Global steel demand is expected to contract by 0.8% to 1.48-billion tonnes this year, following a 3% contraction in 2015; however, the World Steel Association (worldsteel) estimates that global steel demand will return to growth of 0.4% to 1.49-billion tonnes in 2017.

Worldsteel states in its ‘Short Range Outlook 2016-2017’ report, released earlier this month, that slow and steady growth is expected in some regions in 2016 and 2017, but steel demand in China will contract by 4% in 2016 and by a further 3% in 2017.

“The economic environment facing the steel industry continues to be challenging, with China’s slowdown impacting on a range of indicators globally, contributing to volatility in financial markets, sluggish growth in global trade and low oil and other commodity prices,” says worldsteel chairperson TV Narendran.

Insufficient investment expen- diture and continued weakness in the manufacturing sector continued to place pressure on the global steel industry.

The Chinese real estate market and corporate debt problem, anxiety in financial markets, high household debt and volatile capital flows in many emerging economies could further worsen the global economic environment.

“On a positive note, some emerging economies in South and South-East Asia show resilient growth and, along with the North American Free Trade Agreement and the European Union (EU), will support a recovery in 2017,” he says.

A recovery for the construction sector is not forecast in the near future.

“Falling oil- and gas-related investments and the squeeze on government spending have affected steel demand in economies relying on oil-based revenue,” notes Narendran.

He adds that, on the positive side, lower oil prices have alleviated inflationary pressures in oil importing countries, giving room for monetary stimuli to boost economic growth and providing opportunities for structural reforms.

“We believe the commodity markets are at or near the bottom of this cycle.”

The report states that the manufacturing sector has slowed as a consequence of weak growth in global trade.

“The mechanical machinery, metal goods and other transport sectors are weakening, but the automotive sector will maintain its growth momentum, supported by strong demand in many countries,” he notes.

Narendran highlights that India’s prospects are brighten- ing, owing to low oil prices, reform momentum and policies to increase infrastructure and manufacturing output.

“India’s steel demand will increase by 5.4% in both 2016 and 2017, reaching 88.3-million tonnes in 2017,” he says.

Steel demand in emerging and developing economies, excluding China, is forecast to grow by 1.8% and 4.8% in 2016 and 2017 respectively.

Steel demand in Africa is forecast to grow by 3.8% and 6.5% to 40.5-million tonnes and 43.1-million tonnes in 2016 and 2017 respectively.

“While developed economies are also feeling the effect of the worsening global economic environment, they are expected to maintain a stable recovery momentum,” he states, adding that steel demand in developed economies will grow by 1.7% in 2016 and 1.1% in 2017.

Steel demand in the EU is forecast to grow by 1.4% in 2016 and by a further 1.7% in 2017, while steel demand in the US is expected to grow by 3.2% in 2016 and 2.7% in 2017.