Expectations of a strong second half of the year for steel are in jeopardy as a key global industry group again cut its forecast for growth for the rest of 2012 and in 2013.
The World Steel Association said Thursday global steel demand would rise 2.1 percent in 2012 and 3.2 percent to 1.46 billion metric tons (1.61 billion tons) in 2013. Consumption of finished steel products in 2013 would be a record high, but the group isn't expecting much of the improvement to come from developed economies.
In a short-range forecast provided in April, the Brussels-based group expected global steel demand to rise about 3.6 percent this year in hopes of a better performance in the second half of 2012.
"However, the economic situation deteriorated during the second quarter of this year due to continued uncertainty arising from the debt crisis in euro zone and a sharper than expected slowdown in China," said Hans Juergen Kerkhoff, chairman of the association's economics committee, in a statement.
"These factors have weighed heavily on business confidence and manufacturing activities around the world. As a result momentum in both the developed and emerging part of the world weakened considerably."
The group said points of hope for improvements in the sector next year are in that the euro zone crisis may be contained, the United States will successfully deal with fiscal uncertainties and there will be a soft landing for slower growth in China.
The forecast showed 2012 is not expected to bring a soft landing to steel consumption in the European Union as steel demand is expected to fall 5.6 percent to 144.5 million metric tons. China is expected to consume more than 45 percent of all finished steel products this year, although growth this year and next are far short of the 6.3 percent growth the country had in 2011. Steel use in NAFTA countries, which includes the United States, is expected to rise 7.5 percent this year to 130.4 million metric tons this year.
Charles Bradford, a New York-based steel analyst with Bradford Research Inc., said the data reflect the sentiment people are concerned about the industry. However, he said the fundamentals in place still show there's room for the industry to continue to grow in the United States and abroad. Global population growth forecasts will drive automobile purchases and home construction, which are both supportive of the steel industry, he said.
Bradford said he's seen spot prices for hot-rolled coil as low as $570 per ton, which is down about $50 from last month and more than $150 from January. He said with prices for scrap and other raw materials heading downward as well, there's some room for prices to fall further.
Last month, Charlotte, N.C.-based Nucor Corp. told investors it expected third quarter results to be less than the second quarter and rising levels of imports, slowing economic growth and volatile scrap prices were factors in having lower steel mill margins. West Chester, Ohio-based AK Steel Holding Corp. said it expected to post a loss in the third quarter as a result of factors including the per-ton selling price of products being down about 7 percent from the second quarter.