In addition to the disastrous consequences for public health, the Corona crisis also created a huge crisis for the world economy. As a result of the Corona crisis, many industries entered recession, and although the severe economic earthquake caused by Corona was felt mostly in the service sector, such as tourism and airlines, the steel industry of the world was also affected by the spread of the Covid-19 virus. Nevertheless, if we want to compare with the consequences of the 2008 financial crisis, the Corona crisis was less destructive for the world’s steel industry than the financial crisis; Because the service sector, which is the main victim of the Corona crisis, is not so steel-oriented.
Most of the countries of the world started their economic reopening in the middle of May 2020, and it is expected that economic activities will increase in the third quarter of 2020.
Demand for steel in China
When the Corona crisis happened, China came out of quarantine earlier than other countries (at the end of February 2020) and the economy began to improve in this country. China’s economy, except for the hotel and tourism sectors, is rapidly approaching normality. A sharp decline in economic activity in China in February caused GDP to fall by 6.8 percent in the first quarter of 2020, and investment in fixed capital fell by 16.1 percent in the period. China’s industrial production decreased by 8.4% in the first quarter of 2020, and the largest decrease was related to the automotive sector (44.6% decrease).
By late April 2020, all steel-consuming sectors of China’s economy were nearing full capacity, although full production operations of the country’s manufacturing sector were hampered by a fall in export demand. In the summer of 2020, China’s construction sector reached 100% capacity.
The improvement in demand for steel was more evident in the second half of 2020. The driver of demand improvement in China will be the construction sector and especially investment in infrastructure, as the Chinese government has proposed several new infrastructure plans to stimulate demand. Due to the severe recession in the global economy, the economic recovery in the manufacturing sector will be slower.
The World Steel Association has predicted that China’s demand for steel will increase by one percent in 2020. The infrastructure projects introduced by the Chinese government, which started in 2020, will show their effects more during 2021 and will cause further growth in demand this year. In 2020, China’s economy is the only major economy in the world that sees the growth of steel demand!
Demand for steel in developed economies
The World Steel Association has predicted that the demand for steel in developed economies will decrease by 17.1% in 2020. Although in developed economies, the recession caused by the Corona crisis mostly affects the service sector and consumer industries, the disruptions in spending, the labor market, and the increase in uncertainty will cause widespread recession in industries that consume steel. Job losses, bankruptcies, continued social distancing, and low economic certainty will cause steel demand to increase by only 7.8 percent in 2021 in developed economies.
Demand outlook for steel in developing economies
Developing economies have less ability and facilities to manage the consequences of the Corona crisis than developed economies. The health system of developing economies is less prepared to manage this crisis, and therefore, in some developing countries, we saw stricter quarantine regulations than developed economies.
In addition, developing countries have less funds to stimulate demand and support their economies in the middle of the Corona crisis. The World Steel Association has predicted that demand in developing economies (excluding China) will decrease by 11.6% in 2020; But for 2021, the situation is different and the demand for steel is projected to increase by 9.2% in developing economies this year.
India is one of the countries that imposed very strict regulations during the Corona crisis and a nationwide quarantine was implemented in this country. The World Steel Association has predicted that as a result of the Corona crisis, the demand for steel in India will decrease by 18% in 2020, and in 2021, the demand for steel in this country will experience a growth of 15%. The Indian government has prepared a support package to improve the country’s economy, which includes investment in infrastructure such as rail transport lines.
The impact of Corona on ASEAN countries and the Middle East
The World Steel Association has estimated that although there will be a decrease in demand for steel in ASEAN countries (Southeast Asia), this decrease will not be very acute due to the continuation of the implementation of a number of infrastructure projects. In Vietnam, the demand for steel is expected to increase in 2020 due to the early containment of the Corona virus. In 2021, the focus on construction projects in ASEAN countries will increase the demand for steel.
The World Steel Association has also stated about the oil-rich countries of the Middle East and North Africa that these countries are among the countries that suffer the most economic damage due to the double shock caused by the spread of Corona and the fall in oil prices.
