The World Steel Association expects a slight increase in steel demand this year

The World Steel Association (worldsteel) today released its short-term outlook (SRO) for 2022 and 2023. Worldsteel forecasts steel demand to grow by 0.4% in 2022 to reach 1,840.2 Mt after a 2.7% increase in 2021. In 2023, steel demand will rise to see a further increase of 2.2% to 1,881.4 Mt. The current forecast is made against the backdrop of the war in Ukraine and is subject to a high degree of uncertainty.

Inflation and uncertainty cloud steel demand outlook
Commenting on the outlook, Mr Maximo Vedoja, chairman of worldsteel's Economic Committee, said: “This short-term outlook is published in light of the human and economic tragedy that has followed the Russian invasion of Ukraine. We all want a speedy and peaceful end to this war.

In 2021, the recovery from the pandemic shock has been stronger than expected in many regions, despite ongoing supply chain challenges and COVID waves. However, a sharper-than-expected slowdown in China led to lower growth in global steel demand in 2021. The outlook for 2022 and 2023 is highly uncertain. Expectations for a continued and robust recovery from the pandemic have been shaken by the war in Ukraine and rising inflation.”

General
The scale of the impact of this conflict will vary across regions, depending on their direct trade and financial impact on Russia and Ukraine. This has an immediate devastating impact on Ukraine, repercussions for Russia, and a major impact on the EU due to its dependence on Russian energy and its geographic proximity to the conflict zone. The impact will also be felt around the world through higher energy and commodity prices, especially raw materials for steel production, and the ongoing supply chain disruptions that plagued the global steel industry even before the war. In addition, financial market volatility and heightened uncertainty will undermine investment.

Such global consequences of the war in Ukraine, along with weak growth in China, point to lower expectations for growth in global steel demand in 2022. and rising interest rates. The expected tightening of US monetary policy will hurt financially vulnerable emerging markets.

The outlook for 2023 is very bleak. Our forecast assumes that the confrontation in Ukraine will end during 2022, but sanctions against Russia will largely remain.

In addition, the geopolitical situation around Ukraine has serious long-term implications for the global steel industry. These include the possible adjustment of global trade flows, the changing energy trade and its impact on energy transitions, and the ongoing reconfiguration of global supply chains.

China
China's steel demand slowed significantly in 2021 due to the government's crackdown on real estate developers. Steel demand will remain flat in 2022 as the government tries to boost investment in infrastructure and stabilize the property market. Stimulus measures introduced in 2022 are likely to support a slight positive increase in steel demand in 2023. Larger stimulus measures have upside potential, which is likely to happen if the economy faces new challenges due to a worsening external environment.

Developed economy
Despite sporadic waves of COVID-19 infections and supply chain restrictions in the manufacturing sector, steel demand has rebounded significantly in 2021, especially in the EU and the US. However, the forecast for 2022 has deteriorated due to inflationary pressure, which is further exacerbated by events around Ukraine. The impact of the war will be particularly noticeable in the EU due to its high dependence on Russian energy resources and the influx of refugees. Steel demand in developed countries is projected to grow by 1.1% and 2.4% in 2022 and 2023, respectively, after recovering by 16.5% in 2021.

Developing countries except China
In developing countries, the post-pandemic recovery has been hit hard by the ongoing impact of the pandemic and rising inflation, which has triggered a cycle of monetary tightening in many emerging market economies. After falling by 7.7% in 2020, steel demand in developing countries, excluding China, rose by 10.7% in 2021, slightly less than our previous forecast. In 2022 and 2023, emerging economies, with the exception of China, will continue to face challenges from a deteriorating external environment, the Russo-Ukrainian war, and US monetary tightening, leading to low growth at 0.5 % in 2022 and 4.5% in 2023.

Sectors using steel,
Global construction activity continued to recover from the lockdown and reached a record