“Next year will be better, but we will not have recovered (all of) the lost ground,” worldsteel director general Edwin Basson said during a webinar discussing the forecast. (You can find his presentation here.)

Basson said there will be much ground to recover, too, as the coronavirus pandemic has caused both supply and demand shocks and created volatility in the financial markets. And without a doubt, the global economy will retract this year, even more so than it did during the 2008 global financial crisis, he said.  

On the whole, the association forecasts that global GDP will dive somewhere between 3.5% and 8.8% in 2020, depending on the length and stringency of lockdowns. Based on current circumstances, the most likely outcome falls roughly in the middle of that range, Basson said.  

The good news, he said, is that the steel industry so far is faring better through the pandemic than other industries. That’s so, he said, because the industry has continued to operate whereas others, particularly service-based industries, have been brought to a halt. 

And within the steel industry, the mills that have adopted certain Industry 4.0 technologies are faring even better.  

“Those factories and those mines that have invested in automation practices have been able to come through the crisis better,” Basson said. “Even if they did not have all the workers on-site, they could still continue to produce.” 

That said, the industry still is facing a sharp downturn, with global finished steel demand forecast to fall 6.4% this year, down from 1.77 billion metric tons in 2019. However, demand is expected to see some recovery in 2021, growing by 3.8% to 1.72 billion metric tons. 

Basson said global demand is driven largely by three sectors — construction, automotive and machinery, which together account for approximately 80% of global demand. Of those, construction is the largest, accounting for roughly 52% of demand globally. 

Basson said global construction output, excluding China, is projected to fall 3.9% this year. The U.S. and the European Union are expected to see deeper impacts, however, with output falling more than 6% and more than 4%, respectively.  

Globally, construction activity will rebound next year, led by China, India and the ASEAN region. The one notable exception to that, Basson said, is the U.S. 

Recovery in the U.S. construction sector is expected to lag, Basson said, owing to uncertainty on whether the country will adopt an infrastructure plan as well as the sharp decrease in oil prices, which are hammering the energy sector. 

To the contrary, though, a few U.S. producers said earlier this month that non-residential construction has so far held up through the downturn. 

“Though overall market conditions are still challenged by the pandemic, demand in non-residential construction has been resilient during this time,” Nucor Corp. said in its most recent earnings guidance. 

As for the automotive sector, Basson said output is expected fall 18% this year, excluding China, but could see a 7% rebound next year. He said that although this year’s decline is certainly attributable to the lockdowns, demand was softening before the pandemic. 

“We believe a part of this is due to the structural changes that the automotive sector worldwide is dealing with at the moment in changing from an internal combustion engine to (a powertrain) that will eventually be, most likely, an electric motor.”

Basson said the association has noted imposition of environmental policies such as bans on vehicles in city centers and congestion-based tolling in which drivers pay to enter high-traffic areas. The result, he said, is that some motorists are delaying new car purchases until they see how policies shake out and which powertrain technologies might suit them best. 

“This will delay a little bit the quickness with which the auto industry will recover on a global basis,” he said. 

Overall, though, the association expects a recovery to begin next year, aided in no small part by the world’s governments. In worldsteel’s estimation, national governments have announced stimulus packages worth the equivalent of 15% of GDP, or US$12 trillion dollars, Basson said. 

“It is a huge amount of money, and it will certainly help to make sure there is still money available to continue demand and to continue investment. I expect, because of these measures, a robust recovery taking place in 2021.”

The downside, however, is that this year’s stimulus is next year’s debt.

“Governments will have to figure how fast they will repay this debt.”

At the same time, companies may have to reconsider their supply chains. 

Basson said one outcome of the pandemic will be a turn away from long, international supply chains, accelerating a trend that has been developing over the past 10 years. 

“I think we can safely say that there will most likely be a movement toward shorter and more regionalized supply chains. It may not necessarily be the most efficient in terms of financial posting, but it may be more robust in terms of the next international shock we may experience,” he said.