Steel consumption expected to slow
In Part 2 of this series, we covered the importance of steel consumption for investors. In this article, we’ll look at the World Steel Association’s short-range outlook. The steel consumption forecast is a key metric for steel companies such as ArcelorMittal SA (MT), United States Steel Corporation (X), AK Steel Holding Corporation (AKS), and Steel Dynamics, Inc. (STLD).
World Steel Association expects steel demand to grow at a modest pace
This chart forecasts the growth in steel consumption, according to the World Steel Association, or worldsteel. As you can see, it’s expected steel consumption will grow at 2% in 2014. This is a bit more than half the growth witnessed in 2013, when steel consumption grew by 3.8%. It’s expected steel demand will be modest in 2015, also. It should grow by another 2% in 2015, reaching 1, 594 million tonnes.
The current forecast is lower than the original worldsteel forecast. Later in this series, we’ll analyze the various factors that contributed to worldsteel’s revision.
Steel demand in U.S expected to grow at fast pace
According to worldsteel’s forecast, steel consumption among signatories to the North America Free Trade Agreement should grow in excess of 6%. This is the highest growth rate of all major steel-consuming regions. In one of our recent series, Must-know: Why steel investors are celebrating, we looked at the various factors driving steel consumption in the U.S.
As we’ll see in our next article, declining demand for steel in China is one of the major factors behind the expected slowdown in steel consumption. For more on this topic, read Market Realist’s Must-know: Why China’s real estate drives global steel markets.
Although a slowdown in steel consumption affects all steel companies, you can reduce the volatility in your portfolio by investing in a diversified portfolio of steel companies such as the SPDR S&P Metals and Mining ETF (XME).