Steel Rebounds as Rebar to Construction

    According to the WorldSteel Association, the global economy is going through a difficult phase as markets adjust to slower levels of Chinese growth. However, given the expected population increase, emerging new applications for steel and new markets developing, growth in the steel industry will happen.  World crude steel production reached 1.6 billion tons in 2015, down by 3% compared to 2014. In 2015, China accounted for 45% of the global market for steel (by volume), compared to 46% in 2014.

    According to Wood Mackenzie Research (Wood Mac), China’s government is trodding the narrow path of economic readjustment. On the one hand, the never-ending stimulus continues. A mega tax cut will start in July 2017 benefiting consumers and industries alike and an urban hub will be built almost from scratch to ease the demographic pressure on the Beijing area. On the other hand, concerns of an overheating property market remain. Measures introduced in Q1 to cool the market have not worked and construction activity continues unabated. Rebar prices have therefore done well, surpassed European prices in February and March 2017, but have started to falter in April. A fall is inevitable. High stock, falling costs and stubbornly high crude steel production will promote it. 
    Wood Mac said that in 2017, the steel industry hit the ground running, with demand, production and prices on the up in China, Europe and the USA, expecting a year of recovery. Global finished steel demand is expected to grow 2.2%, to 1.52 billion tons. Brazil and Russia are past the worst, manufacturing remains strong in Europe, the stock cycle will be expansionary in the USA and China, and higher oil prices will lift steel demand in oil-dependent economies, most notably in the Middle East. China will cut another 50 tons per annum capacity in 2017. At the same time, protectionist measures will undermine export opportunities for Chinese steelmakers. Crude steel production is expected to expand by 1.6% globally and by 3% ex-China.
    According to the U.S. Department of Commerce, Asia and Oceania accounted for the largest share of global steel use in 2015 at 66%, the EU was at 10%, while North America was at 9%. The Middle East, CIS, South America, Other Europe, and Africa each accounted for 3% of apparent steel use that year. Half of the steel produced globally is used in the building and infrastructure sector, which includes housing, rail, bridge, and green energy construction. The mechanical equipment and automotive sectors together account for roughly 30% of steel demand, followed by metal products (consisting of consumer and other goods) and other transport (including shipbuilding and trains).

    “Half of the steel produced globally is used in the building and infrastructure sector” 

    Technavio’s market research predicts the global steel flat-rolled products market to grow at a CAGR of close to 6% over to 2020. The rapid increase in industrialization and development in APAC countries like India, China, and South Korea will boost the demand for steel flat-rolled products globally. For instance, the construction market in China is expected to grow to nearly USD 2.5 trillion by 2019. Since flat-rolled products find extensive applications in the construction of internal walls, cladding, and purlins, the growth in the construction sector will translate into the demand for steel flat-rolled products until the end of 2020.  
    With the rapid increase in construction activities and industrialization, the market for flat-rolled products in the construction sector is expected to reach nearly 320 million metric tons on the basis of volume by 2020. 
    Analysts have estimated APAC to be the largest market for steel flat-rolled products and is expected to account for more than 65% of the market share by the end of 2020.  Key vendors in this market are: ArcelorMittal, JFE Steel, NSSMC, POSCO, Shanghai Baosteel Group, and United States Steel.

    According to Transparency Research, Steel is an expensive material and this factor limits its uses. Hence, contractors switch their preference from steel flat rolled products to other type of products. Moreover, when steel is exposed to the environment, this can lead to corrosion and that adversely impacts the lifecycle of these steel products. These factors limit the use of steel in the construction industry thus hindering the market prospect of these products in the coming years.

    ACW Staff