The Importance of Steel for the World Economy

Experts argue steel is up there in importance to the global economy as fossil fuels, education and politics. It is a driving force for sustainable development both in developing and developed economies. Developing and manufacturing new products is the cornerstone of wealth creation and without a strong steel industry it is near impossible for many regions to prosper. This essay offers an insight into the importance of the steel industry and how it shapes our global economy.

Firstly, the demand for steel offers an important insight into the tides of change across the global economy. No longer as developed economies the major driving forces in the demand for steel; in fact they haven’t been since 2008. The fact that global annual growth figures have tapered over recent years suggests that the pace of developing economies is slowing. The figures are exacerbated by decelerating growth in China.

Despite the slowing rates of growth, over 1.6 billion tonnes of crude steel were produced globally in 2013; double the amount produced annually just 15 years before. Over two million people are directly employed in the industry across the globe, alongside four million people in related and supporting roles. When taking into account all industries that use steel and steel products such as construction, manufacturing and transport, the total number of people employed stands well north of 50 million.

In spite of being associated with heavy industry, steel production is actually at the heart of the green economy. It is completely recyclable as well as being the key ingredient in a variety of green applications. A variety of green energy production plants are constructed of steel, from wind farms to tidal barrages. Moreover, steel production has been revolutionised over past three decades. It takes half the amount of energy to produce a ton of steel today than it did in the 1980s.

Steel demand is a great indicator of economic wealth. Developing countries use it heavily in expanding infrastructure projects such as new roads, building and railway lines. It is also used extensively in new factories and manufacturing plants as well as being a staple material for gas and water pipelines. There’s a clear link between a country’s infrastructure and its GDP and the two often grow in tandem.

A rise in GDP provokes an increase in demand for consumer goods; refrigerators and washing machines for example. The demand for cars and other transport also increases, all contributing to the demand for steel. Once mass urbanization takes place, steel is a major building material in high rise buildings, new stations and new roads.

Typically the demand for steel in a developed economy flattens off or plateaus once a certain level of wealth and development has taken place. This trend is bucked only in areas of high-tech industrialisation where demand may remain high as new and innovative products are developed and produced.

The typical use of steel in a developed country is another interesting statistic. Roughly a third is used in the construction industry, with a further 25% going into consumer products, electrical and domestic appliances. Another 20% is used in the automotive industry with the rest being used in other transport applications and miscellaneous industries.

In terms of R&D, the steel industry spends over £8 billion a year on product development, process improvement and pioneering technology. It is also striving to become an injury free industry, with millions spend on health and safety worldwide.

Here in the UK, the steel industry faces a number of challenges despite globally accelerating steel production. The industry employs over 20,000 people, down from a peak of 200,000 some 50 years ago and many plants are capital intensive. Nevertheless, the industry still contributes almost £3 billion to the balance of trade every year and more waste steel is recycled in the UK than any other material.

In addition, there are a plethora of healthy companies in the UK that work directly or indirectly with the steel industry. A simple Google search for ‘RSJs London’ for example, brings up a number of companies involved in the manufacture and sale of steel I-beams, H-beams and other products.

To summarise, the global steel industry is a driving force as well as key indicator of the global economy. An integral part of manufacturing as well as the green economy, it should not be overlooked by governments in developed and developing economies. Here in the UK, whilst there are certainly challenges to face, steel remains a healthy and contributing sector of a defiant manufacturing industry.  

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