Following
last year’s 2.3% slump, growth in global steel demand is expected to be limited
to only 1% in 2023, the OECD Steel Committee concluded this week. There is
growing concern over the disconnect between the rapid build-up of new
steelmaking capacity in some economies and market expectations of steel demand, Kallanish notes.
Rising interest rates and
the tightening of monetary policy, sustained high inflation, weak consumer
spending and elevated energy prices are likely to keep steel demand subdued going
forward, the committee reports following its 93rd session. Capacity investments
should be driven by market considerations to not further exacerbate
deteriorating market conditions, it adds.
“The committee expressed
its deep concern about Russia’s aggression against Ukraine and its impact on
global steel markets, contributing to a continued stagnation in world steel
trade, disruptions in raw material markets, and increased market uncertainty,”
it says. It adds that it stands ready to support Ukraine – a long-standing
member of the Committee – in the reconstruction and decarbonisation of its
steel industry.
Concerns continue,
meanwhile, regarding Chinese steelmaking capacity, accounting for 47% of the
world’s total in 2022, “particularly given the current market slowdown from an
ailing real estate sector and possible steel demand declines in the coming
years”, it adds.
Global crude steelmaking
capacity rose to 2.463 billion tonnes in 2022, with significant capacity
expansions particularly in Southeast Asia and the Middle East. This contributed
to the growing gap between global crude steelmaking capacity and production
that reached 632 million tonnes in 2022 from 516.9mt in 2021. The modest
longer-term outlook for steel demand growth risks exacerbating these challenges,
the committee points out.
As a result, the average
capacity utilisation rate has fallen to 74.3%, “a level that is not in line
with a healthy and financially viable steel industry that needs to invest in a
low-carbon future and remain competitive vis-à-vis alternative materials”, it
adds.
Looking ahead, OECD
analysis shows a potential of 166.1mt of new steelmaking capacity coming on
stream in 2023-25, more than half of which is carbon intensive as it involves
investments into traditional blast furnace/basic oxygen furnace plants.
Responding to these
challenges, the committee has launched a Global Steel Supply Chain Observatory,
aimed at assisting members and industries with real-time monitoring of raw
material markets and related policy measures, providing a platform for finding
solutions and reducing risks and vulnerabilities.