World and U.S. steel demand to grow slowly

Demand in developed economies like the United States is projected to grow by 1.1 percent next year. The World Steel Association predicts overall demand will grow by 0.5 percent to 1.5 percent.

"The steel industry environment remains challenging, with escalated uncertainties driven by geopolitical situations in various parts of the world. Recently the U.K. referendum outcome has further raised uncertainty on the long-awaited recovery of investment in the EU," Economics Committee Chairman T.V. Narendran said.

The study noted the U.S. economy is strong, yet steel demand struggles to grow because of the collapse in shale drilling and a strong dollar that hurts U.S. manufacturers and makes foreign manufacturers more competitive on price. Hot-rolled steel prices in the United States have dipped below $500 a ton, a threshold that an Axiom Capital analyst described as "psychologically important."

Internationally, China and emerging economies are expected to drive much of the growth for the steel industry in coming years. China gross domestic product in 2017 should be the lowest since 1990 but its steel sector isn't slowing much because of government stimulus projects, like infrastructure spending. Steel demand in China should drop by only 1 percent this year, and 2 percent next year, according to the forecast.

"As a result, steel demand decline in 2016 will be less severe than the worldsteel April 2016 forecast," the World Steel Association report said. "However, the rebound in the real estate market is limited and not sustainable as inventory levels remain very high and apartments are increasingly unaffordable to most residents. The construction sector will therefore continue to drag down steel demand and manufacturing sectors have only limited room for recovery."