Steel has has a rough year and a half. Since the financial crisis, the industry has suffered one of the worst downturns in decades, with demand for global steel dropping 15% in 2009 — the steepest drop since WWII. In the U.S., steel’s health as an industry is regarded as a bellwether for other market conditions — in other words, the fate of steel is the fate of the nation.
As such, it behooves us all to take an interest in the state of steel at the moment. Earlier this week, the OECD Steel Committee had its annual meeting in Paris, attended by reps from OECD countries as well as other heavy hitters like Brazil, China, India, and Russia. Here are a few of the conclusions:
• The huge contraction in global demand that’s been crippling the industry since the second half of 2008 is tapering off, though there are major regional divides. China, India and several other emerging countries are already seeing growth in demand, while most of the OECD countries are still in recovery mode.
• Although the outlook is improving, the recovery process could be slow and long in some OECD economies, with demand taking up to 3 to 4 years to reach pre-crisis levels. So despite the fact that emerging economies are seeing a faster rebound for steel demand, overall world demand will likely drop.
• Despite the demand decrease, steelmaking capacity has failed to adjust accordingly, even increasing in some regions. Projections to 2012 suggest that global capacity may exceed demand by a wide margin, raising concerns about what to do with the surplus.
• International trade in steel is beginning to pick up. Governments discussed various trade measures adopted recently to support domestic industries, and stressed the importance of maintaining free trade in steel.
• The shape of the industry is likely to change in the future, with production increasing primarily in emerging countries to benefit from faster growing markets.
• One major factor shaping the future of the industry: climate change. Uncoordinated environmental policies could lead to shifts in production towards countries that enact less stringent environmental regulations — which could mean carbon leakage that undermines all the good those laws are trying to do.
Um, is anyone in Copenhagen listening?
