This year has seen a stronger-than-expected recovery in steel demand, leading to upward revisions in the World Steel Association's (worldsteel's) forecast across the board except for China.

"Owing to this vigorous recovery, global steel demand outside China is expected to return to its pre-pandemic level this year,” says worldsteel economics committee chairperson Al Remeithi.

The industry body's latest Short Range Outlook (SRO) for 2021 and 2022 forecasts a 4.5% year-on-year increase in steel demand to 1.86-billion tonnes this year and a 2.2% year-on-year increase to 1.9-billion tonnes in 2022.

“Strong manufacturing activity, bolstered by pent-up demand, is the main contributor. Developed economies have outperformed our earlier expectations by a larger margin than developing economies, reflecting the positive benefit of higher vaccination rates and government support measures.

"In emerging economies, especially in Asia, the recovery momentum was interrupted by the resurgence of infections,” Remeithi notes.

He warned, nevertheless, that persistent rising inflation, continued slow vaccination progress in developing countries and further growth deceleration in China all pose risks to the forecast.

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In general, the construction sector has remained more resilient than the manufacturing sector to the pandemic shock. However, in many developing economies, construction activity was severely disrupted by a total stoppage of projects.

This year, the global construction sector is expected to show a robust recovery fuelled by low interest rates and governments focusing on infrastructure projects as part of their recovery plans. The recovery of the construction sector is, however, uneven across regions.

“In China, the construction sector is facing a turning point and the real estate sector is likely to enter a correction period as the government tries to tackle the sector's structural problems,” worldsteel says.

“The outlook for global infrastructure projects is affected by two conflicting forces. Many governments are trying to use infrastructure as a recovery tool aligned with green initiatives, especially in developed economies. However, governments’ fiscal position has worsened owing to the pandemic.

“Many governments in developing economies will have reduced ability for financing infrastructure investment,” it adds.

The automotive sector, which saw the sharpest decline among the steel-using sectors during the lockdown in 2020, saw a strong recovery in the second half of 2020. Although supply chain disruption is still evident in some markets, the recovery is driven by pent-up demand and increased household savings.

In the US, light vehicle production regained its pre-pandemic level by the third quarter of last year, but it has been trending down since then, partly because of supply chain disruptions.

In the European Union (EU), a strong recovery is under way, and the automotive sector is expected to rebound by 15.3% this year.

However, it is still far below its level when the manufacturing recession first started in 2018. The EU’s automotive sector faces uncertainty with component shortages and a weak prospect of demand owing to general economic uncertainty.

In China, automobile production soared in the first half of this year. In particular, new-energy vehicle production increased by almost 200% from January to August, accounting for 11.2% of total vehicles produced in the same period.

“The disruption in the supply chain is significantly undermining the global automotive industry’s recovery. With pent-up demand dissipating, the growth in auto production in 2022 will decelerate, though high order backlogs will provide some support,” the association says.