Morgan Stanley expects global steel demand to increase 3% this year to 1.6 billion mt, then rise 1% to 1.62 billion mt in 2018, the bank said in its third quarter price deck.
At the same time, global crude steel production will increase 3% this year to 1.65 billion mt, and rise another 1% in 2018 to 1.67 billion.
Global capacity utilization rates will average 86% this year, up 11 percentage points from 2016, before increasing to 89% next year, the bank forecast.
Morgan Stanley forecast an average Chinese steel price of $440/mt this year, and European and US prices of $539/mt and $657/mt, respectively.
It saw Chinese steel prices increasing in 2018 to $470/mt, while European prices will slip to $455/mt.
US prices will recede by $22/mt next year to $635/mt, according to the bank.
China will produce 825 million mt/year of crude steel over the next two years, requiring 1.12 billion mt/year of seaborne grade ore, constituting one billion mt of imports and the balance in local material.
From 2018 until 2025, Morgan Stanley expects Chinese output to contract 2.5%/year.
The bank's long-term 62% Fe iron ore price is $49.50/dmt CFR North China, and it sees prices staying in a $50-$70/dmt range until the seasonal pullback in the third quarter -- above $70/dmt swing capacity starts re-entering the market, while prices below $55/dmt slow the ramp-up of Vale's huge S11D project, it said.
ECONOMIC PICTURE ROSIER
On the economic front, Morgan Stanley expected global economic GDP growth of 3.6% this year and 3.8% next year, driven by a "private sector recovery and upswing in the global capex cycle".
China's growth will moderate through the second half of this year on policy tightening and reduced automotive and property sector activity.
However, Morgan Stanley economists did not anticipate a slump amid the "carefully managed tightening", while stronger private capital expenditure and exports will offset slower credit-intensive investment growth.
The bank forecast 6.6% growth in Chinese GDP this year.
