The steel industry is a barometer for the world’s economic health. Almost every industry needs steel to expand, so the steel industry grows when other industries grow. That type of growth has been happening in 2017, and it is likely to continue for the rest of the year.
Developing Nations Boost Demand
Several developing nations, such as Brazil, India, and Russia, are experiencing economic growth as they come out of recessions. That is causing their demand for steel to skyrocket, which is good news for the industry as a whole. Many of these nations have some steel production of their own, and it is likely that their domestic industries will grow to help meet demand. On the other hand, it also provides an opportunity for the rest of the world to export its steel to those nations. The precise balance between increasing production and increasing important remains to be seen, and will depend on a huge number of political and economic factors.
China is one of the biggest producers and consumers of steel in the world. It is also one of the few developing nations that has not shown and increase in demand for steel. The World Steel Association expects the demand for steel in China to stay flat for the duration of 2017, and to start dropping after that. It is possible that the decrease will begin slightly earlier, possible in the second half of 2017.
That does not mean that the world can ignore Chinese steel. It can still produce and export a huge amount of cheap steel, which is perfect for many developing nations. However, several government have urged China to take action to prevent steel dumping during the earlier part of this year. The Chinese government did respond by revoking licenses from a large number of steel producers, but not enough to make a huge dent in the nation’s output or reduce its relevance in the global steel industry. This has encouraged global steel prices to increase, which does help to compensate the Chinese industry for its lowered production.
Increased demand is leading to increased production. Global steel production has increased by appropriately 6% this year. Most regions have seen an increase in their output. Some have increased by a little more than the average, and some have increased by a little less, but very few have stagnated or decreased.
The future for the steel industry is bright in the vast majority of the world. Economic growth is likely to continue, so demand for steel is unlikely to drop in the near future. If China continues with its efforts to eliminate its excess steel production, prices are likely to rise for companies in the rest of the world. That is likely to be the case for as long as the rest of the world pressures China to support that policy, but there is always a chance that Chinese production will increase once again. Nothing is certain, but the odds of growth and continuing profits are high for most steel companies.