Steel sector: the end of Iron Age or the beginning of a new wave of growth?

25th July 2018
-IAM, News

Olivier Aeschlimann, Senior Financial Analyst - Fund Manager

History books tell us that the iron age came to an end at the end of the 1st century A.D. In fact it only really started in 1856 with the invention of the Bessemer process and the mass production of steel that it permitted. It was the availability of cheap and high quality steel which allowed the incredible economic development in the twentieth century: infrastructure, mobility, energy…. All this would not have been possible without steel. But if the 20th century was so strongly marked by steel, what will be in the 21st century? To break down the demand for steel in three elements give one element of answer. From 1900 to 2017 the worldwide population increased by 1.4% per year; GDP per inhabitant by 1.8% per year and the intensity of steel by 0.6% per year. The three components together give us a yearly growth rate of demand for steel over the period of 3.8%. If we project ourselves to 2025, worldwide population should continue to grow by 0.9% per year and GDP grow by about 2% yearly. So even with a reduction of steel intensity of 1% a year (which is very pessimistic), the demand for steel would continue to grow by 1.9% a year. Of course this rate is lower than during the period 1900-2017, but the volumes considered are much higher. As a result, Big Data and 5G are not conflicting with the Iron Age.