Worldsteel short-range outlook for developed economies in 2021-2022

More targeted and localised lockdowns helped to minimise the impact of the latest infection waves on economic activities in developed counttries in 2021, says However, supply chain bottlenecks and the services sector still lagging behind are preventing a more robust recovery. 

A reduction in supply chain bottlenecks, continued pent-up demand and rising business and consumer confidence, will strengthen the recovery momentum in 2022. After falling by -12.7% in 2020, steel demand will increase by 12.2% in 2021 and 4.3% in 2022, reaching its pre-pandemic level.

In the US, the economy continues its robust recovery, driven by pent-up demand and a vigorous policy response. The level of real GDP exceeded its previous high in the second quarter of this year. Steel demand was aided by the strong performance of the automotive and durable goods sectors, but shortage of some components is undermining this recovery.

The momentum in the construction sector is weakening with the end of a residential construction boom and sluggish non-residential sector activities. The recovery in oil prices is supporting a recovery in energy sector investment. There could be more upside potential if President Biden’s infrastructure stimulus programme is enacted, but this would not feed through until late 2022.

In the EU, the recovery in steel demand that started in the second half of 2020 is gathering pace, with all steel-using sectors exhibiting a positive recovery despite continuing waves of infection.

Germany’s steel demand recovery is supported by exports, which underlie its strong manufacturing performance. However, supply bottlenecks, particularly in the automotive sector, are causing a loss of momentum. Steel demand in 2022 will benefit from a high order backlog in the manufacturing sector while the construction sector is expected to continue to grow after showing relatively high growth performance throughout the pandemic. 

Italy, one of the hardest hit by the pandemic in the EU, is recovering faster than other EU countries, with strong recovery in construction. Several steel using sectors, including construction and domestic appliances, are expected to recover to a pre-COVID level in 2021.

In developed Asia, the COVID situation worsened in 2021, exacerbated by slower vaccination progress, but steel demand recovery was not interrupted and the forecast has been revised up, helped by the strong rebound in global trade and government infrastructure programmes.

In Japan, steel demand is recovering gradually with increasing exports, investment and consumption. Manufacturing, especially automotive and machinery, is leading the recovery. Civil construction continues to underpin steel demand, while private construction remains subdued, with the exception of warehouses and distribution centres. In 2022, recoveries in consumption and investment are expected to support positive growth in all steel using sectors.

South Korea is expected to see its steel demand recovering to the 2019 level in 2021, supported by improving exports and investment in manufacturing facilities. The construction sector will be supported by public civil engineering programmes and residential construction recovery, switching to positive growth in 2021/22. South Korea saw a jump in new shipping orders in 2021, which will boost Korea’s steel demand for the coming years.

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