“The global economic environment has deteriorated significantly in 2022 as inflation risk fully materialized along with other major headwinds, namely the Russia-Ukraine war and China’s lockdowns. The Russia-Ukraine war exacerbated the inflationary pressure that was ignited by the post-lockdown supply and demand imbalances as the war disrupted energy and food supplies and intervened with the normalization of supply chains,” worldsteel said in its biannual short range demand outlook. 

The forecast is a downward revision from worldsteel’s April short range outlook, which predicted that demand would grow 0.4%. But over the past six months, circumstances have worsened and don’t look to be easing soon.  

“Uncertainty remains elevated for the global economy and the balance of risks is largely skewed to the downside. Among those are the effect of monetary tightening, continuation of inflation, the direction of the Chinese economy and its COVID policy, the potential crisis of gas supply in Europe, and the aggravation of the Russian-Ukraine war with unexpected consequences,” worldsteel said. 

EU demand is forecast to fall 3.5% this year. 

"Sentiment is dwindling and industrial activities are cooling sharply toward a decline as high energy prices are forcing factory shutdowns," worldsteel said. 

“With immediate improvement in the gas supply situation not in sight, steel demand in the EU will continue to contract in 2023 with a significant downside risk in case of harsh winter weather or further disruptions to energy supplies.”

In China, demand is predicted to decline 4% this year due in part to repeated COVID lockdowns and the country’s property market crisis. 

“The slump in the property market has deepened, with investment in real estate slowing to its worst in 30 years. All major real estate market indicators are in negative territory, with floor space under construction contracting for the first time in its modern history. Despite the government’s efforts to boost the real estate market, a major turnaround is not expected since buyers’ confidence remains weak due to strict COVID measures and developer bankruptcies.”

But in the U.S., worldsteel predicts demand will grow slightly, increasing by 2.1%. worldsteel said that although manufacturing generally is expected to cool, demand will be supported by the automotive sector “on the back of pent-up demand and easing of supply chain constraints,” worldsteel said. 

“The new infrastructure (plan) will, however, sharply boost infrastructure investment, and rising energy sector investment will support growth in steel demand despite a weakening economy.”