Global industry body expects India's steel demand to move to higher growth post-demonetisation, GST shock

New Delhi: India’s steel demand is expected to move back to a higher growth track as the country recovers from “twin shocks of demonetisation and GST implementation”, global industry body World Steel Association (worldsteel) said on Tuesday. In its October 2018 Short Range Outlook, worldsteel said it projects global steel demand at 1,657.9 million tonne (MT) in 2018, an increase of 3.9 percent over 2017. The demand for steel in the developed world remains healthy, while in the developing countries steel demand will continue to recover amid challenges. “As India recovers from the twin shocks of demonetisation and GST implementation, India’s steel demand is expected to move back to a higher growth track. The demand will be supported by improving investment and infrastructure programmes. Stressed government finances and corporate debt weighs on the outlook,” the body said. [caption id=“attachment_4358339” align=“alignleft” width=“380”] Representational image. Reuters.[/caption] The demand will be supported by improving investment and infrastructure programmes, worldsteel said adding the stressed government finances and corporate debt weighs on the outlook. In the first half of 2018, Chinese steel demand got a boost from the mini stimulus in real estate and the strong global economy. However, continued economic rebalancing efforts and toughening environmental regulations will lead to deceleration of steel demand toward the end of 2018 and 2019. “Both downside and upside risks exist for China. Downside risks come from the ongoing trade friction with the US and a decelerating global economy. “However, if the Chinese government decides to use stimulus measures to contain the potential slowdown of the Chinese economy in the face of a deteriorating economic environment, steel demand in 2019 will be boosted,” it said. Demand in the ASEAN region is expected to resume its growth momentum backed by infrastructure programmes in 2019 and onwards. Risks are largely related to rising trade tensions between the US and China, currency volatilities and political instability. Steel demand in developing Asia excluding China is expected to increase by 5.9 percent and 6.8 percent in 2018 and 2019, respectively. In the Gulf Cooperation Council (GCC) countries, reforms and a stronger oil market have led to an upward momentum in steel demand, but at a slow pace. The outlook for Iran has turned less favourable due to the reinstatement of sanctions by the US. Even with the rise in oil prices, growth in steel demand in Russia is expected to show weak momentum. Turkish steel demand is expected to contract in 2018 with the currency crisis it has faced, but the government’s stabilisation measures and a consequent return to the competitiveness of the manufacturing sector is expected to help recovery in 2019. Steel demand in the Latin American economies is continuing its second year of recovery backed by positive developments in the domestic and the global economy. Steel demand in Brazil continued its stable recovery in 2018. This will continue into 2019 as election fever subsides. Steel demand in Mexico has suffered from uncertainties related to the NAFTA negotiation and the election, but the recent signing of USMCA and the new President calming jittery markets are expected to help the economy to recover slowly in 2019. Steel demand in the emerging economies excluding China is expected to grow 3.2 percent and 3.9 percent in 2018 and 2019, respectively. The body also said that construction activities in most developing economies will continue to grow, notably in India, ASEAN and the Middle East and North Africa (MENA). The automotive markets which showed strong growth in the developed economies are softening on the back of slowing demand growth, rising fuel prices and interest rates. In the developing countries, demand for automobiles will continue to grow at a healthy pace. The machinery sector in both the EU and US continues to be supported by a strong business investment phase.