The developing world's increasing influence on global steel trends
Global steel output is still inching upwards as the recovery progresses, although the composition of world production and consumption are both rapidly changing, as emerging economies play an increasingly vital role in the overall steel market.
The World Steel Association (worldsteel) reported last week that steel production declined in nearly all the major steel producing countries and regions including the EU, North America, South America and the CIS in 2009, although, Asia, particularly China and India, and the Middle East, all showed positive growth in 2009. Overall world steel production dropped 8.0 percent in 2009 over 2008, as steep drops in regions like North America (-33.9 percent) and the EU (-29.7 percent) were mostly countered by increases in developing nations.
Worldsteel said China's 2009 production, totaling 567.8 mmt, was up 13.5 percent from 2008, and represented 47 percent of total global steel production --nine percent higher than 2008. When looking at the overall makeup of global steel production, output in emerging economies is representing an increasingly bigger slice of the pie. BRIC nations (led by China, of course) accounted for 49.6 percent of total steel production in 2008, and in 2009 shot up to 58.3 percent, while the US' share of world steel production diminished to 4.8 percent from 6.9 percent in the prior year.
While developing nations' steel output has been on the rise, at the same time, steel exports from developing to developed countries have by all accounts diminished in 2009 over 2008 (The US' steel import volumes were down -49 percent during this period). It is therefore evident that the increased steel production is being consumed in the developing world. While some may lament the loss of the manufacturing industry in developed countries like the US, most of Europe and Japan, the shift of more steelmaking activity to developing nations seems all but inevitable, as that is where demand is strongest. Furthermore, this transition is arguably a positive development for steelmakers in developed countries, as it means their markets were not flooded with cheap steel when domestic prices and consumption collapsed in the wake of the economic crisis, and this lack of import competition eventually allowed for some modest domestic price recovery. Higher steel demand in other parts of the world also opens the door for exports to these emerging markets.
In his first State of the Union address this past Tuesday, President Obama proposed a national export initiative, with the goal of doubling exports over the next five years. The President's Administration may or may not be successful in realizing this goal, but whether the steel industry is able to achieve a similar feat may determine whether it can remain relevant in an increasingly international industry.