Steel market outlook for 2005 and 2006
The current buoyant steel market conditions are expected to continue throughout 2005 and into 2006, said steel industry and government officials at a Paris conference organized by the OECD (Organization for Economic Cooperation and Development) and the IISI (International Iron and Steel Institute).
Global steel
consumption jumped by 8.8% in 2004, reaching 935 million tons of finished steel. Steel demand in OECD countries increased 7.5%, or 22 million tons, compared to previous year.
North America recorded the strongest increase in apparent steel
consumption, up 15%. The apparent
consumption in other OECD countries rose 3.4%. Steel
consumption in
CIS countries rose 13.5%, while Chinese steel
consumption climbed 11%, a 25 million ton increase compared to 2003.
The global steel trade showed a rise of 4.4% in terms of volume. Trade also reached a new record level of 263 million tons in 2004. This figure accounted for 28% of world steel
consumption. However, major changes took place in trade flows. Net steel exports of OECD countries diminished more than 60%. Furthermore, Chinese steel imports dropped 24%, while at the same time its steel exports doubled to over 17 million tons.
Steel product prices displayed marked increases in 2004, translating into strong profits for the steel sector despite increases in raw material and transportation costs.
In 2005, strong demand from
China is expected to push global demand 5% higher. Experts predict steel
consumption will increase by 10.7% in
China. In addition,
CIS countries will continue to consume steel in greater quantities.
According to the forecasts, crude steel
production will grow in both 2005 and 2006.
China's crude steel output is expected to total 340 million tons, accounting for 30% of world
production.
However, the steel trade is expected to start declining in 2005 as a result of new capacity expansions in
China,
India and other Asian economies.
Global steel making capacity, which was 1.18 billion tons in 2004, will increase to 1.31 billion tons in 2006. Under these circumstances, the Paris-based OECD stated that there could be a new crisis in the steel industry in a few years when capacity expansion exceeds market needs by a significant amount.
However, further market growth in
China,
India, Latin America and the
CIS may be sufficient to prevent such a crisis, OECD officials said.