MEPS (International) Limited, in its latest issue of World Steel Outlook, said that world steel production will continue its inexorable rise in 2012 despite downbeat economic prospects. New housing and construction projects in the emerging and developing countries are expected to fuel increasing activity in the industry. Once again, a large proportion of the improvement will take place in the Asian continent.

MEPS global crude steel production forecast

In million tonnes
(e) - Estimate (f) - Forecast
* Adjusted to account for under reporting
Source: MEPS - World Steel Outlook

MEPS forecasts world steel production in 2012 at 1670 million tonnes. This equates to a 6.7% increase on the estimated outturn of 1565 million tonnes in 2011, a similar YoY rise to that witnessed in the previous twelve month period.

Although economic forecasts are for, at best, modest growth this year, MEPS expects capacity utilization rates to start to rise in the short term. Steel transaction values are predicted to strengthen as restocking commences. These higher prices in the second trimester could encourage more supply to the market. However, the recovery in real demand is not likely to match steel output due to the ongoing worldwide financial difficulties.

The European steel market continues to be disrupted by the sovereign debt crisis. Consumption, particularly in the south of the region, is being restricted by weak economic conditions and government austerity measures. In 2012, steel manufacturing in the EU is forecast to increase by 3.7% YoY.

Steel production in Turkey recorded an all time high figure in 2011. Further strong growth is envisaged in 2012, albeit at a slower pace. Output in the CIS continues to recover from the 2009 low. However, it is predicted to remain below pre crisis levels in the medium term. Market participants are wary of a downturn in exports. We foresee production of steel climbing by approximately 5% in 2012.

MEPS' forecast for crude steel manufacturing in North America for 2012 is 123 million tonnes, up by 3.3% YoY. US steel mills maintained strong activity in 2011, despite poor market conditions in the second half. A more modest rise, at around 3%, is envisaged this year.

South American raw steel production in 2012 is expected to grow by 5.7% to a figure of in excess of 51 million tonnes. Domestic steel market participants are cautiously optimistic for 2012. However, import competition and the weak economic climate remain downside risks.

Civil unrest and operational difficulties have hit demand and production in Africa. Following a substantial decrease in the previous year, steelmaking in 2012 is expected to rise by 6% YoY. A considerable number of new melting units are being installed in the Middle East. Crude steel production should record a 10% growth rate this year. However, rising consumption should ensure the region will remain a net importer in the first half of this decade.

Despite maintenance shutdowns in the fourth quarter, MEPS forecasts Chinese steel output in 2011 at 731 million tonnes. The 2012 outturn, taking into account perceived under reporting, is projected to be 800 million tonnes, an increase of over 9% YoY.

Japanese steelmaking is expected to be more than 110 million tonnes in 2012. This equates to a rise of 2.3% YoY. Only modest growth is envisaged due to the strong yen, floods in Thailand and global economic uncertainty.

Elsewhere in Asia, Indian crude steel output growth is predicted to be higher in 2012, compared with the previous twelve months. Raw material availability and market demand should improve in the medium term. Following significant expansion last year, South Korean steel production will record more modest gains in 2012.

(Sourced from MEPS - World Steel Outlook Q4 2011)