June 2020, short-term steel demand forecast
 
World Steel Association releases June 2020 short-term steel demand forecast results
 
The World Steel Association released the results of short-term steel demand forecasts for 2020 and 2021. It is predicted that in 2020, affected by COVID‑19, global steel demand will shrink by 6.4% to 1.654 billion tons. In 2021, global steel demand is expected to return to 1.717 billion tons, an increase of 3.8% from 2020. China's recovery is expected to lead the rest of the world, which will ease the decline in global steel demand this year. It is inferred that most countries' closures will continue to ease during June and July, social restrictions will continue to be implemented, and most steel-producing countries will not be affected by the second wave of pandemics.
 
Mr. AlRemeithi, Chairman of the Market Research Committee of the World Steel Association, commented on the forecast results:
"This COVID‑19 has disastrous consequences for public health and also has a huge impact on the world economy. Frozen consumption, business closures and supply chain disruptions have severely impacted our downstream users. Therefore, we predict that most The country's steel demand will continue to decline significantly, especially in the second quarter. As the restrictions in May begin to ease, we expect the situation to gradually improve, but demand recovery will be a slow process.
 
Nonetheless, the decline in steel demand in most countries may not be as severe as during the 2008 global financial crisis, as the consumer and service-related industries that suffered the most severe blows have relatively little impact on steel demand. Steel demand in many advanced economies is already in a low-growth zone and has not yet fully recovered from the 2008 crisis.
 
It should be emphasized that we made predictions during a period of high uncertainty. Because economies are restarting without developing vaccines or effective therapies, there is still a big downside risk. If the spread of the virus is controlled and the second and third epidemic peaks do not occur, and the government’s stimulus measures continue to be implemented, we may see a faster recovery. "
 
 
Recovery prospects
Since most countries have gradually restarted economic activity since mid-May, economic activity is expected to recover in the third quarter.
 
Although all steel-using industries are affected by the closure of the city, the mechanical equipment and automotive industries are at the highest risk of long-term demand shocks and global supply chain disruptions. In order to comply with social distance requirements, the steel industry has adjusted its production process. Changes in the working environment may result in reduced productivity and longer production cycles.
 
 
China's recovery situation
China lifted the closure of the city earlier than other countries, and economic activities have gradually resumed since late February. In addition to the hotel industry and tourism, the Chinese economy is rapidly returning to full normalization. Economic activity stalled in February, causing GDP to fall by 6.8% and fixed asset investment by 16.1% in the first quarter. The added value of industry decreased by 8.4%, and the output of automobiles decreased by 44.6%, which was the worst hit.
 
As of the end of April, all major steel-using industries in China have basically returned to normal production levels, although the decline in export demand has hindered the overall production and operation of the manufacturing industry. Since the opening of Wuhan on April 8, the construction industry has returned to 100% of normal construction levels.
 
The recovery of steel demand will become more apparent in the second half of 2020. The construction industry (especially infrastructure investment) will become the main driving force, and the central government has launched a series of new infrastructure construction stimulus measures (the so-called "new infrastructure"). Due to the severe recession of the global economy, the manufacturing recovery will be slower, but the automotive industry will gain some momentum from stimulus measures.
 
We expect China's steel demand to grow by 1.0% in 2020. We also expect that the benefits of the "new infrastructure" project launched in 2020 will continue into 2021, supporting the demand for steel in 2021. The central government is not expected to issue a large-scale economic stimulus plan again as it did in 2009, because this may not be conducive to the government's desire to continue to rebalance the economy. However, if the global economic environment has a far-reaching impact on China's economic recovery, the government may need to further boost the economy, which means that steel demand may rise.
 
 
 
Advanced economies
In 2020, steel demand in advanced economies is expected to decline by 17.1%. Although the consumer and service industries are the main force in this recession, the sluggish consumer spending, the deterioration of the labor market and the collapse of confidence have caused chaos in the economy and are driving a general decline in the steel industry. Spillover effects from massive unemployment and bankruptcy, weak confidence performance and continued social restrictions indicate that steel demand in advanced economies will only partially recover by 7.8% in 2021.
 
Due to the continued decline in manufacturing, EU steel demand shrank by 5.6% in 2019. Previously, it was expected that the manufacturing industry would enter a recovery phase in early 2020, but due to the closure of the city, orders fell sharply, causing the manufacturing industry to fall into a deeper recession. The automotive industry is expected to be hit the hardest, while demand in the construction industry may be relatively good.
 
In the United States, the epidemic is causing a sharp decline in manufacturing, which is expected to reach its lowest point in the second quarter. The fall in oil prices has brought additional downward pressure on investments in energy-related industries, and was in trouble before the crisis. The soaring unemployment rate has led to a decline in income and confidence, which has affected housing construction. Although the situation of non-residential buildings is relatively good, it is expected to decline in 2020 and rebound slightly in 2021.
 
Since the second half of 2019, Japan’s steel demand has continued to weaken and will continue to contract in double digits by 2020, due to the reduction in exports and stagnation of investment, which has seriously dragged down the Japanese automobile and machinery industry. Despite the suspension of some construction projects, the construction industry will experience a relatively small contraction as public works continue.
 
In South Korea, due to the decline in the export market and the weak domestic economy, it is expected that the major steel industry will see a double-digit decline. The shipbuilding industry is expected to be the hardest hit, and public infrastructure projects will cause construction activity to shrink somewhat.
 
 
 
Developing economies (except China)
Compared with developed economies, developing economies are less able to respond to outbreaks, and insufficient public health capabilities have led some countries to adopt stricter closure measures.
 
Limited financial space to support the economy, falling commodity prices, capital flight and currency depreciation have caused some developing countries’ steel demand to fall as severely as developed countries. Steel demand in developing economies, excluding China, is expected to decline by 11.6% in 2020, but there will be a significant rebound of 9.2% in 2021.
 
India has implemented the world's strictest closure measures nationwide, causing industrial production to stall. Construction activities were completely stopped at the end of March. Due to the slow recovery of workers, recovery is expected to take longer. The disruption of the supply chain and the slowdown in demand recovery will cause a heavy blow to the automotive industry. Due to weak private investment and disruption of the supply chain, the machinery and equipment industry is expected to continue to decline.
 
With the support of the government's stimulus plan, investment in infrastructure such as railways will lead the recovery of the construction industry. The government's increased support for rural incomes and consumption in the upcoming holiday season will contribute to a substantial recovery in the demand for consumption-driven manufacturing products in the second half of the year. As a result, India’s steel demand may fall by 18.0% in 2020 and will rebound by 15.0% in 2021.
 
In the first quarter of this year, ASEAN countries were hit hard by the closure of China, and then the supply chain and tourism industry suffered severe disruptions. Despite the closure of the city, some infrastructure projects are continuing, and the decline in steel demand is not expected to be serious. The continued increase in demand in Vietnam is predictable, thanks to the early control of the outbreak. In 2021, the renewed focus on infrastructure investment is expected to boost steel demand.
 
COVID‑19 has set off a “perfect storm” in Latin America, which will undermine the prospects for recovery in Latin America in 2020. Due to its accumulated structural imbalances, political instability, and high exposure to commodity prices, Latin America is particularly vulnerable. It is expected that the demand for steel in the region will drop significantly in 2020, and only a weak recovery will occur in 2021. The area still seems to be trapped in the epidemic, and the outlook may deteriorate further. Prospects for advancing the reform agenda and infrastructure plans are being hindered, indicating that the epidemic will have a long-term impact on the region.
 
In the CIS, the economy will slowly come out of recession. The epidemic crisis, coupled with the plunge in oil prices, will lead to a severe contraction in steel demand in 2020 and a moderate recovery in 2021.
 
Due to the double impact of the epidemic and the collapse of oil prices, the oil-producing countries in the Middle East and North Africa are among the most affected.
 
 
Achitechive
During the closure of the city, construction projects in some countries were suddenly suspended due to supply chain disruption and shortage of workers. However, the decline in the construction industry may not be as severe as during the global financial crisis. In the construction industry, the implementation of social restrictions appears to be more challenging, hindering resumption of work. As the balance sheets of consumers and businesses deteriorate, the prospects for new construction projects also deteriorate. The government may focus on new construction projects to support demand, but a significant deterioration in the government’s balance sheet may limit the government’s ability to invest in public infrastructure.
 
 
Machinery industry
The machinery and equipment industry with the longest supply chain in the manufacturing industry has experienced serious logistics bottlenecks and supply chain problems. At the same time, due to the shelving or cancellation of investment projects, the demand for machinery and equipment will drop significantly in 2020. Due to the bleak investment outlook, the industry will face the challenge of demand recovery in the longer term. However, the recovery of industries such as agriculture and construction machinery will accelerate.
 
 
Automobile industry
In the steel industry, the automotive industry is the worst victim of the epidemic crisis. In 2020, sales in the automotive industry are expected to decrease by another 20% on the basis of the past two years. Due to income growth and remote work, it will take years to return to pre-crisis levels, but safety concerns may boost passenger car demand in the short term. In addition, the supply disruption may continue after the closure of the closure period, because liquidity problems will not only prevent automakers from restarting production, but also prevent auto parts suppliers from restarting production. The transition to electric vehicles will continue and may accelerate after the pandemic.