Top 7 challenges in forecasting the steel industry's prospects in 2024

Top 7 challenges in forecasting the steel industry's prospects in 2024

Steel NewsDate: 18-03-2024 by: Ngoc Cam

In the context of inflation and global economic recession, the world's largest mining company BHP (Australia) still has uncertainty about the prospects of the steel industry due to the factor of China - the world’s largest steel producer. Below are the top 7 main reasons that make it difficult for BHP to predict the global steel market in 2024.

1. High steel production and exports from China and India in 2023

2023 was the fifth consecutive year that China recorded crude steel output above 1 billion tons thanks to sustainable demand from non-residential. Chinese steel industry has seen strong growth in net exports with total turnover reaching its highest level in the past 7 years. Exports rose to 98 million tons in 2023, the highest since 2016.

The Indian steel industry in 2023 also marked significant growth with crude steel output reaching 140 million tons, an increase of 12% compared to 2022. The Indian steel market was considered the only bright spot on the Asian steel map in 2023 amid weak demand and persistent oversupply in the region.

2. Strong blast furnace usage rate in China

China's blast furnace (BF) utilization rate averaged 88% in the first half of 2023 and 90% in the second 6 months, reaching 89.1% for the whole year. BHP explained the reason for the high BF rate is because:

  • Production at electric arc furnaces (EAF) is limited due to lack of competitiveness, weak demand for construction steel, reduced scrap availability and loss of profits.

  • Abundant steel supply in the global export market

  • Activity of the flat steel industry in 2023 was relatively stable with demand increasing by 2% compared to 2022, of which the second half of 2023 increased by 3.2% y/y.

3. Low real profits of Chinese steel manufacturers 

The profit margin of steel mills in 2023 was still very low. BPH estimated margins for BF-BFO furnaces to average around $7/ton in 2022 but fell to -$6/ton in 2023.

4. Stable China's steel output forecast in 2024 

BHP's preliminary estimate of China's crude steel production in 2024 is in the range of 1-1.1 billion tons. However, output could still be affected by possible mandatory production cuts in China. Overall, up to now, BHP still does not have solid data on the outlook for Chinese crude steel output in 2024.

5. Decline China's steel exports in 2024 

BHP predicts China's net steel exports in 2024 will decrease compared to 2023 at more than 87 million tons. The reason is that Beijing aims to limit steel production, but it is unlikely to fall below 54 million tons due to China's price advantage in the global steel market.

6. Uneven demand of the end-user sector in China 

BHP weighs in on the outlook for end-user demand for steel in China in 2024, including the pace of development, scale and structure of the housing construction recovery as well as the ratio of steel usage per unit of GDP. Currently, BHP predicts real GDP will increase from 4.5 - 5%, after growth of 5.2% in 2023. The fields of housing, infrastructure, machinery and equipment manufacturing, automobiles and construction ships, consumer goods,... continue to decline.

7. China to enhance steel reserves

In the long term, BHP believes that China will increase its accumulated steel inventory by 1.5 - 1.75 times when the urbanization rate reaches about 80%. The Australian mining firm also expects China to improve living standards similar to those of countries currently on the edge of the high-income bracket by mid-century.

Above is the latest news about predicting the world steel situation in 2024. Don't forget to follow and read more useful articles on the topic of Vietnamese and global steel at MRS Steel!