worldsteel Short Range Outlook April 2023
08-17-2023
Chinese steel demand contracted in both 2021 and 2022
Commenting on the outlook, Mr. Máximo Vedoya, CEO of Ternium, and Chair of the worldsteel Economics Committee, said, “in 2022, recovery momentum after the pandemic shock was hampered by high inflation and increasing interest rates, the Russian invasion of Ukraine, and the lockdowns in China. As a result, steel-using sectors’ activity went down in the last quarter of 2022. This, combined with the effect of stock adjustments, led to worse than expected contraction in steel demand.
Persistent inflation and high-interest rates in most economies will limit the recovery of steel demand in 2023, despite positive factors like China’s reopening, Europe’s resilience in the face of the energy crisis, and the easing of supply chain bottlenecks. In 2024, demand growth is driven by regions outside China but faces global deceleration due to China’s anticipated 0% growth, overshadowing the improved environment. Sustained inflation remains a downside risk, potentially keeping interest rates high.
As China’s population declines and moves to consumption-driven growth, its contribution to global steel demand growth will lessen. Future global steel demand growth will rely on reduced drivers, primarily concentrated in Asia. Investments in decarbonisation and dynamic emerging economies will increasingly drive positive momentum for global steel demand, even as China’s contribution to global growth diminishes.”
Total steel demand in China is expected to be flat by 2024
Chinese steel demand contracted in both 2021 and 2022 as the Chinese economy decelerated sharply due to unexpected lockdowns that extended across the country.
The negative momentum in the construction sector that was seen in 2021 intensified in 2022: all key real estate indicators were in deeply negative territory. In 2022, the floor space of newly started projects dropped by 39.4% and investment in real estate declined by 10.0%, the first year-on-year decline in 25 years. These acute declines will put pressure on construction activities in 2023-2024, but a slight pickup in the real estate sector is likely in the later part of 2023 due to government support measures. The recovery of real estate is expected to continue in 2024, but will only be moderate.
Infrastructure investment showed a strong pickup of 9.4% thanks to government support, but this was largely focused on less steel-intensive areas such as water supply systems, telecommunications, and logistics. In 2023, the infrastructure sector may continue to benefit from the projects initiated at the end of 2022, although growth may weaken in 2024 if no large-scale projects begin in 2023.
China’s manufacturing sector performance in 2022 was weak, although exports performed relatively well. The manufacturing sector is expected to show only a moderate recovery in 2023-2024, with slowing exports.
Automobile production grew by 3.4% in 2022, mainly driven by 11.2% growth in the passenger vehicles segment. Commercial vehicle production dropped by 31.9% in 2022. Another leap in new energy vehicle production was seen in 2022, with production jumping by 96.9% to 7.06 million units, which accounted for 25.7% of total vehicle production. In 2023-2024 the automotive industry is expected to show a slightly weaker performance as no new stimulus measures are expected to be introduced.
After declining by 3.5% in 2022, China’s total steel demand is expected to grow by 2.0% in 2023. It is expected to stay flat in 2024.
