Cornerstone - Summer 2015 - (Page 33)
Urbanization, Steel Demand,
and Raw Materials
By Mike Elliott
Over 70% of steel produced in 2013 was generated using
direct coal input, leading to the use of 1.2 billion tonnes of
coal-about 15% of total global consumption.2
Global Mining & Metals Leader, Ernst & Young
rbanization and steel intensity go hand in hand. In the
preliminary stages of a country's urbanization, steel intensity increases with the need for new infrastructure for
improved connectivity, efficient use of natural resources, and
creation of sophisticated transport hubs. Increased population
density means taller buildings requiring more high-quality steel.
Demand for machinery also increases as more of the population
urbanizes to find employment industries that are steel-intensive.
The steel intensity curve explains the long-term drivers for
steel use (see Figure 1). The first stage of the curve during
an emerging economy's rapid growth is the most steel intensive, driven largely by high levels of government investment
that boost construction and infrastructure demand. In many
rapid-growth markets, which are in Stage 1 to the left of the
steel intensity curve, steel consumption will continue to be
driven by the growth of their construction and infrastructure
sector. The steel intensity curve stabilizes or starts to decline
at around US$15,000-20,000 GDP per capita as a country
becomes more developed and urbanization rates begin to
decline (Stages 2 and 3).
Apparent steel consumption (kg/capita)
Integrated steel-making (i.e., non-recycled steel) is primarily
based on iron ore and coking coal (i.e., metallurgical coal). For
each tonne of steel that is produced, about 1400 kg of iron ore
and 800 kg of coal are required.1 Due to this, the production of
steel is the second largest use of coal after power generation.
the medium to longer term."
Although steel remains a large market for coal and iron ore,
the current reality of a slowing global market is reflected in
forecasts for minimal demand growth in 2015. It is therefore
likely that the raw material markets will remain oversupplied,
with pricing flat for at least the next two years (see market
projections in Table 1). This prolonged period of low prices is
likely to push higher-cost suppliers out of the market.
While there are concerns that China-as a key driver for
growth in global steel demand-may have reached peak steel
demand far earlier than previously forecasted and now has a
lower growth outlook for the next two to three years, steel
producers and raw material suppliers should not be deterred.
Considerable scope remains for growth in global steel demand
in the medium to longer term. This will come through urbanization and industrialization in other rapidly growing markets
as well as from other downstream sectors. Once these trends
gain traction, an uptick in raw material markets is likely.
Over the last 10-15 years, urbanization and industrialization
in China has been a significant driver of global steel demand.
The Chinese government has been investing in infrastructure,
which has helped drive economic growth. The steel-intensive
nature of infrastructure has driven the creation of vast steel
production capacity within China, which in turn has fueled
demand for coking coal and iron ore.
growth in global steel demand in
CHINA'S CHANGING DEMAND
"Considerable scope remains for
FIGURE 1. Steel intensity compared to per capita GDP
Import demand for coking coal in China has been growing rapidly in recent years, at almost 30% in 2012 and 40% in 2013.
Similarly, seaborne iron ore demand from China increased by
10% per year in the past three years to reach about 917 Mt in
2014.3 To meet this continued demand, iron ore and coal miners have significantly increased supply capacity.
Table of Contents for the Digital Edition of Cornerstone - Summer 2015
From the Editor: Urban Centers as Vehicles for Societal Development
Cover Story: Urbanization, City Growth, and the New United Nations Development Agenda
The High Cost of Divestment
South Africa’s Road to Growth is Paved with Coal
Driving India’s Next Wave of Urbanization
Transitioning Urbanization, Energy, and Economic Growth in China
ASEAN Urbanization and the Growing Role of Coal
Urbanization, Steel Demand, and Raw Materials
The Rise and Potential Peak of Cement Demand in the Urbanized World
Cogeneration Plants Close to Town Get the Most Out of Coal in Germany
Shenhua Guohua’s Application of Near-zero Emissions Technologies for Coal-fired Power Plants
Ashworth Gasifier-Combustor for Emissions Control From Coal-Fired Power Plants
Underground Coal Gasification: An Overview of an Emerging Coal Conversion Technology
Carbon Energy Delivers Innovations in Underground Coal Gasification
Cornerstone - Summer 2015