At the 17th SteelOrbis Steel Conference “New Horizons in Steel Markets” held today, November 30, in Istanbul with the participation of more than 600 participants, Barış Çiftçi, director of industry analysis at the World Steel Association (worldsteel), shared the latest developments regarding global steel demand, recession concerns, the effects of the energy crisis on the steel industry and the outlook in China, and also talked about the trends that will guide the steel industry in the future.
According to Mr. Çiftçi, after the 2015-2016 period when steel demand was weak, the 2015-2016 period may be termed as the "good times" for the steel industry as demand increased and China's exports normalized. Having started 2019 well, the industry witnessed a serious decline in the second half of the year as a result of the decrease in automotive sector sales and the decline in global production. Stating that, although there were positive expectations for 2020, a much sharper decline was observed in the market with the outbreak of the pandemic, while he noted that the Russia-Ukraine war carried things in a completely different direction.
Sharing worldsteel data, Mr. Çiftçi said that, while global steel demand was 1.84 billion tons in 2021, it is expected to decrease by 2.3 percent to 1.8 billion tons in 2022. However, he added that his view is that global demand could decrease even more. For 2023, worldsteel expects global steel demand to rise by one percent to 1.9 billion tons. Regionally, in 2022, steel demand is expected to decrease by 3.5 percent in the EU and 9.2 percent in Russia and other CIS countries, while it is expected that the demand in these regions will decrease by 1.3 percent and 6.7 percent in 2023, respectively. In developing regions such as the Middle East, Africa and ASEAN countries, steel demand is expected to show a positive development in 2022 and 2023. Thus, steel demand in these regions is expected to increase by 2.4 percent, 3.2 percent and 5.8 percent this year, respectively, and by 3.4 percent, 4.4 percent and 6 percent in 2023, respectively.
Commenting on the short-term and medium-term expectations for the global markets, Mr. Çiftçi shared the PMI data for the manufacturing industry and his outlook for the steel industry in this direction. Stating that PMI data has been moving downwards since the middle of 2021, he went on to say, “When we look at the sub-data of this index and new orders, an even greater decrease can be seen there. This shows that the global recession expectation is realistic. However, China has been showing some stability recently. As for inflation, we are witnessing commodity prices that are coming back, freight rates that were too high during the pandemic are now normalized, and there are indications that excessively high rents in the US are normalizing. Although these developments are not reflected in official figures yet, they will be reflected in the next months. Also, a normalization is expected in the automotive sector in 2023. As a result of these indicators, serious support may come for the steel industry in the coming period,” he said.
On the other hand, Çiftçi stated that China should change its investment-based economy policy which it has been implementing successfully for the last 40 years, because, for the last 10 years this model has made the country's economy dependent on real estate and infrastructure investments and does not provide a high-quality growth. Still, he stated that it is very difficult to change this policy and that is why the ups and downs in the country will continue.
According to the worldsteel official, a recovery is expected in the global market starting from the second half of 2023. In this context, he stated that the possible effects of the recovery in China, in the automotive sector and in the supply chain will positively affect the steel industry, and, consequently, steel demand can be supported in a way that does not fall below a certain level thanks to strong infrastructure investments and investments in non-energy sectors. However, he added that it is unclear how the economies with very high external debt will perform in this situation.
Stating that the world is entering a new era and is in a transition period, Çiftçi said that the structure of steel-using sectors and thus the structure of steel demand will change. In this context, although the construction sector is not expected to undergo a rapid transformation as it has too many input materials, it is expected that in the longer term, the use of modular construction and prefabricated elements, which are more modern construction methods, is expected to increase in this sector. According to Çiftçi, it is expected that the use of steel in the construction sector will increase as the height and flexibility of the buildings increase and the use of solar energy and smart systems becomes more widespread. As for the automotive sector; Çiftçi stated that the increase in access to vehicle pool services such as taxis, the transition from internal combustion engine technology to electric vehicle technology and the use of autonomous vehicles will lead to many changes in the steel industry. As a result of these developments, the demand for steel from the automotive industry may decrease, and designs may change. So, the advantage of steel consumption in the automotive industry may be reduced.
According to Çiftçi, the steps that the steel industry can take amid global transformations include taking advantage from the expected increase in scrap supply, switching at least one third of blast furnaces to direct reduced iron (DRI) plants, and using green hydrogen and biofuels in this production. However, these are not easy to implement. At the same time, switching to DRI capacities is not enough and the entire value chain should move towards greener production. Also, companies which have scrap know-how are expected to gain advantages in the future, as the importance of scrap usage has increased in this transition period.