MEPS is forecasting total world steel manufacturing in 2009 at 1165 million tonnes. This equates to a decrease of 12 percent on the previous year's result. There are a number of positive signs in the market. Steel stock levels at both the distributors and mills are extremely low. The savage cuts in steel output over the past nine months have partly rebalanced supply and demand by eliminating overblown inventories in the supply chain. Moreover, steel consumers, including OEM's, building and construction companies and distributors were also carrying substantial stocks of their goods and raw materials in the boom market conditions.
There are indications of a pick up in automotive production across the world - fuelled by scrappage schemes and tax incentives. Construction demand appears to be improving in China and some emerging nations. Tax incentives to purchase white goods are also being signalled in several countries. These should lead to inventory rebuilding and higher real consumption of steel. Construction activity is, however, slow to revive at the moment (except in China and a few Asian nations), despite government investment in infrastructure projects. The impact on steel demand from the building segment will take more time to come to fruition, particularly in the industrialised nations.
MEPS foresees blastfurnace iron production in 2009 at 835 million tonnes - a reduction of 91.5 million tonnes compared to 2008. Higher vehicle manufacturing should assist in improving activity at the blastfurnace mills in the second half of this year. A 6.4 percent decrease is forecast for direct reduced iron output in 2009. This smaller decrease compared to steel is due to stronger market conditions prevailing in many of the countries employing this iron making process.
Quarterly crude steel production in the EU-27 member states fell to around 30.5 million tonnes during the first half of this year - a decrease of approximately 43/45 percent. There are indications that mill order intake is now increasing. Some producers are starting up previously closed plants, particularly to produce material for the automotive sector. Steel buyers are starting to reorder because inventories have dropped to very low levels. However, they remain cautious about building up stocks to anywhere near pre crisis levels.
After a difficult start to the year, iron and steel production in non EU Western Europe has started to recover. As a consequence, we have made a small upward revision to our earlier forecast for steel output in 2009 - mainly as a result of improvements in Turkish mill activity.
We have uprated our forecast for CIS crude steel production in 2009 to 93 million tonnes. This represents a decline of 18.6 percent on the previous year's figure. Many steel mills across the region are selling semi-finished products in export markets because of the favorable currency exchange rates compared to most other countries of the world.
The impact of the global economic crisis has been felt most acutely in the NAFTA region. Weak market conditions have prompted us to downgrade our previous forecast for crude steel production to just below 83 million tonnes. This represents a decrease of one third on the 2008 figure. A similar reduction is predicted for blastfurnace iron production. Steel demand is flat in all the major steel producing nations in the region. However, we believe that the worst is now past and steel output will begin to turn up in the second half of the year.
South American steel production dropped significantly in the first quarter of this year. Since then steady improvements have been made but a pick up in economic conditions across the region has been slow to take off. We now expect an 11 million tonne (23.5 percent), year on year, decline in supply from local mills in 2009.
We predict that African steel output in 2009 will decrease by approximately 10 percent compared to the prior year. Some North African markets are picking up - particularly for residential building. This should lead to a better second half performance.
Iron and steel production in the Middle East is forecast to rise in 2009, against the trend in most other parts of the world. Ironically, construction demand has fallen across most of the region but new capacity has come on stream and output is being ramped up at existing units.
Total Asian iron production is forecast to decline by 2 percent in 2009, year on year. Steel output is expected to be 3 percent lower. A revival in construction in many parts of the region is underway. Government stimulus measures have also assisted in maintaining a reasonable level of demand in these difficult global economic conditions.