Steel Use Growth Rates to Halve in 2013: Report

Growth rates in the use of steel throughout North America are set to drop back by more than half in 2013 after demand for the building material surged on strong levels of manufacturing and a pick-up in construction activity, the latest report says.

Stronger demand in other parts of the world, however, may mean a return to upward pressure on prices.

Releasing its quarterly Short Range Outlook, the World Steel Association (worldsteel) says overall volumes of ‘apparent steel use’ throughout the North American Free Trade Agreement (NAFTA) region increased by 7.8 per cent last year amid strong activity in US energy and car manufacturing and an increasingly resilient building recovery in that country, with high levels of construction output in Canada adding to momentum.

In 2013, however, worldsteel says US fiscal constraints will see usage growth will drop back to 2.9 per cent and remain at around this level (three per cent) in 2014.

Though the Association does not give separate forecasts for Canada, recent reports suggesting a return to more normal levels of housing construction activity and moderating manufacturing conditions mean the prospect of any big increase in demand is unlikely.

By contrast, from a global perspective, overall steel use growth rates are expected to pick up after remaining virtually stagnant last year as demand strengthens again in China and poor manufacturing and construction conditions in Europe stabilise.

Worldsteel Economics Committee chairman Hans Ju̎rgen Kerkhoff said overall demand for steel rose by just 1.2 per cent in 2012 as the impact of the European crisis spread and significant emerging economies slowed amid corrective macroeconomic policy.

“However, in the early part of 2013, the key risks to the global economy – the Eurozone crisis, a hard landing for the Chinese economy, and the US fiscal cliff issue – have all stabilised considerably and we now expect a recovery in global steel demand to kick in by the second half, led by the emerging economies,” Kerkhoff said, though he also cautioned that recent events in Cyprus underscore Europe’s continuing fragility.

“In 2014, we expect a further pickup in global steel demand with the developed economies increasingly contributing to growth.”

In its forecast, worldsteel expects steel use growth rates to rise to 3.2 per cent this year.

While the expected pick-up in overall demand is good for steel manufacturers, it raises the prospect of a return to upward pricing pressure on the construction industry around the world including Canada.

Despite strong regional use in 2012, prices for most types of steel declined in the second half of last year along with the global trend.

By Andrew Heaton

Top Image Credit: Made In China Online