| WHILE reflecting
on slower growth and excess capacity in global steel, the OECD Steel Committee
has noted that Global steel consumption growth has moderated, from a
year-on-year rate of 5.4% in the last quarter of 2012 to 4.2% in the first
quarter of 2013, according to data from the Commodity Research Unit (CRU).
However, growth in the beginning of 2013 was still higher than the 1.7% recorded
in the third quarter of 2012. The relatively higher steel consumption growth
rates seen in the last quarter of 2012 and the first quarter of 2013 reflect an
increase of apparent steel consumption in China, whereas steel consumption in
the rest of the world decreased.
According to the most recent Short Range Outlook released by the World
Steel Association in April 2013, world apparent finished steel use is expected
to increase by 2.9% in 2013 and by 3.2% in 2014, following a growth rate of 1.2%
in 2012. In 2013, apparent steel use is expected to increase by 0.4% in
developed economies, which would be a slight improvement following a demand
contraction of 1.9% in 2012. In emerging markets, apparent steel use is expected
to grow by 3.9% in 2013, with Chinese steel consumption rising by 3.5%. In
Africa, Central and South America, and the regional aggregate Other Europe,
growth rates in 2013 are expected to be 8.1%, 6.2% and 6.1%,
respectively.
The
steel industry's economic performance has declined significantly since the
global economic and financial crisis, with the steel industry ranked amongst the
least profitable industries in most economies. Some companies are facing these
conditions more successfully than others, but no firm seems completely immune to
the systemic strains facing the industry at this time. A high level of excess
capacity is a major cause of the industry¡¦s weak financial performance, and is
threatening the viability of many firms. With investment projects continuing to
increase in a number of economies while steel consumption growth is anticipated
to remain moderate, the global imbalance will continue to pose risks for the
industry for the foreseeable future.
Many
of the factors that contribute to excess capacity are also increasing the
likelihood of trade frictions in steel. Subsidies and government support
measures that promote investment in steelmaking facilities or sustain companies
in distress that would otherwise shut down are a major source of trade friction.
Subsidies that encourage steelmakers to keep production running at high levels,
even under weak market conditions, have had significant effects on trade, with
unfair trade practices such as dumping resulting in injury to the industries of
other economies.
More
progress in energy efficiency in the steel sector is technically possible, but
will require substantial capital to modernise. Improvements in steel quality
will also continue to provide energy-savings in consuming industries,
outweighing the energy needed to produce that steel. Low-priced shale gas, that
can be used in the direct reduced iron (DRI) process, is creating new
opportunities by lowering production costs and CO2 emissions and contributing to
new investments in DRI projects.
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