Global steel consumption decreased by 0.8% year-on-year in the first quarter of 2014 after growth of 9.3% in the third quarter of 2013 and 8.7% in the fourth quarter of 2013, according to the Commodity Research Unit (CRU). The halt in global steel consumption growth in the first quarter of 2014 reflected a moderation in Chinese steel demand in the first quarter of 2014, following strong steel demand increases in China in the third and fourth quarters of 2013.
Industrial production, an important indicator of steel demand, in advanced economies increased by 3.1% year-on-year in the first two months of 2014 driven by strong industrial activity in Japan. In emerging economies, the average yearly growth rate in industrial production decelerated slightly from 4.4% in the last quarter of 2013 to 4.1% in the first two months of 2014.
In the first quarter of 2014, global steel production increased by 3.7%, year-on-year, to 1 616 mmt in annualised terms. Chinese steel production increased by 4.9%, reaching 804 mmt in annualised terms. In the rest of the world, steel production was 812 mmt, in annualised terms, in the first quarter of 2014, up 2.5% compared to the first quarter of 2013.
According to the April 2014 forecasts of the World Steel Association, world apparent steel use (ASU) is expected to increase by 3.1% in 2014 and by 3.3% in 2015, down from a growth rate of 3.6% in 2013. In 2014, apparent steel use in developed economies is expected to increase by 2.5%, marking a modest turnaround following the 0.3% demand contraction likely recorded in 2013. In emerging markets, ASU growth is expected to slow down to 3.2% in 2014, from a rate of 5.1% in 2013. Chinese steel consumption is expected to rise by 3.0% in 2014, down from growth of 6.1% in 2013.
According to the OECD Economic Outlook released on 6 May 2014, macroeconomic risks are overall better balanced although still tilted to the downside. These risks include financial tensions in emerging markets that can have bigger spillovers than anticipated, falling inflation in the euro area and geopolitical risks that have also increased since the start of the year. Some of these risks could affect major steel consuming or producing economies, contributing negatively to global steel demand.
Following the Ministerial Council Meeting on 6-7 May 2014, where Ministers stressed the need to address the issue of the excess capacity in some global industries such as steel, the Committee has deepened its discussions on capacity, and will take this work further. An OECD study on steel projects that have come on stream very recently, as well as announcements of projects planned over the next few years, suggests that new investments continue at a rapid pace in many parts of the world, despite high levels of global excess capacity and slower steel demand growth. Recognizing that investment decisions should be based on commercial considerations, delegations of the Steel Committee viewed with concern the role that government interventions are playing in the development of global capacity.
Delegations discussed several proposals for furthering the Committee’s work on excess capacity including: developing commonly agreed methods to measure capacity, examining information on policies that contribute to excess capacity, including support for individual investment projects, and the organisation of a potential future event in the next biennium.
Members stated their interest in and concern about policy developments that have contributed to global steel excess capacity. Specific concerns related to government steel policies include continued government subsidies (notably subsidies for the creation of new capacity or the maintenance of inefficient capacities), continued approvals for new steel facilities, the manipulation of border measures, the activities of government financial agencies, and other government interventions. Delegations agreed to continue informing each other about their steel reform agendas and plans, with a view to increasing transparency and encouraging market-based adjustment.
Global steel trade has undergone significant fluctuation over the past few years. World export activity has nearly recovered from the financial crisis of several years ago, but the trade performance of individual economies has differed widely. Some regions that have traditionally been large net importers of steel are investing rapidly in new steelmaking capacity, a trend that is gradually leading to reduced demand for imports. In many emerging economies, steelmakers are moving up the value chain and exporting more sophisticated steel products. Some developed countries have responded to strong steel demand growth in neighbouring regions, and their steel export structure has changed as a result.
Members noted that trade-restrictive measures continue to be applied frequently in the steel industry. Recent developments with potentially important implications for steel trade flows include, for example, tightened behind-the-border measures, tariff increases, certain quota measures, imposition of localisation barriers, and frequent recourse to safeguard measures. Unfair trade practices can in some cases lead to increased imports. As a consequence, countries are responding with trade remedy actions which are legitimate measures to counter-act unfair trade provided they are compatible with WTO rules. Policies discouraging exports of steelmaking raw materials have generally become more prevalent over the past several years, and delegates noted that refraining from such measures would reduce distortions in raw material markets and in broader global markets for steel. Delegates also discussed the significant role of state-owned enterprises (SOEs) in the steel sector and their potential distorting effect on the market, and welcomed SOE-related work in other bodies of the OECD to alleviate any distortions caused by government involvement in the marketplace.
Delegates discussed the supply-demand prospects for key steelmaking raw material markets. The prices of the main steelmaking raw materials, iron ore, coking coal and to a lesser extent ferrous scrap, have been oriented downwards since mid-2011. This trend reflects the slowdown of Chinese steel demand as compared to the previous years and the prospects of increasing mining capacity for coking coal and iron ore that could potentially lead to excess supply in these markets.
Steel production is a significant industrial contributor of global CO2 emissions, but, steel is also highly traded and sensitive to cost disruptions linked to uneven climate change policies in different economies. Steel is also an important material used to produce renewables and is amongst the most recyclable materials. Delegates took note of the current status of international climate change discussions, notably in the context of the COP 21 that will take place in Paris in late 2015.
*The meeting was attended by representatives from OECD countries as well as Brazil, China, Malaysia, Philippines, Romania, Russian Federation, South Africa, and Ukraine. [top]