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June 2004

International Iron & Steel Institute Shares Short-Range Outlook

While the economies of the U.S., Japan and Europe continue on course towards economic recovery, it is the growth in China that is one of the major factors currently driving the world economy. With a projected GDP growth of more than double all other economies, China is by far the fastest growing global economy.

As a result of these economic developments, IISI is anticipating much stronger growth than last year. World GDP is projected to improve from 2.6% in 2003 to 3.8% in 2004 and 3.4% for 2005. In October, IISI projected world growth at only 2.2% in 2003, 3.1% in 2004 with no predictions for 2005. An overview of the world growth summary for the five years 2001 to 2005 is presented in Table 1.

The economic growth outlook for the three major world economies all reflect a strong recovery that appears to be sustained and is projected to remain positive. Growth in the U.S. is projected to remain strong at 4.7% in 2004 and 3.6% in 2005. The outlook for Japan has improved significantly, having emerged from a long recession. Growth in Japan is now anticipated to be 3.1% for 2004 and 1.5% for 2005. Growth in the EU-15 is projected to improve substantially in the next two years. After bottoming out in 2003 with a growth of only 0.8%, growth in 2004 is projected to be 2.1% and 2.4% in 2005. Economic activity in China continues to remain robust with growth projected at 8.5% in 2004 and 8.0% in 2005 following a growth of 9.1% in 2003.

Global Steel Outlook
Global consumption of finished steel products is projected to increase by 6.2% or 53 million metric tons in 2004 and by 4.5% or 41 million metric tons in 2005 according to the estimates made by the Economic Studies Committee of the International Iron and Steel Institute. The growth can be clearly split into two separate areas, China and the Rest of the World (ROW). Steel consumption in China is estimated to increase by 13.1% or 31 million metric tons in 2004 and by 10.4% or 27 million metric tons in 2005. China has increased its share of global steel consumption from 13.5% (87 million metric tons) in 1995 to an estimated 30.3% (290 million metric tons) in 2005. China is currently projected to account for 61% (58 million metric tons) of the forecasted two-year global increase of 94 million metric tons in 2004 and 2005.

Steel consumption in the ROW, excluding China, is estimated to increase by 3.6% (22 million metric tons) in 2004 and by 2.2% (14 million metric tons) in 2005. The ROW is estimated to account for 39% (36 million metric tons) of the increased global steel consumption over the next two years.

The IISI economic studies committee at its meeting on March 29, 2004 substantially revised the China consumption numbers for the years 1995 – 2005 to eliminate the double counting of coils and to use a higher yield factor of 0.90 in relation to crude steel production. China represents the biggest swing factor in the global steel consumption estimates from IISI and the revision corresponds to a significant improvement. China’s consumption continues to rise sharply, but the annual rate of change has declined from 21.0% in 2002 to 10.4% in 2005.

Steel consumption in Japan is projected to rise 1.8% at an average annual rate of 0.6% over the years, 2003 – 2005. Total steel consumption will rise from 71.7 million metric tons in 2002 to 73 million metric tons in 2005. The Rest of Asia, excluding China and Japan, is projected to rise by 13 million metric tons from 142 million metric tons in 2002 to 155 million metric tons in 2005.

The EU-15 consumption of steel is projected to rise by 5.2% (7.3 million metric tons) at an average annual rate of 1.2% over the three years from 2003 – 2005. Total steel consumption will rise from 138.7 million metric tons in 2002 to 146 million metric tons in 2005.

Of the CIS countries, Russian steel consumption accounts for the major portion of the figures with a projected average annual rate of 2.4% from 2003 – 2005 representing 1.7 million metric tons.

The consumption of steel in the U.S. is estimated to rise by 4.6% (4.7 million metric tons) at an average annual rate of 1.5% over the three years from 2003 – 2005. Total steel consumption in the U.S. fell from 103 million metric tons in 2002 to 100 in 2003 but is projected to rise to 106 million metric tons in 2004 and 107 million metric tons in 2005.

Commenting upon the latest economic forecast, the Secretary General of IISI, Ian Christmas said, “The shortage of raw materials and congestion at sea ports was responsible for constraining steel production.” He went on to question, “Whether, all further increases in steel consumption forecast over the next eighteen months would be realizable, since there are restrictions relating to raw materials supply and not to steelmaking capacity.”


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