The latest global steel forecast has been released by the World Steel Association at their appearance at the worldsteel General Assembly. Growth in global steel demand is set to slow throughout 2018, with China’s consumption of steel likely to drop as the economic superpower begins to mature and shift its focus from manufacturing products to services.
Despite this, demands are still expected to continue growing, although at a much slower pace. The commodity will increase by 1.6% to 1.65 billion tonnes up from 1.622 billion tonnes in 2016.
In a statement to the general assembly in Brussels, worldsteel said the risks to the global economy have, to some extent, declined. “We see the best balance of risks since the 2008 economic crisis. [However] in 2018 we expect growth to moderate, mainly due to slower growth in China.”
The flatline in growth in China is also associated with the number of outdated (and in many cases) illegal induction furnaces getting shut down, and although this was not accounted for in the global demand statistics, it will have a one-off effect on nominal versus underlying demand.
As China begins to slow, demand in India, which is the world’s third-largest steel consumer, is predicted to grow 5.7% in 2018, compared to their 4.4% growth this year. Their government is demanding more than double production capacity by 2030, yet their venture into massive infrastructure program has been downgraded for this year and into 2018, partly due to the deleveraging of manufacturing and banking sectors.
What will happen to Australian steel production in 2018?
The steel industry is worth around $900 billion a year. The figures are a fair gauge of the world’s economic health, as its often seen as an economic barometer due to its widespread use in construction and manufacturing.
Iron ore, which is one of Australia’s top source of export revenue (along with oil, precious gems and meat) has averaged $74 a tonne in the first half of this year. In fiscal 2017, Australia mined a record 873.5 million tonnes of iron ore, making it the world’s top producer.
China’s slowdown will likely influence our iron ore prices. “Steelmaking commodities are expected to slow in the next two years, driven largely by a slowdown in infrastructure spending and construction activity in China. Lower demand growth is expected to adversely affect iron ore and metallurgical coal prices” said Mark Cully, who is the chief economist at the Department of Industry, Science and Innovation.
The department has predicted the iron ore price to decline to $US48 a tonne in 2018, while metallurgical coal prices are expected to fall to $US137 from $US191.
Despite this, there is still a massive shift in “steel as a sustainable product” culture. As steel grades can be recycled without losing its strength, it makes the perfect material for construction, manufacturing and delivering renewable energy such as solar, hydro and wind power. Currently, Australia’s steel recycling rates are high, with 80-90% of steel being reused or recycled.
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