According to Global Insight, World's economy continued to expand and its growth rate is expected to remain at around 4% QoQ every quarter till 2012 whereas GDP growth in emerging markets could be above 6%. Among emerging markets, Asia Pacific will achieve the fastest growth while others will have satisfactory expansion. One of the major factors which will drive Asia's economy is the growing infrastructure construction.
Global Insight has made a comparison among many regions and found that compound growth between 2010 and 2015 in infrastructure construction in Asia (non Japan) registered the highest rate of 7.9%, followed by that in South America at 7.7%. Western Europe is the only region which is expected to encounter a negative growth rate of 0.2% in infrastructure construction.
India's GDP growth is poised to remain high at above 8% every year till 2014. This is partially due to the high level of foreign investment. The construction sector registered the largest share of steel use in the country, at 61% of total steel use. Investment in infrastructure and power sector, the main driver of the increase in steel use, is expected to expand continuously.
China's GDP growth is expected to be around 8-9% in the coming years. China has changed its economic growth driver from external to domestic, from coastal to inland and from industrial to services. Steel market driving growth has shifted from investment to consumption. Steel consumption sectors will grow at double digits, except construction.
Japan's economic growth gradually recovered in 2010, led by exports and capital investment. However, the downside risks are foreign exchange rates and oil prices. Construction for residential houses showed some signs of pick up. However, public construction declined. Domestic automobile sales also dropped due to the end of eco car support while the export sector expanded.
Amidst the economic growth in many countries, the unexpected earthquake tsunami disaster that hit Japan will definitely cause a big pause in the country's economic growth and might have an impact on its other trading partners as well. However, many experts believe that Japan will be able to recover very soon. Credit Suisse quoted Japan's ability to recover from the Kobe earthquake/tsunami in 1995. Following such tragedy, Japan's iron and steel shipments dropped by 5% to 10% from January to February 1995. However, the shipments rebounded strongly in March 1995, before setting back virtually to normal for the remainder of the year.
It is expected that steel mills in Japan, after its re operation, will start to build up stocks in anticipation of the country's rebuilding needs. There might even be an increase in steel exports from Japan in the coming months, after the re operation, while mills are waiting for the country to begin its rebuilding process.
Japan in normal times is not a big steel importer. However, due to the large scale rebuilding needs and the fact that some domestic mills would take time to re operate, there could be a temporary surge of steel imports into the country. In the medium term, domestic steel mills will have to increase their capacity utilization to serve the new domestic demand. In the meantime, steel mills in countries which have the capability to produce quality steel such as China might be able to take over some of market share from the Japanese steel mills. However, Chinese steel mills should be aware of the Japanese strict quality codes which could make it difficult for them to penetrate the market.
(Sourced from SEAISI)
