU 29.9 -1.0 0.4 -4.5 -1.0 1.6

US 18.4 -5.9 -0.3 8.3 6.8 7.6

Japan 9.5 -2.6 1.0 2.5 1.5 0.8

Developed countries 63.0 -2.7 0.6 1.2 2.2 3.7

Brazil 2.1 5.6 3.7 1.8 3.4 4.6

Russia 1.8 4.4 3.6 1.3 6.1 7.7

India 3.8 8.6 6.3 6.3 4.6 9.7

China 11.4 14.9 9.6 7.0 6.9 8.3

Emerging markets 37.0 7.6 5.8 4.7 5.2 6.9

World 100.0 0.3 2.5 2.5 3.3 4.9

Source: Oxford Economics.

Automotive industry

The value added of the automotive sector in advanced economies increased by 8.2% in 2012, supported by a positive development in the United States. The U.S. motor vehicles sector registered a strong increase in value added, i.e. 19% in 2012, and car sales in the United States reached 15 million units in April 2013 at a seasonally adjusted annualised rate. New and more fuel efficient motor vehicle models and falling auto loan rates are expected to support U.S. car demand in the future. The Japanese motor vehicles sector saw its value added rebound by 12% in 2012 after registering a sharp drop in 2011 linked to the earthquake in Japan and the floods in Thailand. In the European Union, the motor vehicles sector suffered a decline of 0.9% in 2012. The EU’s weak development in 2012 was the result of declines in value added exceeding 10% in France, Italy, Spain and Sweden. Germany’s motor vehicles sector, which accounts for 50% of the total value added for the EU, continued to enjoy growth, but the pace slowed down markedly from 13.0% in 2011 to 1.4% in 2012. In the United Kingdom, the sector’s value added increased


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by 4.4% in 2012 after a strong growth of 13.9% in 2011. Car registrations in Europe have been trending downwards since early 2011, falling to 11.5 million units for the twelve months ending in April 2013. This is down from more than 14 million units per year before the crisis.

Figure 5. New car sales and registrations

In millions of units, for the last 12 months

Source: Datastream.

In emerging markets, the motor vehicles sector has continued to expand but at a slower pace than before. Growth in value added in emerging markets decelerated from 8.4% in 2011 to 7.4% in 2012. The slowdown was led by weaker developments in Brazil, where the sector’s value added contracted by 15% in 2012 partly due to credit constraints that weighed on sales. Activity in India’s motor vehicle sector has also slowed significantly; after registering value added growth of 13.7% in 2011, growth in 2012 fell to 0.4%. These weak developments in Brazil and India were offset, however, by significant improvements in Russia’s and China’s motor vehicles sectors. Value added in the Russian sector surged by 44% in 2012 following solid growth of 14.3% in 2011. In China, the automotive sector’s value added increased by 6.9% in 2012 after growing by 1.3% in 2011. Per capita income growth and low vehicle densities are expected to continue to support car demand in emerging markets. Recent developments show stronger momentum in new car sales in China, with sales during the twelve months ending in April 2013 increasing by 12% year-on-year. On the other hand, new car sales in India decreased by 4% in the twelve months ending in April 2013. In Russia, the growth of car sales has slowed to a rate of 4% for the twelve months ending in April 2013, down from 10% in 2012. In Brazil, tax incentives have recently boosted car sales, with an increase of 9% witnessed during the twelve months ending in April 2013.

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Figure 6. New car sales and registrations

In millions of units, for the last 12 months

Source: Datastream.

Table 6. Motor vehicles value added, share of the world total and annual growth rate

In percent


EU 27.6 -0.7 12.4 -0.9 -3.6 -0.7

US 15.3 -4.3 8.9 19.0 6.3 6.5

Japan 20.7 2.4 -12.9 12.0 -4.4 1.3

Developed countries 66.3 -1.5 1.1 8.2 -1.3 1.8

Brazil 2.7 7.4 3.2 -15.0 3.8 4.9

Russia 1.4 -1.7 14.3 44.0 17.8 6.8

India 2.2 14.8 13.7 0.4 4.8 11.2

China 10.5 18.8 1.3 6.9 11 10.6

Emerging markets 33.7 9.1 8.4 7.4 6.5 7.0

World 100 1.6 3.7 7.9 1.6 3.8


Engineering and metal goods

Global engineering and metal goods value added increased by 1.7% in 2012, a slowdown from growth of 8.0% in 2011, according to data from Oxford economics. This slowdown was driven by contractions of this sector’s output in the EU, Japan, Brazil, Russia and India due to weaker corporate investment. In

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contrast, this sector posted high growth rates in 2012 in China (10.1%) and in the United States (7.2%), supported by strong domestic demand for capital equipment.

In 2013, global engineering and metal goods value added is expected to accelerate slightly to 2.6% from 1.7% in 2012, the main contributor of global growth being China, thanks to continued investment spending by capital-intensive industries. In the EU, the value added of the engineering and metal goods sector is expected to remain in contraction in 2013, reflecting subdued investment. The Japanese sector is expected to see its value added rebound by 1.3% in 2013 after declining by 7.6% in 2012.

Table 7. Engineering and metal goods value added, share of the world total and annual growth rate

In percent


EU 31.6 -0.3 7.5 -0.9 -0.1 4.0 US 17.2 -0.7 7.4 7.2 1.2 5.0 Japan 14.5 0.1 4.2 -7.6 1.3 8.6 Developed countries 64.0 -0.9 6.8 -0.1 0.4 5.1 Brazil 1.0 3.1 -0.5 -3.3 -0.5 4.4 Russia 1.3 -0.5 2.4 -19.1 -1.5 10.5 India 1.8 18.4 -3.8 -7.9 3.3 9.5 China 17.9 15.6 15.3 10.1 9.8 10.5 Emerging markets 36.0 9.8 10.3 4.9 6.4 9.3 World 100 2.2 8.0 1.7 2.6 6.7


Steel-weighted industrial production

A proxy for global steel-weighted industrial production (SWIP) can be calculated using the share of the major steel-using industries as weights, namely construction (50%), transportation (16%) and global engineering and metal goods (28%). This SWIP indicator increased by 3.2% in 2012, representing a slight slowdown from a growth rate of 4.3% in 2011. The SWIP indicator is expected to display even slower growth of 2.8% in 2013, mainly due to weaker developments in the automotive sector.


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Table 8. Indicator of global steel-weighed industrial production, annual growth rate

In percent

2006-2010 2011 2012e 2013f 2014f

Construction 0.3 2.5 2.5 3.3 4.9

Motor Vehicles 1.6 3.7 7.9 1.6 3.8

Engineering and metal goods 2.2 8.0 1.7 2.6 6.7

Steel-weighed industrial production (SWIP) 1.1 4.3 3.2 2.8 5.2

Sources: Oxford Economics, OECD for SWIP calculations.

Steel market developments

Global steel demand

Global steel consumption growth slowed down from 5.4% year-on-year in the last quarter of 2012 to 4.2% in the first quarter of 2013, but was still higher than the growth rate of 1.7% recorded in the third quarter of 2012, according to data from the Commodity Research Unit. The higher steel consumption growth in the last quarter of 2012 and the first quarter of 2013 reflects a sharp increase of apparent steel consumption in China (up 12.4% year-on-year in the last quarter of 2012 and 10.1% in the first quarter of 2013). In contrast, apparent steel consumption in the rest of the world decreased by 1.7% year-on-year in the last quarter of 2012 and by 1.9% in the first quarter of 2013. In the first quarter of 2013, steel consumption contracted in many large steel-producing economies, notably the European Union (-6%), the United States (-7%), Japan (-8%), Korea (-7%) and Brazil (-7%).

Figure 7. Finished steel demand yearly growth rate for the world, China and the rest of the world

In percent

Source: Commodity Research Unit (CRU).

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Production and capacity

In the first quarter of 2013, global steel production reached 1 554 mmt in annualized terms, representing an increase of 2.3% compared to the first quarter of 2012 (Figure 8). Chinese steel production increased by 9.2% year-on-year in the first quarter of 2013, reaching a new all-time high of 767 mmt in annualized terms. In the world excluding China, steel production reached 787 mmt in the first quarter of 2013 in annualized terms, 3.7% lower than in the first quarter of 2012.

Figure 8. Global steel production

In millions metric tonnes and yearly growth rate in percent

Sources: CEIC, World Steel Association.

According to the World Steel Association, the world steelmaking capacity utilization rate was 80.0% in April 2013 (Figure 9) compared to 82.0% in April 2012. The capacity utilization rate rebounded sharply from the level of 73.2% reached in December 2012, driven by increasing steel production in China. The implied global annual steelmaking capacity, derived from monthly production and capacity utilisation figures, reached 170 mmt in April 2013, or 2 040 mmt in annualized terms. After having been relatively stable in 2012 at a level close to 160 mmt, implied global annual steelmaking capacity now seems to be increasing again.

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Figure 9. Monthly capacity utilization and implied capacity

In millions metric tonnes and in percent

Sources: Secretariat calculations based on data from the World Steel Association.

Steel prices

The global compositeP0F

1P hot rolled coil price has generally been declining since the second quarter of

2011. It decreased by 17% year-on-year in May 2013 to USD 612 per tonne, 30% lower than its post-crisis peak reached in April 2011. During the same period, the U.S. domestic hot rolled coil price decreased by 13%, by 11% in Germany, by 29% in Japan and by 14% in China. The global composite rebar price decreased by 13% year-on-year in May 2013 to reach USD 636 per tonne and has been oriented downwards since February 2012. In May 2013, rebar domestic prices decreased by 8% year-on-year in the United States, 9% in Germany, 23% in Japan and 11% in China.

1 The global composite prices referred to here are the average of domestic prices in the United States,

Germany, Japan and China. The data are produced and publically available from MEPS.

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Figure 10. Selected hot rolled coil prices

In USD per tonne

Source: Commodity Research Unit.

Figure 11. Selected rebar prices

In USD per tonne

Source: Commodity Research Unit.

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Steel trade developments

According to the International Steel Statistics Bureau (ISSB), global steel trade decreased by 0.7% in 2012 after having increased by 6.2% in 2011 and 18.7% in 2010. Weak trade developments in 2012 were in line with lower demand growth and the sharp slowdown in global steel production. World exports of finished and semi-finished steel products reached 403 million tonnes in 2012, compared to 406 mmt in 2011, and were still 8 percent below the level of 439 million tonnes recorded in 2007. Flat steel exports, which account for around half of steel exports, decreased by 3 percent, affected by the slowdown in manufacturing activity in 2012 compared to 2011 in both advanced and emerging economies. In contrast, long steel exports, which represent around one quarter of the world’s steel exports, increased by 4.6%, reflecting improvements in some construction markets, notably in the United States.

China was the largest steel exporter in the world in 2012 for the second consecutive year. Chinese exports increased by 13.2% to 52.7 million tonnes in 2012, driven by a 52% surge in long steel products exports. The latest data show a further acceleration in Chinese steel exports, which were up by 19% year-on-year in the first four months of 2013. Japanese steel exports reached 41.4 mmt in 2012, up 2.0% compared to 2011. Korean exports increased by 4.7% in 2012 to reach 30.2 mmt. Japanese and Korean export growth has been driven by demand for flat products, whereas their shipments of long products declined in 2012. .

According to ISSB, the European Union’s steel exports, excluding intra-EU trade, reached a new all time high of 38.4 mmt in 2012, up 2.8% compared to 2011. Russian exports increased by 7.8% in 2012, to a level of 26.6 mmt. In contrast, Ukraine’s steel exports decreased by 7% in 2012, falling to 24.1 mmt. Turkey’s steel exports grew by 9.8% to reach 18.6 mmt in 2012. Turkish export growth was supported by the 12.4% increase in shipments of long steel products, which accounted for 63% of Turkey’s total steel exports that year.

Turning to imports, the United States became the largest steel importing country in the world in 2012. U.S. steel imports amounted to 30.6 mmt in 2012, up 16.6%, according to ISSB data. Other economies in NAFTA also experienced large increases in steel imports in 2012. Canada’s steel imports increased by 5% to 9.6 mmt and Mexico’s grew by 35% to 9.2 mmt in 2012. NAFTA’s imports, excluding intra-trade, reached 30.8 mmt in 2012, up 31% compared to 2011. The EU’s steel imports decreased significantly in 2012, by 25% to a level of 26.3 mmt, dampened by weakness in European steel demand. However, more recently, the EU’s steel imports increased by 18.2% year-on-year in January 2013 and by 18.6% in February 2013. Korea, which remained the third largest steel importer in the world, recorded a decrease of 10.6% in its steel imports in 2012. In contrast, steel imports increased strongly in several ASEAN economies in 2012, notably in Thailand by 21.5% to 15.2 mmt and in Indonesia by 40% to 12.0 mmt.


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Figure 12. Monthly exports of steel, January 2009- March 2013 (or latest month available)

Thousands of metric tonnes by major exporting economy

Sources: Data are from the World Steel Association and the Iron and Steel Statistics Bureau.


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Figure 13. Monthly imports of steel, January 2009-March 2013 (or latest month available)

Thousands of metric tonnes by major importing economy

Sources: Data are from the World Steel Association, EUROFER and the Iron and Steel Statistics Bureau.


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The largest steel trade surplus in 2012 was recorded in China, where steel exports exceeded steel imports by 39.0 mmt. The widening of the Chinese steel trade surplus in 2012 was the result of a 13% increase in exports and a simultaneous 14% decline in imports. The second largest net steel exporter in 2012 was Japan with a trade surplus of 35.7 mmt, up 2% compared to 2011. The EU’s steel trade surplus increased to 12.1 mmt in 2012 from 2.2 mmt in 2011, mainly due to the strong decline in EU steel imports (-25%).

With respect to large net importing economies, the United States registered the largest steel trade deficit in 2012, amounting to 17.4 mmt and representing a 31% increase from the previous year. ASEAN countries are also among the world’s largest net steel importers. Thailand’s net steel trade deficit amounted to 13.6 mmt in 2012, up 25% compared to 2011, driven by an increase of 21% in its steel imports. Indonesia’s net steel trade deficit increased to 11.1 mmt in 2012, up 51% compared to 2011.

Figure 14. Trade balances in steel, January 2009- April 2013 (or latest month available)

Thousands of metric tonnes by selected economies

Source: Iron and Steel Statistics Bureau.

Prospects for the global steel market

Indicator-based forecasts of steel production in the short-term

The ratio of new orders to the stock of purchases, two components of the global steel PMIP1F

2P, appears

to be a reasonably good leading indicatorP2F

3P of the yearly growth rate of global steel production four months

2 The Steel PMI is the result of a survey carried out by Markit of steel-using manufacturers. The PMI

reading is fairly good coincident indicator of the yearly growth rate of steel production. This survey assesses how busy steel-using companies are, looking at their production, order books and warehouse inventory trends. It is available at the global, European, Asian and United States levels. Source: Markit Economic Research, Steel PMI, 22/01/2013.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Jan/

09Ap

r/09

Jul/0

9O

ct/0

9Ja

n/10

Apr/

10Ju

l/10

Oct

/10

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11Ap

r/11

Jul/1

1O

ct/1

1Ja

n/12

Apr/

12Ju

l/12

Oct

/12

Jan/

13

EU (external trade)

exportsimports

0

500

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09Ap

r/09

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9O

ct/0

9Ja

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l/10

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/10

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11Ap

r/11

Jul/1

1O

ct/1

1Ja

n/12

Apr/

12Ju

l/12

Oct

/12

Jan/

13

NAFTA (external trade)

exportsimports

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Jan/

09

Apr/

09

Jul/0

9

Oct

/09

Jan/

10

Apr/

10

Jul/1

0

Oct

/10

Jan/

11

Apr/

11

Jul/1

1

Oct

/11

Jan/

12

Apr/

12

Jul/1

2

Oct

/12

CIS

exportsimports

0

200

400

600

800

1,000

1,200

1,400

1,600

Jan/

09

Apr/

09

Jul/0

9

Oct

/09

Jan/

10

Apr/

10

Jul/1

0

Oct

/10

Jan/

11

Apr/

11

Jul/1

1

Oct

/11

Jan/

12

Apr/

12

Jul/1

2

Oct

/12

South America

exportsimports

01,0002,0003,0004,0005,0006,0007,0008,0009,000

10,000

Jan/

09

May

/09

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09

Jan/

10

May

/10

Sep/

10

Jan/

11

May

/11

Sep/

11

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/12

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13

Asia (excl. China)

exportsimports

0

1,000

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09

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/…

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/…

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/…

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13

China

exportsimports


21

ahead. According to Secretariat estimates, this ratio suggest that the yearly growth rate of global steel production would accelerate slightly from 2.3% in the first quarter of 2013 to 3.6% in the second quarter of 2013 before slowing to 3.0% in the third quarter of 2013.

Figure 15. Global steel production yearly growth rate (actual data and estimated data using the ratio of new orders to stock of purchases)

In percent

Sources: DataStream, World Steel Association, Markit.

A similar regression analysis can be used to estimate the EU steel production yearly growth rate using the components of the European Steel PMI. The ratio of new orders to the stock of purchases is a leading indicatorP3F

4P of the yearly growth rate of EU steel production six months ahead. This leading indicator

suggests that the contraction in EU steel production would moderate from -5.8% in the first quarter of 2013 to -3.2% in the second and third quarters of 2013. Similar regression analyses using the Steel PMI for Asia and for the United States do not provide statistically satisfactory results.

3 A regression analysis shows that the global steel production yearly growth rate in the month M+4 is equal

to 86.47 * (R(M)-1.040). With R(M) the ratio of new orders to the stock of purchases by global steel-using companies surveyed for the month M. The R² for the regression is 0.49 and the coefficients are statistically significant.

4 With R(M) the ratio of new orders to the stock of purchases for EU steel-using companies surveyed for the month M, a regression analysis show that: EU steel production yearly growth rate (M+6) = 112.93 * (R(M)-1.077). R²=0.74 and the coefficients are statistically significant.

-40

-30

-20

-10

0

10

20

30

40

Actual data

Estimated dataf

Forecasts


22

Figure 16. European steel production growth rate (actual data and estimated data using the ratio of new orders to stock of purchases)

In percent

Sources: DataStream, World Steel Association, Markit.

Steel demand forecasts for the medium-term and the long-term

According to the World Steel Association, world apparent finished steel use is expected to increase by 2.9% in 2013 and by 3.2% in 2014, following a growth rate of 1.2% in 2012. In 2013, apparent steel use is expected to increase by 0.4% in developed economies after declining by 1.9% in 2012. In emerging markets, apparent steel use is expected to grow by 3.9% in 2013, with Chinese steel consumption rising by 3.5%. In Africa, Central and South America and Other Europe growth rates in 2013 are expected to be 8.1%, 6.2% and 6.1%, respectively.

In its March 2013 Quarterly report, the Australian Bureau of Resources and Energy Economics (BREE) expected global crude steel demand to grow by 3.7% in 2013 and by 3.6% in 2014. BREE expects Chinese steel demand to increase by 4.2% in 2013 and 4.0% in 2014.

IHS Global Insight provides long-term forecasts of apparent steel use for selected economies based on an input/output model linking industry inputs and outputs, GDP and other factors such as demography and urbanization. The table below shows the compound annual growth rates of apparent steel consumption for the top nine steel-consuming economies and the world. According to these forecasts, the average yearly growth rate of global steel consumption would be 3.7% for the period 2011-2015 and 4.1% for the period 2016-2020. By 2020, global apparent steel consumption is expected to reach a level that is 56% higher than its pre-crisis peak in 2007. Because of weak growth over the next seven years, apparent steel use in the European Union and Japan is still expected to be significantly below pre-crisis peaks in 2020. The United States is expected to reach its 2007 level in 2016 thanks to an average growth rate of 5.3% in the period 2011-2015. Apparent steel use in Korea is expected to reach 124% of its 2007 level in 2020.

-70

-60

-50

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Actual data

Estimated data

Forecasts


23

Growth in Chinese apparent steel use is expected to slow significantly from an average growth rate of 11.1% between 2006 and 2010 to 3.9% between 2011 and 2015 and to 3.2% between 2016 and 2020. Brazil’s ASU would also slow down from an average growth rate of 9.2% between 2006 and 2010 to 2.4% between 2011 and 2015 and to 3.9% between 2016 and 2020. In Turkey, Russia and India, ASU growth rates are expected to remain strong up to 2020.

Table 9. Apparent steel consumption for selected economies, compound annual growth rate

In percent

2006-2010 2011-2015 2016-2020 % of 2007 level reached in 2020

First year with ASU > 2007

World 4.3 3.7 4.1 156 2010

China 11.1 3.9 3.2 199 2008

EU -2.4 -0.3 1.7 78

US -5.2 5.3 1.9 109 2016

India 9.9 5.5 7.4 233 2008

Japan -4.1 0.7 1.1 86

Korea 2.2 1.8 3.6 124 2008

Russia 3.4 5.8 3.8 140 2011

Turkey 4.9 6.2 4.9 170 2011

Brazil 9.2 2.4 3.9 161 2008

Source: World Steel Association for actual data, IHS Global Insight for forecasts.


24

ANNEX: Recent economic and steel data for individual economies

Asia

In China, GDP increased by 7.7% year-on-year in the first quarter of 2013, after posting 7.9% growth during the previous quarter. The yearly growth rate of Chinese secondary industry output has been slowing since early 2010, moderating to 7.8% in the first quarter of 2013, i.e. the lowest rate seen since 2009.

Figure 17. Chinese GDP (total and secondary industry) yearly growth rates

In percent

Sources: DataStream.

The total value added of industrial companies was up 9.3% year-on-year in April 2013 compared to an average yearly increase of 10.8% in 2012. The NBS manufacturing PMI was 50.6 in April 2013. In September 2012, the Chinese real estate climate index fell to its lowest level since 1998. It has since rebounded to 97.6 in April 2013. According to CRU, finished steel consumption in China increased by 10.1% in the first quarter of 2013 compared to the same period in 2012 following growth of 12.4% in the fourth quarter of 2012. Chinese steel production amounted to 767 mmt, in annualized terms, during the first quarter of 2013, which is an all time high.

4

6

8

10

12

14

16

2005 2006 2007 2008 2009 2010 2011 2012

GDP

GDP secondary industry


25

Table 10. Steel production and consumption in Asian economies during the first quarter of 2013

Annualised level in mmt, annual growth rate compared to the same period in 2012 in percent

Steel production

(mmt)

Growth rate (%)

Finished steel consumption

(mmt)

Growth rate (%)

Asia 1039.3 6.5 1030.2 7.5

China 767.0 9.1 828.5 10.1

Japan 106.5 0.3 70.8 -8.2

India 80.1 3.9 N.A. N.A.

Korea 66.3 -4.2 62.8 -6.6

Chinese Taipei 19.4 -7.5 21.3 6.4

ASEAN N.A. N.A. 46.7 14.1

Sources: World Steel Association, DataStream, CRU.

The yearly GDP growth rate in India was 4.5% in the fourth quarter of 2012. GDP growth has been slowing down since early 2011. Manufacturing production has been on a slowing trend since April 2010; in February 2013 it increased by only 2.2% from a year earlier. . Steel production growth also slowed to a yearly growth rate of 3.9% in the first quarter of 2013 compared to the same period in the previous year.

Figure 18. Indian GDP yearly growth rate

In percent

Sources: DataStream.

In Korea, annualized quarterly GDP growth was 3.5% in the first quarter of 2013, up from an annual growth rate of 2% in 2012. This rebound was supported by the Korean government’s measures to boost economic activity, which had been dampened in the second half of 2012 by low investment and weakening external demand. Korean manufacturing production decreased by 1.5% year-on-year in March 2012,

0

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26

similar to the 1.6% rate of decline observed in February. Finished steel consumption decreased by 6.6% in the first quarter of 2013 compared to the same period in the previous year.

Chinese Taipei’s GDP increased by 1.5% in the first quarter of 2013 compared to the first quarter of 2012. Manufacturing production in Chinese Taipei decreased by 3.2% year-on-year in March 2013. Steel production decreased by 3.1% in the first three months of 2013.

In Japan, GDP increased by 3.5%, in annualized terms, in the first quarter of 2013 following growth of 1% in the last quarter of 2012. The strengthening of economic activity was driven by fiscal and monetary stimulus measures. Japanese manufacturing production decreased by 6.1% in March 2013, the tenth consecutive month of yearly contraction. Japanese steel production remained unchanged in the first quarter of 2013 in year-on-year terms.

South East Asian countries

In Indonesia, GDP increased by 6.0% in the first quarter of 2013 compared to the same period in 2012. Indonesian GDP growth has been robust and stable during the last ten years with annual growth rates between 4.5% and 6.5% each year. Manufacturing production increased 11.2% year-on-year in the last quarter of 2012 after registering a0.4% decline in the third quarter of 2012. In Vietnam, GDP increased by 5.0% in 2012, a slower performance compared to 5.9% growth in 2011. According to the IMF, Vietnam’s GDP growth rate is expected to be 5.2% in 2013. In Malaysia, GDP increased by 6.4% year-on-year in the last quarter of 2012. Manufacturing production decreased by 5.2% year-on-year in February 2012. In Thailand, GDP increased by 19.5% in the last quarter of 2012 compared to the same quarter in the previous year, reflecting a recovery from the heavy floods late 2011. Manufacturing production increased by 0.5% in March 2013, relative to its year-ago level, and was still 6% below its pre-flood level in September 2011.

North America

In the United States, GDP increased by 2.5% quarter-on-quarter, in annualised terms, in the first quarter of 2013. This marks an improvement following growth of only 0.4% in the last quarter of 2012. In March 2013, manufacturing production in the US climbed 2.9% year-on-year. The ISM index decreased to 50.7 in April 2013, a four-month low, indicating slower manufacturing growth. Construction expenditures in the US reached USD 857 billion (in annualized terms) in March 2013, up 14% compared to February 2011 but still down 29% compared to their peak reached in March 2006. US steel production decreased by 7.3% year-on-year in the first quarter of 2013.

In Canada, quarter-on-quarter annualized GDP growth was 0.6% in the last quarter of 2012, similar to the growth rate of0.7% observed in the third quarter. Manufacturing production increased by 0.7% year-on-year in February 2012 after contracting by 1.7% during the previous month. Similar to the slowing trends being seen in the US, Canadian steel production decreased by 5.6% year-on-year in the first quarter of 2013.

In Mexico, GDP increased by 3.1% quarter-on-quarter, in annualised terms, in the fourth quarter of 2012. Manufacturing production in Mexico increased by 1.1% in February 2013 compared to February 2012. Steel production in Mexico increased by 3.4% year-on-year in the first quarter of 2013.


27

Table 11. Steel production and consumption in North American economies during the first quarter of 2013


Steel production (mmt)

Growth rate (%)


(mmt) Growth rate

(%)

North America 118.9 -5.6 119.5 -1.8 United States 86.0 -7.3 86.3 -7.0 Mexico 18.3 3.4 16.1 1.1 Canada 13.4 -5.6 14.5 10.8

Sources: World Steel Association, DataStream, CRU.

South America

In Brazil, the annualized quarterly GDP growth rate was 1.4% in the last quarter of 2012, after registering 0.4% growth in the second quarter and 0.9% in the third quarter. Brazilian manufacturing production increased by 1.7% year-on-year in March 2013, a better performance compared to the previous 18 months when industrial production declined at an average pace of 2%. The recovery of the Brazilian manufacturing sector was driven by motor vehicles manufacturing, which increased by 4.7% in March 2013. Light passenger car production increased by 25.7% year-on-year in April 2013 and production of trucks by 56.5%. The recovery of the automotive sector was driven by the reduction of the tax on automobile sales, contributing to an increase of new car registrations by 29.4% in April 2013 year-on-year. Brazilian steel production decreased by 4.4% year-on-year in the first quarter of 2013.

In Argentina, the annualized quarterly GDP increased by 5.2% in the last quarter of 2012, compared to a decline of 3.2% in the second quarter of 2012. Industrial production increased 1.5% in March 2013, year-on-year, the first positive growth rate in half a year. Steel production in Argentina decreased significantly, by 17.4% year-on-year, in the first quarter of 2013.

Table 12. Steel production and consumption in South American economies during the first quarter of 2013


Crude steel production (mmt)

Growth rate (%)


(mmt)

Growth rate (%)

South America 44.4 -5.9 N.A. N.A. Brazil 33.4 -4.4 23.8 -6.9 Argentina 4.4 -17.4 N.A. N.A. Venezuela 2.6 9.0 N.A. N.A.

Sources: World Steel Association, CRU.

Europe

Euro area GDP decreased by 0.9%, in annualized terms, in the first quarter of 2013, the sixth consecutive quarter of GDP contraction. Manufacturing production in the euro area decreased by 3.1% in March 2013, in year-on-year terms, thus continuing the long decline observed each month since December 2011.


28

In Germany, annualized quarterly GDP growth in the first quarter of 2013 was 0.3%, an improvement compared to the GDP decline of 2.7% witnessed in the last quarter of 2012. German manufacturing decreased by 1.5% year-on-year in March 2013 and its growth rate has not been in positive territory since June 2012. German steel production decreased by 0.3% year-on-year in the first quarter of 2013.

In France, annualized quarterly GDP decreased by 0.7% in the first quarter of 2013, which follows negative growth of0.8% in the fourth quarter of 2012. Manufacturing production decreased by 4.9% year-on-year in March 2013 and has been contracting for 16 consecutive months. In March 2013, manufacturing production was 8% below its post-crisis peak and 20% below its pre-crisis peak. French steel production decreased by 4.1% year-on-year in the first quarter of 2013.

Italy’s GDP declined by 2.1% in annualized terms in the first quarter of 2013, after contracting each quarter since the third quarter of 2011. Manufacturing production decreased by 6.1% in March 2013 compared to the same period last year, marking its 19P

thP consecutive month of year-on-year contraction. In

March 2013, manufacturing production was 11% below its post-crisis peak and 25% below its pre-crisis peak. Italian steel production decreased by 17.2% year-on-year in the first quarter of 2013.

In Spain, GDP decreased by 2.0% in annualized terms in the first quarter of 2013 and has been in contraction each quarter since the third quarter of 2011. Manufacturing production decreased by 10.3% year-on-year in March 2013, its 19P

thP consecutive month of contraction. This brought Spanish

manufacturing production to a level that is 20% below its post-crisis peak and 38% below its pre-crisis peak. Spanish steel production decreased by 5.5% year-on-year in the first quarter of 2013.

In the United Kingdom, GDP increased by 1.2% in annualised terms in the first quarter of 2013. Manufacturing production decreased by 1.4% in March 2013 in year-on-year terms. Steel production and consumption increased strongly in the first quarter of 2013 in the United Kingdom, i.e. by 43% and 47%, respectively.

Table 13. Steel production and consumption in the EU 27 during the first quarter of 2013



Growth rate (%)


(mmt) Growth rate

(%)

EU 27 163.3 -5.3 147.0 -5.8

Germany 43.3 -0.3 31.0 -7.5

Italy 24.6 -17.2 16.0 -23.3

France 15.9 -4.1 10.9 -16.1

Spain 14.2 -5.5 10.7 -7.0

United Kingdom 10.9 43.0 9.2 47.4

Sources: World Steel Association, DataStream, CRU

In Russia, the yearly GDP growth rate was 2.1% in the last quarter of 2012. Manufacturing production increased by 2.8% year-on-year in March 2013. Russian steel production decreased by 5.1% year-on-year in the first quarter of 2013.


29

In Ukraine, GDP decreased by 2.5% in the last quarter of 2012 compared to the same quarter in 2011. Manufacturing production decreased by 2.2% in April 2013. Steel production in Ukraine increased by 0.4% year-on-year in the first quarter of 2013.

In Turkey, GDP increased by 1.4% in the fourth quarter of 2012 compared to the same period in the previous year. GDP growth has been on a slowing trend since the first quarter of 2011, when 12.4% growth was registered. Manufacturing production increased by 1.1% year-on-year in March 2013. Turkish steel production decreased by 5.9% year-on-year in the first quarter of 2013.

Table 14. Steel production in Russia, Ukraine and Turkey during the three first quarters of 2012



Growth rate (%)

Russia 68.6 -5.1

Ukraine 33.5 0.4

Turkey 34.0 -5.9

Sources: World Steel Association, DataStream.

Middle East and Africa

In the Middle East and Africa, industrial production decreased by 2% in the first quarter of 2013 compared to the same period last year. African steel production decreased by 6.1% year-on-year in the first quarter of 2013 driven by a decline of 11.3% in steel production in South Africa. In contrast, Egypt’s steel production increased by 4% year-on-year in the first quarter of 2013 and the country surpassed South Africa to become the largest steel producer in Africa. Iran’s steel production decreased by 2.8% in the first quarter of 2013 to reach an annualized level of 14.1 mmt. In Saudi Arabia, steel production increased by 0.7% year-on-year in the first quarter of 2013.

Table 15. Steel production in selected economies in the Middle East and Africa during the first quarter of 2013



Growth rate (%)

Iran 14.1 -2.8

Saudi Arabia 5.5 0.7

Africa 14.5 -6.1

South Africa 6.6 -11.3

Egypt 6.8 4.0

Source: World Steel Association, DataStream.


June

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http://www.oecd.org/sti/ind/steel.htm @ Front cover image courtesy of JFE Steel Corporation

2015

@OECDInnovation

Steel Market Developments provide up-to-date information on global and regional steel markets. Reviewed and approved by the OECD Steel Committee, they are disseminated approximately twice a year to allow policymakers, industry, media and academia to keep abreast of the main trends and recent developments taking place in steel markets.

The reports provide an overview of recent supply and demand developments and, when available, forecasts from publicly available sources. Topics of special interest are occasionally covered, such as developments in steel-related raw material markets, steelmaking capacity trends or updates on specific regions that are important for the global steel market.

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STEEL MARKET DEVELOPMENTS - OECD · STEEL MARKET DEVELOPMENTS 4 consumption rising by 3.5%. In Africa, Central and South America, and the regional aggregate Other Europe, growth rates