SteelOrbis talked to Dr Kamel Djoudi, secretary general of Arab Iron and Steel Union (AISU), about 2022 evaluations and 2023 expectations.
Global steel industry
The changes seen worldwide have pushed the global economy into a state of tension and instability. The remaining challenges from the repercussions of the Corona pandemic, the Russian-Ukrainian war and high-energy prices, in addition to the increase in interest rates in most countries globally and the decline in economic growth in China, have led to global instability, which has affected all industries without exception.
The International Monetary Fund forecasts indicate a decline in global economic growth from 6.0% in 2021 to 3.2% in 2022, and global growth is expected to continue to swing at the same pace during 2023 and 2024 due to the damage caused by the pandemic and the war.
As for the steel industry, the expectations of the World Steel Organization indicate that global steel demand will contract by 2.3% in 2022 to 1.7967 million tonnes because of the repercussions of inflation and high-interest rates worldwide. While high inflation, monetary tightening and China’s slowdown contributed to economic difficulties in 2022, steel demand in 2023 will indicate a slight recovery of 1.0% due to infrastructure projects.
Arab steel industry
The Arab region was affected in 2020 to an extend close to the global impact, as the region's economy recorded a growth rate contraction of 3.0%. However, other global shocks did not have the same effect in the following years, as the latest forecasts indicate that the region's economy will grow at a rate of 5.5% in 2022, which is close to double the growth rate of the global economy, led by an improvement in oil prices, especially in the GCC countries.
Despite the shocks that caused a significant increase in inflation rates and which prompted most countries in the region to increase interest rates to counter inflation rates, the economic situation performance in the region as a whole varied from one country to another. The GCC countries and oil exporting countries have been the least affected, while the oil importing countries in the region face high risks.
In spite of the oil-importing developing countries achieving growth rates of 4.5%, which are higher than the growth rates of the global economy, they will face many challenges, including importing oil and gas products and food commodities at high cost, in addition to the depreciation of their local currencies and thus the increase in the volume of their external debts, while incurring additional expenses because of the upsurge in internal support for products to mitigate inflation.
As for the steel industry in the Arab countries, looking at the period from 2020 to 2023 we find that steel consumption continued to decline during 2020 and 2021 by 9% and 1%, respectively, due to the impact of the Corona pandemic. However, after the return of most economic activities and the rise in oil prices, steel consumption returned to a height of 40.5 million tonnes, up 4%, in 2022, and 42.2 million tonnes, or up 5%, in 2023.
As for crude steel production in 2021, it amounted to 33.1 million tonnes, an increase of 11%, as a result of the return to everyday life in factories and projects, and it will decline by -1% in 2022 as a result of the stagnation and the use of 2021 stocks. It is expected to rise to 34.8 million tonnes in 2023, with an increase of 6%, year on uear.
Steel industry in Gulf countries
Oil prices collapsed in 2020 to low levels that were not seen since 2004 due to the Corona pandemic, and with the return of all economic activities in 2021 prices have risen again. The Russian-Ukrainian war accelerated the rise, so that the expected average global price for the 2022 is about $104/ barrel, which is close to the price levels in 2013 and double what they were in 2019. In addition, the current gas prices reached about four times the previous prices, which had a positive impact on all the economies of the Gulf countries, which caused the economic growth of the region to reach 6.9% in 2022.
Despite the rise in oil prices in 2021 to an average price of $70, spending on projects did not rebound as expected, as money was directed to reduce debts, mitigate inflation, and provide social protection programs.
Accordingly, steel demand did not increase in 2022. However, after the improvement in steel prices and the beginning of the implementation of postponed or suspended projects, steel consumption has returned to its previous rates and is expected to continue to grow in 2023 to reach about 18 million tonnes rising by 5%, led by Saudi Arabia and the UAE, with about 10.3 million tonnes and 4.5 million tonnes, respectively.
As for crude steel production, it increased by 7% in 2021 to reach 16.3 million tonnes because of the receding of the Coronavirus, the easing of preventive measures, the return of foreign workers and the resumption of usual work levels, and it remained at the same level of production in 2022 with about 16.2 million tonnes. Production is expected to continue without significant change in 2023 to reach 16.3 million tonnes.
Steel industry in North African countries
In 2022, North Africa witnessed a significant economic growth rate of 4.1%. Despite achieving growth higher than the growth rates in the global economy, it will face many huge challenges, including the rise in import prices of oil and gas products and food commodities. In addition, it faces the depreciation of its local currencies and thus the increase in the value of its external debts, and will incur additional expenses as a result of the increase in internal subsidies on products to mitigate inflation.
We find the nature of economic activity in the North African region countries different from one country to another. In Egypt, economic growth increased due to government spending and direct foreign investments, and it rose in Algeria due to high oil and gas prices. Economic growth declined in Libya by 18% and in Morocco by 0.8% due to the decline in oil production in Libya and the drop in agricultural production in Morocco.
As for steel consumption, despite the economic growth in 2022, which increased by a lesser rate than in 2021, steel consumption in North Africa increased by 6%, bringing consumption to about 17.1 million tonnes, compared to 16.2 million tonnes in 2021, due to the demand increase in Egypt by 8% and in Morocco by 19%. It is expected to continue at the same pace, reaching 18.1 million tonnes in 2023.
After crude steel production in 2021 witnessed a significant increase of 17% reaching 16.1 million tonnes, led by Egypt, production declined in 2022 by 1% because of the consumption of 2021 stocks. The global demand for steel, especially in Europe, stagnated, and production in North Africa is expected to rise to 17.9 million tonnes by 12% in 2023.
Conclusion
Despite the continued rise in oil prices, from which some oil-exporting countries have benefited somewhat in the Arab region, the economic situation will remain tense as a result of inflation and high prices for all raw materials and logistical services, which necessitated that governments direct a large part of oil revenues to cover price differences and protext local currencies.
The infrastructure in Arab countries will remain the train that drives steel consumption, with the completion of projects related to the Qatar World Cup 2022 and the "Expo Dubai 2020" and some decline in steel consumption in Qatar and the UAE. It is expected that the 2023 will be more active in the infrastructure field to complete development plans for the tourism sector to take advantage of the tourism boom caused by the organization of the World Cup and Dubai Expo 2020. Also, the implementation by the Kingdom of Saudi Arabia of a new set of projects estimated at a value of 216 billion riyals and large government projects undertaken by Egypt will also provide a boost.