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Commodity Market Report 01 April 2023

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Report summary

Steel will witness a tale of two halves in 2023 as the macro headwinds are still at play. We expect the H2 2023 to fare better as Chinese demand garners momentum, inflation and credit policy eases, and supply chain pressures retract. Chinese consumption will inch towards recovery, led by a gradual rise in property investments, pent-up consumer spending and a robust infrastructure pipeline. We have revised our near-term outlook slightly downward as the government-led stimulus is weaning due to rising public debt and inflation-linked spending cuts. We believe energy and supply chain challenges will take time to resolve. Over the long term, China will be a major deterrent. Global growth will piggyback on strong demand momentum from emerging economies like India and Southeast Asia. The steel supply mix is in for an overhaul as decarbonisation initiatives intensify. A switch over to low-carbon steelmaking will elevate the production share of EAF from 27% in 2022 to 48% by 2050.

A tipsy-turvy ride ahead for steel demand
- Asia and Americas to aid demand recovery in 2023
- Demand growth to slow over the long term as China falters
Global supply to echo demand, rise at 0.6% CAGR by 2050
- Chinese output to edge up, India will continue to ride the momentum in 2023
- India and Southeast Asia to be the torchbearers for long-term supply growth; Chinese output falls amid dwindling demand
- Evolving decarbonisation initiatives to alter the steelmaking landscape
China
- Demand
- Steel demand in 2022 declined 3% year-on-year due to a sluggish property sector
- Demand to improve marginally in 2023, led by the construction sector
- Weakening demographics to reduce long-term steel demand
- Carbon taxes’ (including CBAM) implications on China’s steel industry
- Supply
- Crude steel production to edge up in 2023
- EAF share continues to grow for decarbonisation in the medium term
- 6 more item(s)...
Japan
- Steel demand to recover from macro jolts. Near-term outlook to stay muted.
- Long-term prospects remain weak
- Capacity restructuring seems inevitable
- Supply to follow in demand footsteps
South Korea
- South Korean demand to outperform Japan in the near term
- Automobile and shipbuilding to lead in the medium term
- Growth to falter over the long term
South-East Asia
- Steel consumption stayed flat in 2022; to rebound 4% in 2023
- Long-term prospects remain bullish on solid fundamentals
- Infrastructure to be a key growth determinant
- Housing and automotive production will support consumption
- Rise in BOF output will support hot metal; decarbonisation initiatives to accelerate post 2035
EU and the UK
- Macroeconomic outlook
- Russia/Ukraine war crippled European demand in 2022
- Switch to electric vehicles to surpass long term auto demand
- Green infrastructure to boost steel demand from construction sector
- Trade diversification following Russian sanctions
- EAF to become dominant production technology in 2030s
- CBAM and ETS to drive up long-term carbon prices
- European long-term production strategies
Turkey
- Earthquake recovery to boost medium-term steel demand
- Production to trend lower amid plant closures and global macro headwinds
- Exports to stay restricted amid rising domestic consumption
- Positive long-term outlook
Russia
- DEMAND
- Steel demand in 2022 fared better than anticipated despite the war-led disruptions
- Sanctions to bite and keep steel demand under pressure
- SUPPLY & TRADE
- Supply to feel pressure until exports remain restricted; long term growth pegged at 1% by 2050
Ukraine
- DEMAND
- Bleak demand outlook for the next few years before reconstruction demand surge kicks in
- SUPPLY & TRADE
- Exports to struggle in the near term, long-term growth will be healthy
Middle East
- Steel demand shot up in 2022 post a feeble few years, with modest growth expected in 2023.
- Iran to exceed 55Mt steel capacity target by 2025, continue to lead in long term
Iran
- Iranian growth slowed due to persistent power shortage issues
- Supply-side issues to haunt steel mills in the near term
8 more item(s)...