Global Steel Demand Set to Grow in 2011-2012

However, rising prices could derail the trend.

Global demand for steel is set to increase in 2011-2012 thanks to China and emerging markets, the OECD said in a report Monday, but warned rising prices and climate concerns could derail that trend.

Urbanization and construction booms in emerging economies are forecast to push demand by an annual 6% this year and next, said the report published by the Organization for Economic Cooperation and Development.

However, although the industry's rebound was faster than expected since the global economic downturn three years ago, that "trend could be called into question" if steel prices continue to rise, the report said.

"Governments and industry will have to explore policy means to ensure secure, predictable and accessible supply" for producers, it added.

Construction and manufacturing activities in China have surged to keep pace with the world's second-largest economy, where a growing middle class has also pushed up consumption of cars.

Meanwhile steel production in Japan, the world's biggest steel exporter, is close to returning to levels before the March 11 earthquake and tsunami, the report said, soothing fears of a supply crunch.

"Overall, the impact on the Japanese industry is considered to be smaller than originally feared," the OECD said.

"Over the longer term, reconstruction work is expected to generate additional demand for steel and thus accelerate the economic growth rate of Japan."

The OECD report also called on governments to rapidly take up new technologies to reduce emissions in the steel industry, a major carbon-dioxide emitter.

"Expected economic development during the 21st century will require ever growing amounts of steel...Reducing emissions from steel manufacturing to levels consistent with a low-carbon economy cannot be accomplished with today's technology."

Copyright Agence France-Presse, 2011

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