Worldsteel has revised up its forecast for finished steel demand growth outside China thanks mainly to strong manufacturing activity and developed economies outperforming earlier expectations.

Global steel demand will grow by 4.5% on-year in 2021 to 1.85 billion tonnes, after 0.1% growth in 2020, worldsteel says in its latest short-range outlook (SRO). This compares to its 5.8% growth forecast in April. The downward revision is purely due to deceleration in China, where demand is now seen shrinking 1% this year.

Developed economies, like the US, EU and certain Asian nations, have managed to minimise the impact of the latest Covid-19 infection wave on economic activity in 2021, using more targeted and localised lockdowns. After falling by 12.7% in 2020, developed economies’ steel demand will increase 12.2% in 2021 and 4.3% in 2022, reaching its pre-pandemic level, worldsteel says.

However, supply chain bottlenecks and the services sector still lagging behind are preventing a more robust recovery.

“The Chinese economy recovery has slowed since June, leading to a steel demand contraction of 13.3% in July and then 18.3% in August,” worldsteel director general Edwin Basson said during Thursday’s virtual SRO press conference attended by Kallanish. “The sharp deceleration is partly attributable to small waves of infections and the government cap on steel production. No growth in Chinese steel demand is expected in 2022.”

Steel demand in developing economies, excluding China, also recovered in 2021, aided by the recovery in commodity prices and international trade. However, new Covid-19 waves combined with low vaccination levels have restrained this recovery.

“Russia’s export duties for steel are in favour of the domestic steel sector, which we expect to continue to do well mostly due to state-funded construction activities in 2021,” Basson told Kallanish. “We expect Russia, Ukraine, Kazakhstan and other CIS countries to continue their positive recovery.”

Steel demand in Latin America has shown a surprisingly strong recovery in 2021 thanks to the construction and automotive sectors. However, in 2022, the region could see markedly weakened momentum as it will struggle with compounded structural issues including high inflation, heightened fiscal deficits and political uncertainty.

In 2022, global steel demand will see a further increase of 2.2% on-year to 1.89 billion tonnes, worldsteel says. The current forecast assumes that, with the progress of vaccinations across the world, the spread of variants of the Covid-19 pandemic will be less damaging and disruptive than seen in previous waves.