China to support global steel demand growth this year

Global steel demand is expected to rise by 3.9pc this year to 1.77bn t, supported by 7.8pc growth in China, the world's largest market, to 900.1mn t, the World Steel Association (Worldsteel) said in its Short Range Outlook (SRO) today.

Chinese demand is taking support from real estate investment, despite the country's GDP growth falling to its lowest since 1992. The country's manufacturing sector is experiencing a "significant slump" because of the slowing economy and the impact of trade tensions with the US.

The overall Chinese economy is expected to weaken further later this year, with trade tensions taking their toll and the government unlikely to reintroduce further stimulus measures as it tries to push forward its economic restructuring. Beijing could focus on mild stimulus measures to boost consumer spending, such as tax cuts, and this could benefit the automotive sector, which has contracted for the last 13 months.

Steel demand in the rest of the world will grow by just 0.2pc this year, to 874.9mn t, with uncertainty, trade tensions and geopolitical strife weighing on investment and trade. Demand in developed economies is likely to shrink by 0.1pc on the back of a fall in manufacturing. The European market will contract by 1.2pc this year and is forecast to grow by 1.1pc in 2020.

Growth in non-EU countries in Europe slumped by 12.1pc this year, driven by the economic crisis in Turkey, but will grow by 5pc next year as the country's economy stabilises somewhat.

Worldsteel said that the weakening global automotive sector is contributing to slowing steel demand in developed economies. "Our view is we are probably approaching a long-term peak for demand for steel in the automotive industry," director-general Edwin Basson said. Automotive sector consumers are postponing their buying decisions until there is more clarity over the direction of vehicle demand. Passenger car production in Germany, where the crackdown on diesel engines has been strong, fell by 10.6pc on the year in January-August.

Next year, Chinese demand growth is expected to fall to 1pc, with the rest of the world experiencing 2.5pc growth, aided by expansion in emerging and developed economies. Steel demand in 2020 will be 1.8bn t, according to Worldsteel.