Worldsteel raises forecast for 2018 global steel demand growth to 1.8 percent

LONDON (Reuters) - Global steel demand will grow 1.8 percent this year and 0.7 percent next year, driven by favorable world economic momentum, though the market faces risks from rising trade tensions, the World Steel Association (worldsteel) said on Tuesday.

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In 2018, global steel demand will reach 1.616 billion tonnes, while in 2019, it will hit 1.627 billion, the worldsteel said. The association previously forecast growth of 1.6 percent this year.

“We’re in a relatively positive phase compared to last year and the year before that. We see positive growth almost throughout the countries we’re looking at, driven for the first time in many years (by) investment expenditure in developed and developing economies,” worldsteel director Edwin Basson told reporters in London.

“The exception to the rule is China. We think China is going to have sideways (growth) this year and actually decline next year.”

Worldsteel expects steel demand in China, which consumes half the world’s steel, will remain flat in 2018 at 736.8 million tonnes and fall 2 percent next year to 722.1 million.

This is as economic growth in the world’s second largest economy decelerates mildly and the government continues to steer the country away from investment-led to consumption-led growth.

“It’s natural there might be a bit of a lull in steel use when you make this shift from investment to consumption (led growth), but consumption in China will be strong for years to come. We’re not concerned,” said Basson.

Global steel equity values have more than doubled since hitting 12-year lows in early 2016 in the worst of the steel sector crisis.

The steel industry, worth about $900 billion a year, is seen as a gauge of world economic health. Worldsteel represents more than 160 steelmakers accounting for 85 percent of global output.

The association sees steel demand growth of 1.8 percent this year and 1.1 percent next year in developed economies, and

growth of 4.9 percent and 4.5 percent this year and next in emerging and developing economies, excluding China.

It said the downside risks to its forecasts include rising inflationary pressure, tightening of U.S. and EU monetary policies and escalating trade tensions, though it expects as regards the latter that cooler heads will prevail in the end.

Demand in India, the world’s third-largest steel consumer and the industry’s best hope for growth after China, is set to grow 5.5 percent this year, compared with a previous forecast for growth in 2018 of 4.4 percent.

Next year, worldsteel sees India’s steel demand growth at 6 percent.

Reporting by Maytaal Angel; editing by Jason Neely and David Evans