Older steel regions make way for new

Out of 24 world regions, 11 will be in the declining stage of the steel demand life cycle, four will have reached maturity, eight will be in a growth period and only one will be in the introduction phase by the year 2000, according to Restructuring and Revival: The World Steel Industry, 1987-2000, a new study from Wharton Econometrics.

“Regional steel demand is closely correlated with regional stage of economic development,” John Jacobson, principal author of the study, says. “Similar to many other products, steel typically follows an S-shaped product life cycle curve, depending on the level and rate of economic development.”

Classifying the world’s steel- producing regions according to the four stages of the steel life cycle — introduction, growth, maturity and decline – – Mr Jacobson concluded:

* Most of the major industrialized economies had reached a level of maturity, or stagnant growth, in their steel industries by 1970. Having begun to slip by 1985, they are now in a period of long-term structural decline.

* The number of steel regions in the decline stage of steel demand will reach 11 by 2000, up from seven in 1985 and zero in 1970.

* Total regions in the growth period of steel demand had declined from six in 1970 to five in 1985, but will increase to eight by the year 2000. Introduction stage

“At the introduction stage, steel demand is growing from a small base and is heavily influenced by the sharp discrete increases in new manufacturing and infrastructure development projects,” Mr Jacobson says. Most of the steel producers in Latin America, Africa and Asia, along with China and North Korea, are at this initial level. Only India will still be in the introduction phase by the end of the century.

The growth stage, says the author, tends to last only a short time, but it is accompanied by sharp upward movement in steel demand. “The surge in demand is linked to industrial expansion projects and dispersion of wealth throughout the economy,” he says. Western Europe, the Mid-East, Mexico, Brazil, South Korea and Taiwan were in the growth stage in 1985; of these, only South Korea and Taiwan are expected to reach the mature stage by 2000.

“Steel demand tends to be more stable during the mature phase, which is characterized by a move toward steel for replacement purposes and by producers adopting more defensive marketing strategies,” Mr Jacobson says. Steel industries in Italy, Spain, Canada, South Africa, Japan and Oceania were in the mature stage two years ago; most of this group will be in decline by 2000, he predicts.

Once steel demand enters the decline phase, volatility increases again as markets are lost and the activity base erodes, he says. As of 1985, Belgium-Luxembourg, West Germany, France, the Netherlands, the United Kingdom, Sweden and the U.S. had reached the decline stage. By 2000, Mr Jacobson forecasts, they will be joined by Italy, Canada, South Africa and Japan.