The IMF just released its latest World Economic Outlook. The WEO includes world gdp growth forecasts for 2008 and 2009. Not surprisingly, world growth is expected to decelerate to 4.1% in 2008 and 3.9% in 2009, compared to 5.1% in 2006 and 5.0% in 2007.
What does this mean for global steel demand growth? The steel nerds have looked at the historical relationship between world gdp growth and steel demand - read the post here. Based on this relationship, world steel demand is expected to grow by 50 million tonnes per year in 2008 and 2009, down from an average growth of 70 million tonnes per year in the 2002 to 2007 period. Of course there are factors other than gdp growth that influence steel demand, but the relationship between the two is pretty good and provides a simple heuristic for measuring the impact of an economic slowdown on steel demand.
It will be interesting to see what adjustments the IISI makes to its global steel demand forecast when the next outlook is released. The last Short Range Outlook released in April of this year projected steel demand growth of 80 million tonnes per year in both 2008 and 2009. Of course, global economic conditions have continued to deteriorate since April.
Goldman Sachs reported today that it believes the US economy will suffer a recession in 2008, and Goldman is not alone. It seems everyone is worried about the impact of the credit crunch and high energy costs on US consumers. So, what might a recession mean for shipments by steel producers in the US in 2008?
There is clearly a correlation between GDP growth and steel demand. In developed economies, such as the US, the rule of thumb is that GDP has to grow at a base line level or steel demand contracts. In the US, the rule is pretty simple: If GDP grows by more than 2.5%, steel demand tends to rise. Conversely, steel demand falls when GDP grows by less than 2.5%. You can see this in the graph below. (If the graph is hard to read, click on it and it will enlarge).
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The latest issue of the China Metallurgical Newsletter has Chinese steel industry data through October 2007. Based on the first ten months it looks like finished steel demand is likely to come in around 510 million tonnes for the 2007, while net exports are likley to finish 2007 at around 45 million tonnes (exports 62 MT and imports 17 MT).
Also in this issue, the EVP of the China Iron & Steel Associaiton (CISA), Mr. Luo Bingsheng, provides a few forecasts for 2008.
GDP Growth 11%
Steel demand growth (ADC) 12% — this implies about 60 MT of demand growth in 2008
Crude steel production growth 10% — from 490 MT in 2007 to 540 MT in 2008
Here’s a graphical version of the SIMA versus actual import data that Jessica posted. It includes only carbon/alloy finished long products. The data is shown in short tons. The SIMA license data comes from this website of the import administration. It’s published every Tuesday evening.
The analysis here is an attempt to exploit the early availability of the license data to estimate the imports for the recently completed month. This is necessary because the actual import data which comes from the Department of Commerce trails the month end by 6 weeks. There is a preliminary DOC estimate published about three weeks after month end, but acceptable license data is usually available before then and provides more detail than the DOC preliminary report. In the case of August for instance, the DOC preliminary estimate is of a 39% decline in all imports from the July level. The license data shown here indicate a 37% decline for this group of finished long products.
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The IISI published its short range outlook October 8. Here’s the link. It’s not available in any better form than a PDF, but that’s attached, IISI Short Range Outlook 10/8. The summary table is shown below:
- Table 1: Short range outlook for apparent steel use (2006-2008) in ‘000 of tonnes
| Regions |
2006
|
2007
|
2008
|
% 05/06
|
% 06/07
|
% 07/08
|
| EU-27 |
184.9
|
192.2
|
195.0
|
11.4
|
4.0
|
1.4
|
| Other Europe |
27.2
|
29.3
|
31.0
|
11.0
|
7.8
|
5.7
|
| C.I.S. |
50.0
|
59.8
|
65.2
|
18.1
|
19.5
|
8.9
|
| N.A.F.T.A. |
155.7
|
148.1
|
153.9
|
11.5
|
-4.9
|
4.0
|
Central and
South America |
35.6
|
39.5
|
41.6
|
11.8
|
10.9
|
5.2
|
| Africa |
23.1
|
25.1
|
27.5
|
11.4
|
8.9
|
9.5
|
| Middle East |
37.3
|
40.4
|
43.4
|
9.8
|
8.4
|
7.5
|
| Asia (inc. Oceania) |
607.2
|
663.2
|
721.1
|
6.2
|
9.2
|
8.7
|
| Regions |
2006
|
2007
|
2008
|
% 05/06
|
% 06/07
|
% 07/08
|
| World |
1,120.9
|
1,197.7
|
1,278.6
|
8.8
|
6.8
|
6.8
|
| BRIC |
457.8
|
516.6
|
573.9
|
9.8
|
12.8
|
11.1
|
| Rest of the World |
763.5
|
799.6
|
834.8
|
8.7
|
4.7
|
4.4
|
