World Steel Association Projects Steel Demand Will Return to 2008 Levels

The World Steel Association (worldsteel) forecasts for 2010 confirm my earlier view that steel demand (and production) most likely bottomed this year and some kind of recovery is underway.

Worldsteel’s forecasts indicate that demand for steel in 2010 will return to 2008 levels after contracting in 2009 by 8.6%:

The World Steel Association (worldsteel) is forecasting that apparent steel use will contract worldwide by -8.6% to 1,104 mmt in 2009 after declining by -1.4% in 2008. This is an improved figure over the spring forecast issued in April 2009 which predicted a decrease of -14.1%. The improvement is largely due to the exceptionally strong growth in steel demand in China. With signs, from the beginning of the second half of 2009, of a recovery across the world now apparent, global steel demand in 2010 is forecast to grow by 9.2% to 1,206 mmt which is a recovery to the level of 2008.

While Chinese steel demand should account for 48% of the world’s apparent steel use, Worldsteel does not expect Chinese growth rates to lead the way next year (”ArcelorMittal chief surprised at China’s steel demand outlook“). Chinese growth will drop to 5% while regions like the U.S., India, and the EU-27 will experience double-digit rates of increase.

Click here for the details of Worldsteel’s forecasts. (This post also appears on “Inflation Watch“).

Note that these forecasts come right on the heels of a mostly negative report in Barron’s over the weekend on U.S. Steel. Quoted analysts were divided on whether X is over-valued and how much risk exists in future supply and demand for steel. Interestingly, the article cites Nucor (NUE), AK Steel (AKS), and ArcelorMittal (MT) and “other steel companies” as better investments. Timna Tanners of UBS has a sell rating on X and a price target of $25, but she seems to like Steel Dynamics (STLD) which is “…in a better position than U.S. Steel to restart production quickly and respond to spot demand. ‘It doesn’t have the same high cost structure as U.S. Steel’.”

The article ends by claiming that “A sustained global economic recovery would benefit all steel producers, but that seems a long way off.” At least for now, Worldsteel’s forecasts suggest otherwise.

Be careful out there!

Full disclosure: long STLD

Comments

[Wildebeest:]

The World Steel Association numbers clearly show the bottoming in the spring and the recovery since. The return to 2008 production levels will signal a boost to the iron ore and coal prices after the ~30% reduction this year. Good news for BHP, Rio Tinto and Vale investors.

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Oct 12 04:12 PM

[bassmaster17:]

Dr. D has some terrific articles. That being said. I remember when Credit Suise downgraded NOV when it was at $27 and the nice backlog despite some recession related weakness coupled with the strong balance sheet and valuation made me puzzled by the call. Nobody has downgraded NUE, actually UBS updraded it at $49 and Goldman has said some good things about it. I like the balance sheet, the dividend and the afformentioned article supports buying it. Despite the quarterly losses the future seems bright for NUE and the negativity surrounding it could be stemming from its CEO's bickering and complaining. He has emotional issues, but when it comes down to it, he excels in the category that counts, which is running a business. Look through the gloom...he was exuberant in 2007 when things were going well...and I believe those who buy NUE will be rewarded in the long run.

Oct 18 02:08 PM