Steelmakers braced for China slowdown

Global steel demand is forecast to grow at a lower rate this year, and reduce the profitability of steelmaking companies - because of a continuing economic slowdown in China, the world's biggest buyer of the metal.

On Monday, The World Steel Association, the industry's main international body, said it expected global steel demand to be largely flat in 2015, at about 1.54bn tonnes. Demand growth will then increase slightly next year, to 1.4 per cent.

"We are releasing a restrained growth outlook for the global steel industry mainly due to the deceleration in China," said Hans Jurgen Kerkhoff, chairman of WSA's economics committee.

This trend is likely to affect steelmakers such as ArcelorMittal and Tata Steel, Chinese groups including Hebei and Baosteel, as well as South Korea's Posco and Japan's Nippon Steel.

Last year, the WSA was forced to downgrade its forecasts after a weaker than expected economic performance in emerging economies. In April 2014, it had forecast that global steel demand would rise 3.1 per cent in the calendar year, and then 3.3 per cent in 2015. Instead, demand rose just 0.6 per cent in 2014.

Monday's forecast for 2015 provides further evidence that China, which accounts for about half of the world's steel use, has come to the end of a period of rapid consumption. Data released last week showed that China's economy expanded at its slowest pace in six years during the first quarter, because of a slowdown in construction and manufacturing.

According to the WSA, Chinese demand for steel fell 3.3 per cent last year to 710m tonnes - the first negative growth since 1995 - as a result of the decline in construction activity. It expects Chinese steel demand to contract by another 0.5 per cent in 2015.

Edwin Basson, director-general at WSA, said Chinese steel demand is likely to remain flat at around 700m to 720m tonnes for the next five years.

Steel demand growth in US and Europe is also forecast to be slow this year after a strong performance in 2014, driven by a pick-up in construction activity and manufacturing.

Demand in the US is expected to contract 0.4 per cent to 106m tonnes this year, down from a rise of 11.7 per cent in 2014. European demand will grow 2.1 per cent to 150m tonnes, down from a rise of 4.5 per cent last year.

Overall, steel demand in developed countries is expected to grow just 0.2 per cent in 2015, down from growth of 6.2 per cent last year.

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