Global steel association, worldsteel has revised its short-range outlook downwards by one percentage point for 2014, and 1.2 points for 2015. “Positive momentum in global steel demand, [which was] seen in the second half of 2013, [has] abated in 2014, with weaker than expected performance in the emerging and developing economies,” the association explains.

Global apparent steel use should increase by 2% to 1.562 billion tonnes in 2014, and not by 3% as had been forecast in April, says head of the association’s economics committee, Hans Jürgen Kerkhoff. This follows year-on-year growth of 3.8% in 2013.

In 2015, world steel demand should grow by another 2% and will reach 1.594bn tonnes. The previous 2015 forecast had been for 3.2% growth, Kerkhoff tells Kallanish.

Slowing steel demand in China reflects the economy’s structural transformation, and is a significant reason for the lower global growth projection, he adds. “We have also seen major slowdown in South America and the CIS due to falling commodity prices, structural constraints and geopolitical tensions.”

In contrast, the developed economies have fared well, and recoveries in the EU, US and Japan should be stronger than expected, although this will not offset the slowdown in the emerging economies, he notes.

“In 2015, we expect steel demand growth in developed economies to moderate, [and to pick up] in the emerging and developing economies.” Chinese rebalancing will continue to act as a drag on steel demand.

However, next year’s forecast is prone to risks coming from various fronts. The US is expected to increase interest rates, which is likely to impact global capital flows and add instability in the vulnerable emerging markets, Kerkhoff warns.

The outlook in emerging markets is constrained by the need for structural reforms, as well as gobal geo-political tensions. As a result energy prices, globally, have emerged as a new risk factor. In China, the rebalancing and transition towards a consumption driven economy is not without challenges and uncertainties. Lastly, the recovery in the Euro-Area is still constrained by household and government deleveraging, Kerkhoff concludes.