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MEPS Forecasts Record Steel Demand through 2008

09/16/2004 - MEPS (International) Ltd. recently released its latest predictions regarding trends in iron and steel production in a report titled, “Global Iron & Steel Production To 2008.”

MEPS (International) Ltd. recently released its latest predictions regarding trends in iron and steel production in a report titled, “Global Iron & Steel Production To 2008.”

Crude Steel Production Forecast

“We expect crude steel production to expand steadily over the next five years to reach just above 1.1 billion tonnes by 2008. This represents an increase of 14.6% over the five years from 2003 or an annual growth rate of 2.8%. Pig iron making will also increase significantly over the forecast period. We estimate growth of 2.7% per annum to reach 750 million tonnes in 2008. Many of the countries with substantial rises in output have blast furnace/oxygen steelmaking as the favored process.

“Direct Reduced Iron will take a greater share of the ferrous inputs for steel manufacturing in the future. Countries in the Middle East, Africa, Asia and South America, particularly those with a plentiful supply of energy, will be consistently reporting higher production figures in the future. We forecast total DRI output in the world in 2008 at just above 56 million tonnes, up by 8.3 million tonnes (17.1%) on the outturn in 2003.

“The most significant change in the distribution of global iron and steel output will take place in China. Its share will expand substantially over the next five years. The main losers in percentage terms, will be the large industrialized areas, including the EU, NAFTA and Japan. However, it should be noted that we forecast crude steel production expanding in all regions of the world in the period to 2008.

From “Crude Steel Production Forecast to Top 1.1 Billion Tonnes in 2008,” MEPS (International) Ltd.

According to MEPS, the global steel sector is entering a new phase, with growth in China stimulating demand for steel across the Asian continent. Based on exports to industrialized nations, the emerging and developing countries in the region are showing strong manufacturing activity. Steel consumption is expected to move upwards over the next five years.

MEPS comments that the fate of the world steel scene cannot be estimated using regressive analysis. Previous cyclical trends are not being followed. Based mainly on perceived raw material shortages, it is apparent that boom conditions currently apply. In the three years between 2001 and 2004, MEPS estimates that apparent consumption of finished steel expanded from 766 to 918 million tonnes, an increase of almost 20%, or a year-on-year average of more than 6%. This compares to a rate of 2.5% per annum in the ten years to 2002, and a 1.2 annual percentage over three decades, 1970 to 2000.

MEPS estimates global apparent consumption of finished steel in 2004 at 918 million tonnes — 5.3% above the year earlier figure. The group does not expect the recent growth rates to continue into the medium term, but is forecasting further expansion in demand over the next few years, with apparent consumption of finished steel reaching 1 billion tonnes in 2008. This equates to an average annual increase of almost 3% over the next five years.

MEPS bases its rather modest prediction on two key factors. Firstly, apparent consumption growth over the last three years is, in the group’s opinion, above the level of real demand. A large amount of inventory building has occurred, particularly in China. The talk of shortages of raw materials has prompted buyers to carry higher stock levels than previously considered necessary. Low interest rates have made this exercise much less painful than in the past. Secondly, the Chinese government is keen to avoid overheating of their economy. It is making attempts to reduce growth in key industrial sectors, including steel.

Further information is available on the MEPS website.