The world iron and Steel Association released the latest short-term (2022-2023) steel demand forecast report today. The report shows that global steel demand will continue to grow by 0.4% in 2022, reaching 1.8402 billion tons, after increasing by 2.7% in 2021. In 2023, global steel demand will continue to grow by 2.2% to 1.881.4 billion tons. In the context of the conflict between Russia and Ukraine, there is a high degree of uncertainty in the current prediction results.
Steel demand forecasts are shrouded in inflation and uncertainty
Commenting on the forecast results, m á Ximo vedoya, chairman of the Market Research Committee of the world iron and Steel Association, said: when we released this short-term steel demand forecast, Ukraine was in the midst of human and economic disasters since Russia launched military operations. We all hope that this war will end soon and peace will come soon.
In 2021, under the impact of the pandemic, despite the supply chain crisis and multiple rounds of COVID-19, the recovery momentum in many regions was stronger than expected. However, due to the unexpected slowdown of China's economy, the growth rate of global steel demand decreased in 2021. There is a high degree of uncertainty in steel demand in 2022 and 2023. Our expectations for a sustained and stable recovery were shaken by the outbreak of the war in Ukraine and the high inflation.
Forecast background
Due to regional differences, the impact of this conflict will also vary, depending on the direct trade and financial exposure of each region to Russia and Ukraine. The conflict has brought a direct and devastating impact on Ukraine, and Russia will bear the consequences accordingly. The European Union has also been significantly affected due to its dependence on Russian energy and geographical proximity to the conflict region. Moreover, this impact has also affected the world due to the rise of energy prices and commodity prices, especially the raw materials required for steel production, as well as the continuous interruption of the supply chain, which has plagued the global steel industry even before the war began. In addition, financial market volatility and high uncertainty will affect investors' confidence.
The impact of the Ukrainian war spilled over to the world, coupled with the slowdown of China's economic growth, the growth of global steel demand is expected to decrease in 2022. In addition, the continued outbreak of COVID-19 in some parts of the world (especially China) and the rising interest rates have also brought downside risks to the economy. The expected tightening of US monetary policy will aggravate the financial vulnerability risks faced by emerging economies.
The global steel demand forecast in 2023 is highly uncertain. The premise of our prediction is that the confrontation between Russia and Ukraine in Ukraine will end in 2022, but the sanctions against Russia will remain unchanged to a large extent.
In addition, the geopolitical pattern surrounding Ukraine will have an extremely far-reaching impact on the global steel industry. These include the adjustment of the global trade pattern, the transformation of energy trade and its impact on the energy transformation, and the continuous reconfiguration of the global supply chain.
China
In 2021, due to the Chinese government's strict regulation and control measures on real estate development enterprises, China's steel demand slowed significantly. In 2022, due to the government's efforts to promote infrastructure investment and stabilize the real estate market, steel demand will remain stable. The stimulus measures introduced in 2022 are likely to support a small increase in steel demand in 2023. If the deteriorating external environment causes China's economy to face more challenges, the Chinese government will launch more solid stimulus measures, which will bring upward potential to the economy.
Developed economies
Despite sporadic outbreaks and supply chain constraints in manufacturing, steel demand is still recovering strongly in 2021, especially in the European Union and the United States. However, due to inflationary pressures and events around Ukraine, the outlook for steel demand in 2022 is weaker. The impact of the Ukrainian war is particularly significant in the EU region, which is highly dependent on Russian energy and the influx of refugees. In developed economies, steel demand is expected to increase by 1.1% and 2.4% in 2022 and 2023, respectively, after recovering by 16.5% in 2021.
Developing economies (excluding China)
In developing economies, with the persistence of the pandemic and the outbreak of inflation, as well as the resulting tightening cycle of many emerging economies, the recovery process of developing economies faces more challenges. Steel demand in developing economies (excluding China) increased by 10.7% in 2021, following a 7.7% decline in 2020, a figure slightly higher than our previous forecast. In 2022 and 2023, emerging economies will continue to face challenges brought about by the deteriorating external environment, the war between Russia and Ukraine, and the tightening of monetary policy in the United States. These challenges will lead to low-speed growth in emerging economies in 2022 and 2023, with 0.5% and 4.5% respectively.
Steel consumption industry
In 2021, despite the contraction of China's construction activities, construction activities continued to recover from the epidemic blockade globally, with an increase of 3.4%. In many countries, the recovery is driven by infrastructure investment as part of the recovery plan. In the next few years, infrastructure investment and energy transformation investment are likely to continue to drive the growth of the construction industry. However, the construction industry is also facing some resistance caused by high costs and interest rates.
In the automotive industry, in the second half of 2021, the bottleneck of the supply chain prevented the recovery momentum, and the recovery situation of the global automotive industry in 2021 was disappointing. The war in Ukraine may delay the restoration of normality in the supply chain, especially in Europe. Despite the sharp decline in global automobile production, the electric vehicle sector experienced rapid growth during the pandemic. In 2021, the global sales of electric vehicles reached 6.6 million, almost twice that of 2020. The proportion of electric vehicles in total vehicle sales rose from 2.49% in 2019 to 8.57% in 2021.