Slackening growth in China, the world's biggest consumer of steel, has prompted the World Steel Association to cut its forecasts for global use of the commodity by nearly two percentage points for the coming year.

 

The WSA said on Friday that it expects global demand to rise 3.6 per cent in 2012 to 1.42bn tonnes – down from an earlier forecast of 5.4 per cent – as Chinese growth slowed.

 

This month, China reported its lowest quarterly growth figure in nearly three years. The country's steel use expanded by 6.2 per cent in 2011 but is now forecast by the WSA to grow just 4 per cent in 2012 and 2013.

 

Beijing's year-old crackdown on property markets across the country has damped appetite for raw materials and demand growth for a range of commodities is expected to fall this year as a result, analysts say.

 

"China's economy is approaching the upper inflection point in its growth curve, certainly as far as steel is concerned,"Edwin Besson, director-general of the WSA said. China is still expected to consume 648.8m tonnes of steel in 2012 – or 45 per cent of the global total. This reflects an overall trend for greater emerging market use as demand in developed countries stagnates.

 

In 2013, the WSA expects global demand growth to accelerate to 4.5 per cent.

 

In Europe, where prolonged sovereign debt troubles have tipped several countries into a double-dip recession, steel use is likely to fall 1.2 per cent to 150.9m tonnes in 2012, before recovering to 155.8m tonnes the following year, the WSA said.

 

The downturn had left Europe with surplus capacity of between 30m and 40m tonnes per year, Mr Besson said. Until it became clear how the continent's debt problems would be resolved, steel-producers were more likely to mothball steelplants than close them for good, he added. ArcelorMittal, the world's largest steelmaker, has run just 16 of its 25 European blast furnaces in the final quarter of 2011.

 

Steel demand is forecast to grow almost seven per cent this year in India and South America, while US steel demand is expected to grow by 5.7 per cent this year and 5.6 per cent next year, bringing US use of the metal to to 99.5m tonnes by the end of 2013.

 

"The US seems to be recovering: the financial sector is under control, and the housing market seems to be starting to recover, which is a good sign as it means that personal debt is under control,"he said.

 

Yet even if the WSA's forecasts are right, US steel use in 2013 will still be 8 per cent below the peak reached in 2007. In developed economies overall, steel demand will be 14 per cent below pre-crisis levels, whereas in emerging economies, demand for the metal will be 45 per cent higher than in 2007.

 

The disparity in steel consumption between developing and developed economies will grow further, the WSA said, with emerging economies expected to account for 73 per cent of global steel demand in 2013, up from 61 per cent in 2007.

 

Source: FT