Business

Demand for steel to slow

(China Daily)
Updated: 2010-10-05 08:41

A worker cutting steel tubes in Huaibei, Anhui province. Demand growth for steel is expected to decelerate. [China Daily]

TOKYO - Global steel demand growth will decelerate next year as China's real estate market weakens and consumption in Japan falls, the World Steel Association said.

Consumption growth will slow to 5.3 percent in 2011, from a forecast 13.1 percent gain this year, the association said on Monday in a statement released in Tokyo. China and Japan are respectively the world's biggest and second-largest steel producing nations.

Slowing demand in China, where the government has introduced measures to dampen property speculation, led to 40 percent of Chinese mills being made idle or put on maintenance, the China Iron & Steel Association said in August.

Consumption in India, Central and South America will drive global growth, the association, whose members produce around 85 percent of the world's steel, said on Monday.

"The emerging economies such as India and Brazil will likely lead gains in demand while there are uncertainties over the outlook for Chinese demand," Yoku Ihara, an adviser at Retela Crea Securities Co in Tokyo, said before the demand outlook was released.

Consumption may reach a record 1.34 billion metric tons in 2011, said the association, which is holding its annual meeting in Tokyo this week.

Weaker demand

"China's apparent steel use growth will slow considerably in the remaining part of this year due to the Chinese government's effort to cool the real estate sector and ongoing steel production control," the association said.

Chinese demand is likely to increase 3.5 percent next year, down from a projected 6.7 percent this year, the group said.

China curbed electricity supplies to steelmakers recently to reach energy efficiency targets and has also ordered companies to shut obsolete mills.

Steel demand in Japan will probably fall 1.4 percent next year after a recovery of 19.1 percent this year because of a tighter fiscal policy and a stronger yen, the association said.

"Construction activity in Japan is still in a prolonged slump, the cost of raw materials is climbing and the Japanese currency, the yen, continues to strengthen," said Eiji Hayashida, chairman of the Japan Iron and Steel Federation.

Emerging markets

India will become the largest steel consumer after China and the United States next year, with growth of 8.2 percent in 2010 and 13.6 percent in 2011, the association said.

Steel demand in Brazil is forecast to rebound 34.6 percent this year and consumption in the Central and South American regions will likely gain 9.1 percent to a record 47.6 million tons next year, it said.

Steel demand in India is forecast to grow 10 percent in the year ending March 31, helped by demand for automobiles and spending on roads and ports, G.K. Basak, executive secretary of the steel ministry's joint plant committee, said on Sept 6.

Global steel consumption this year is rising faster than the association's April 2009 estimate of 8.4 percent growth on a stronger-than-expected recovery in developed nations after the global financial crisis.

Still, steel demand next year in the US, Europe and Japan is likely to be more than 20 percent lower than 2007 levels, according to the association.

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