Global steel consumption will rebound by more than 9 percent next year, recovering after this year's 8.6 percent decline, which was less severe than earlier expected thanks to strong China growth, a global body said on Monday.
China, which contributes about half of the global output, will see its apparent consumption jump 18.8 percent to 526 million tonnes this year, the World Steel Association said on Monday. The body previously expected China's demand to fall 5 percent.
In April, the group had forecast that global apparent consumption -- which does not make any adjustments for possible changes in stock levels -- would fall 14.1 percent this year.
The global recovery is stronger than we predicted in April. According to our current forecast, China will rebound 19 percent in 2009 and 5 percent in 2010, Daniel Novegil, chairman of the World Steel Economics committee, said in a statement.
Emerging economies will slow down 17 percent in 2009 but grow 12 percent in 2010. Apparent steel use in developed economies that contracted 34 percent in 2009 will rebound 15 percent in 2010. Therefore, the World Steel Association forecasts that global steel demand will return to growth in 2010.
Global demand will rise 9.2 percent to 1.206 billion tonnes next year from 1.104 billion tonnes, the group said in its first forecast for 2010.
The recession slashed global steel demand deeply this year, cutting into earnings for industry leaders such as ArcelorMittal, but Chinese production has boomed as Beijing embarked on an infrastructure-focused stimulus plan.
But analysts have raised questions about the sustainability of China's unexpectedly strong growth, questioning how much of it is speculative demand versus end-use.
Li Shijun, the Vice Secretary General and a outspoken industry analyst for the China Iron and Steel Association (CISA), said the demand outlook for China could be overestimated due to lack of consideration on the country's inventories.
Many Chinese firms have been builting up stocks this year after destocking last year, so that the country's massive production does not necessary mean a strong real recovery, Li said during an industry conference in Beijing.
Data of steel inventories in Chinese steel makers, merchants and end users are not available from official statistics, partly due to the country's massive but fragmented industry.
But Chinese steel mills have been cutting prices since they hit a 10-month high early August, which analysts said was because output was far exceeding actual domestic demand.
China's Baoshan Iron and Steel Co Ltd (Baosteel), China's largest steel maker, on Saturday cut prices for its major steel products by 9-13 percent for November sales versus the October tag.
IRON ORE DEMAND UP?
Some analysts have worried that China's position in the annual iron ore price negotiations with miners could be weakened further in the coming year as steel mill production picks up.
But Luo Bingsheng, CISA's Vice Chairman, said China's iron ore imports have exceeded actual demand by 50 million tonnes so far this year and the massive amounts would leave no room for further price rises.
CISA's Secretary General Shan Shanghua said the industry body saw global iron ore supply exceeding demand in 2010 as global steel production to recover slowly.
Analysts also have said that iron ore deliveries to China could fall in the rest of the year as global top miners including Brazil's Vale and Australia's Rio Tinto and BHP Billiton would prioritise clients who have officially signed annual deals. (Additional reporting by Xiaoyi Shao; Editing by Lincoln Feast)