36 Int. J. Trade and Global Markets, Vol. 7, No.

1, 2014

Steel market and global trends of leading

geo-economic players

Mario Coccia
National Research Council of Italy,
Institute for Economic Research on Firm and Growth (CERIS-CNR),
Collegio Carlo Alberto – Via Real Collegio,
n. 30 - 10024 Moncalieri (Torino), Italy
and
Munk School of Global Affairs,
The Munk Centre for International Studies at Trinity College,
University of Toronto,
1 Devonshire Place, Toronto, ON M5S 3K7, Canada
Email: m.coccia@ceris.cnr.it

Abstract: The aim of this study is twofold: (a) to report a flow analysis based
on trends of steel across some leading geo-economic players; (b) to analyse the
long-term relationship between steel consumption and economic growth by the
sensitivity of the demand of steel consumption to a change in the national
income. Results show that China (CHN) and Italy (ITA) have higher average
annual growth of the production of crude steel (CHN 9.75%; ITA 0.83%), steel
crude use equivalent (CHN 8.37%; ITA 1.95%) and steel use finished products
(CHN 9.38%; ITA 1.65%), whereas the USA have higher average annual
growth of imports (13.23%) and China has higher exports of semi-
finished/finished steel products (20.38%). The estimated average elasticity of
the consumption of steel on national income per countries, based on
unidirectional causality that runs from national income to steel consumption,
shows de facto positive values, except in UK economy.

Keywords: steel consumption; steel production; global trends; steel market;

competitive performance; economic growth, industrial dynamics; comparative
analysis; time series.

Reference to this paper should be made as follows: Coccia, M. (2014) ‘Steel

market and global trends of leading geo-economic players’, Int. J. Trade and
Global Markets, Vol. 7, No. 1, pp.36–52.

Biographical notes: Mario Coccia is an Economist at the National Research

Council of Italy, visiting professor at the University of Piemonte Orientale
(Italy), Polytechnics of Torino and research fellow at the Max Planck
Institute of Economics. He has conducted research work at the University of
Toronto, United Nations University – Maastricht Economic and Social
Research Institute on Innovation and Technology, Georgia Institute of
Technology, Yale University, University of Maryland, Bureau d’Économie
Théorique et Appliquée (University of Strasbourg), and Institute for Science
and Technology Studies (University of Bielefeld). His research publications
include more than 250 papers in several disciplines.

Copyright © 2014 Inderscience Enterprises Ltd.

 Steel market and global trends of leading geo-economic players 37

1 Introduction

Steel is a main material that plays a vital role for the competitive advantage of modern
economies (Yellishetty et al., 2010). Steel production and consumption represent
the backbone of industries in manufacturing economies. In fact, although several
transformations of the industrial structure of some advanced countries (such as Germany,
Italy, etc.), the engine of the economic growth is mainly driven by manufacturing sector
coupled with steel industry. Steel consumption is also a critical factor that supports
industrialisation of countries and their economic development (cf. Huh, 2011).
Evolutionary trends of steel consumption and production, imports and exports of semi-
finished and finished products can provide vital signals concerning the upturn and
downturn of business cycles and as a consequence, the recovery or decline of industrial
and manufacturing activity across economic systems.1 Huh (2011, p.107) claims that the
consumption of steel is a main indicator of industrial dynamism since reveals as countries
pass to higher stage of development. Fruitful effects of the steel industry to the output of
national economies are confirmed by higher inducement coefficients: e.g., Korea (3.4
steel industry and 2.9 for manufacturing), Japan (3.1 and 2.8), etc. (OECD, 2011). These
coefficients show the impact of changes in the final demand for products of one industry
on the production of all industries of the economic system (cf. also Huh, 2011, pp.7–8).
Globalisation and current economic turbulence have generated market change in the
world demand and supply for most major metals, such as the steel. Economists and other
analysts have devoted many efforts for investigating this market change in order to
support the current behaviour of modern economies for copying with future uncertainty
of world scenarios (Roberts, 1988; Roberts, 1990; McSweeney and Hirosako, 1991). The
study here analyses, across leading geo-economic players, the production and use of
crude steel, steel use of finished products, imports and exports of semi-finished and
finished steel products to explore the steel trends. In particular, as time series of metal
market provide premonitory signals concerning the dynamics of industrial and
manufacturing activity of economies, the purpose of this study is twofold:
 On the one hand, to show the behaviour of some leading geo-economic countries
(considering also the competitive role of Italy in a worldwide setting) by a flow
analysis based on trends of the steel.
 On the other, to analyse, within a long-term equilibrium hypothesis between steel
consumption and economic growth, the estimated average elasticity of consumption
of steel on national income per countries.
Results can provide critical information about the current competitive behaviour of
leading world players, their industrial structure and dynamics useful to policymakers in
order to design industrial policies that could support patterns of economic growth in
current turbulent and fast-changing markets.

2 Theoretical framework and related scientific works

The Organisation for Economic Cooperation and Development (OECD), World Steel
Association and other international institutions carry out several statistical analyses about
steel industry of countries. Economists, scholars and analysts have analysed, by different
38 M. Coccia

approaches, steel market in order to understand the industrial dynamics and structure of
countries. For instance, Saraceno (1953, p.12) describes an interesting comparison,
among main economies, of the average rhythm of growth of the steel consumption over
1925–1952, showing the following average rates of growth: Japan 4.16%, UK 3.15%,
USA 3.04%, Italy 2.27%, France 1.98% and Germany 1.76%. McSweeney and Hirosako
(1991, p.258) claim that: “crude steel consumption declined by about 2% pa from 1973
in absolute terms (and by more than 4% pa when expressed in quantity per dollar of
GDP)”. Roberts (1988), applying the intensity use technique on OECD countries, shows
that 25% of the decline in crude steel consumption can be due to a slowdown in GDP and
65% is attributable to a decline in the intensity of use. Blecker (1981) claims a
cumulative decline in the US steel industries. Instead, Roberts (1990) develops a general
model to explain trends in metal consumption over 1963–1983 US data in order to make
a forecast of metal requirements in the long run: he indicates a slow growth in the use of
steel in the USA. Another scholar, Rebiasz (2006), analysing Polish steel consumption
over 1974–2008, shows a small decrease of the intensity of steel use.
Current economic analysis focuses on the relationship between steel consumption and
economic growth based on case-study of countries in order to verify the so-called long-
run stationary equilibrium hypothesis: “to determine if steel consumption and economic
activity follow a common stochastic trend or whether the two series randomly drift apart
over time” (Evans, 2011, p.97). In general, steel consumption has been associated to
higher rate of economic growth because it is linked to the level of steel intensive
industrial sectors (Roberts, 1990; Crompton, 2000; Rebiasz, 2006). Studies carried out on
these topics show mixed results. Labson and Crompton support the presence of a long-
term relationship between steel consumption and economic growth in the Japanese
economy (cf. Huh, 2011, p.108). Other scholars do not found a relationship and Evans
(2011, p.9) argues that the divergence of steel consumption from economic activity is due
to short-run disequilibrium in the transition phase of its dynamics.
Ghosh (2006, p.7) studies the Granger causality between steel consumption
and economic growth in developing countries, focusing on India where steel industry
tracks the overall economic growth of the country. He does not find a long-run
equilibrium relationship between steel consumption and economic growth in India, but:
“unidirectional Granger causality running from economic growth to steel consumption”
(Ghosh, 2006, p.7 and p.10). In other words, income growth pushes steel consumption
increases. In addition, Ghosh (2006, p.10) also shows that Indian GDP growth is not
susceptible to steel consumption increase. The causality from economic growth to steel
consumption increase and the lack of “any feedback effect” means that a growth in
income is a determinant for fostering steel consumption. This effect is due to the
recovery of economic activity, during the upturn of business cycle, driven by higher
demand of consumer goods, construction, transportation and infrastructure that use steel
as main input.
Crompton (2000), for the Japanese economy, shows a stable long-run equilibrium
hypothesis. The ambiguity of the relationship between economic growth and steel
consumption is confirmed by other analyses that try to demonstrate the equilibrium
hypothesis. The divergent results can be due to the specificity of industrial structure of
countries, their level of economic development, as well as different specification of
econometric modelling and time periods. For instance, the different results between
Japan and India are that Japan has an advanced and competitive manufacturing sector,
while the Indian manufacturing sector has a low influence on the national economic
 Steel market and global trends of leading geo-economic players 39

system (cf. Huh, 2011, p.108). Recently, Huh (2011) has tested the long-run stability of
equilibrium hypothesis between steel consumption and economic growth for Korean
economy that has a strong economic growth driven by the manufacturing sector.
Results show that in Korea, steel consumption and GDP have a long-term equilibrium
that runs from GDP to steel consumption: i.e. income growth is a critical determinant of
steel consumption. Instead, Evans (2011) analyses a long-run stationary equilibrium
hypothesis between economic activity and consumption of crude steel in UK. He finds a
long-run equilibrium hypothesis but argues that the economic relationship can change
over time. This result is at odds with other studies because some econometric models do
not consider structural breaks in the equilibrium hypothesis.
To sum up, current economic literature shows that the analysis of steel trends and
equilibrium hypothesis has received considerable attention. In addition, the steel trends
play a vital role in industrial organisation, since this major material is again a main
input for manufacturing sector of advanced economies. Before describing the statistical
analysis and results, let me describe the methodology of research.

3 Sources and research design

This research focuses on China, France, Germany, Italy, Japan, UK and USA, since these
main countries have generated in 2006 the 67% of world GDP-constant 2000 US$
(World Bank, 2008). In addition, over 1999–2008, they have produced the 57.03% of the
world crude steel, consumed the 56.61% of crude steel and 58.51% of steel finished
products, as well their steel handling of import and export has been roughly 35% of
world materials (World Steel Association, 2011). In order to probe the main steel trends
of these world geo-economic players, this paper analyses the period from 1975 to 2009. I
do not consider the previous period since it is an abnormal one, because of 1973 oil
crisis. In particular, data source of steel are from World Steel Association (2011). “The
World Steel Association was founded as the International Iron and Steel Institute on
19 October 1967. … is one of the largest and most dynamic industry associations in the
world. … Worldsteel members produce around 85% of the world’s steel” (Source:
worldsteel.org, accessed on December 2011). Steel data per countries are gathered in
Steel Statistical Yearbooks by World Steel Association, from 1975 to 2009. These data
are integrated by Gross Domestic Product and Population of World Development
Indicators (World Bank, 2008; cf. Coccia, 2013b) and population employed by OECD
(2011).
Table 1 shows variables, period and their sources. These variables are main indicators
to explore long-term trends of countries and their competitive behaviour in comparison to
other economies, as well as to analyse the relationship between steel consumption and
economic activities, within the theoretical framework of the long-run equilibrium
hypothesis.
The methodology is based on two research strategies:
 First: A Steel Flow Analysis (SFA) that has the aim to show the flow of steel into
and out of countries. SFA displays the main trends of key variables concerning the
dynamics of the steel that plays an important role for the “industrial metabolism” of
countries (Yellishetty et al., 2010, p.1084).
40 M. Coccia

In addition, as data are time series with annual data, they can be represented as St = f (t) +
εt. Scatter data show that trends are approximately linear, because there is a steady-state
growth over time, such that the apt specification can be:
St   i   i t   it (1)

where St = indicator of steel (1000 tonnes); t = time, ε = error term. 

Table 1 Variables, period and their sources

Variables Period Sources

 Total production of crude steel (1000 tonnes)
 Steel crude use equivalent (1000 tonnes)
 Steel use finished products (1000 tonnes) 1975–2008
World Steel
 Imports of semi-finished and finished steel Association (2011)
products (1000 tonnes)
 Exports of semi-finished and finished steel
1980–2008
products (1000 tonnes)
 GDP per capita PPP* (current international $)
1975–2002
 GDP PPP* (current international $)
 Population 1975–2008
World Bank (2008)
 GDP constant 2000 US$
 GDP per person employed constant 2000- 1989–2006
PPP $
 Population employed 1989–2006 OECD (2011)
Note: * Purchasing Power Parity (PPP).
Time series of variables cover different periods. Dependent variables of models are the
several indicators of Steel (St), as reported in Table 1, measured in 1000 tonnes, whereas the
explanatory variable is the time. Statistical analysis applies exponential smoothing
procedure that produces fit values and residuals for time series, using an algorithm that
smoothes out irregular components of time series data. Initial smoothing state represents
the parameter αi of equation (1): arithmetic mean of the steel production or consumption
(or other variables of the steel applied in the econometric modelling) over time.
βi of equation (1) is the average absolute annual rate of growth and is estimated by
Prais-Winsten estimation method, by the autoregression estimate procedure from time
series with first-order autocorrelated errors. Prais-Winsten transforms the regression
equation to remove the autocorrelation. A synthetic and critical indicator to analyse the
dynamics of steel variables and to assess competitive behaviour of countries is the
average annual relative rate of growth that is given by:

 100 (2) 

As far as Chinese case study is considered, scatter of data shows that the apt trend is an
exponential one; in this case the specification of St is represented by an exponential
function:
St   t (3) 
 Steel market and global trends of leading geo-economic players 41

Parameters are also estimated by Prais-Winsten method applied to natural logarithmic

transformation:
LnSt  Ln  tLn (4) 
if Yt = Ln St; a = Ln α and b = Ln β
we have
Yt  a  bt (5) 
a is the average geometric level of variables, whereas average annual relative rate of
growth is given by:
 b  1 100 (6) 

 Second: To analyse the long-term relationship between steel consumption and

economic growth, the sensitivity of the demand for steel consumption to a change
in the national income is calculated. In particular, considering the theoretical
framework (Ghosh, 2006; Evans, 2011; Huh, 2011), the model setting is based on
the following assumption:
Steel consumption and GDP have a long-term equilibrium, running from GDP to total
steel consumption.
The hypothetical-deductive approach of this study is based on the following
hypothesis, which I intend to test:
Hypothesis 1: Average elasticity of steel consumption on national income is positive.
The pioneering research by Tinbergen (1939) is applied to analyse the relationship
between consumption of steel and national income in our context. The specification of
the function of steel consumption is:
yt  b  xt  (7) 

where y is the consumption (use) of steel and the explanatory variable x is the Gross
Domestic Product. Logarithmic transformation of this exponential function allows to
calculate the average elasticity of the consumption of steel on national income. In fact,
Y = Ln yt; X = Ln xt; B = Ln b
Hence, exponential function is transformed in:
Y  B  X (8) 
The elasticity is:
dY
  (9)
dX
λ shows the sensitivity of the demand for steel consumption to a change in the national
income. This simple indicator provides main information on the extent to which changes
in economic growth affect steel consumption and, as a consequence, it may show the
reaction of the industrial structure to shocks. In addition, the elasticity can provide
critical information of the long-run stability of equilibrium hypothesis between steel
consumption and economic growth patterns.
42 M. Coccia

Statistical analyses are carried out by software statistics SPSS (2011, Version 15 for
Windows).

4 Empirical evidence

The statistical analysis provides two main results that play a vital role to support an
efficacious industrial policy of countries.
Results: Trends are synthesised in Table 2 by average annual relative rates of growth
(%) per countries in order to evaluate the competitive behaviour of countries. These
results are based on significant regression coefficients (at the 0.01 level) and the majority
of models have high adjusted R2 (goodness of fit), as well Durbin-Watson statistic
indicates low or lack of autocorrelation of time series. For the sake of briefness, the
76 estimated relationships are not reported. In particular, table 2 shows that the highest
average annual relative growth of the total production of crude steel is in China (9.75%),
followed to wide distance by Italy 0.83% and Germany 0.75%. Negative annual growth
of the total production of crude steel is in the UK (0.98%) and the USA (0.68%).
Conversely, annual growth of steel crude use equivalent is driven by China 8.75%, Italy
1.95% and Germany 0.96%. Similar considerations for steel use finished products.
Imports of semi-finished and finished steel products have the highest percent annual
growth in the USA 13.23%, whereas China has 6.28% and Italy 5.05%. Exports of these
materials show the highest value in China with an annual relative growth of 20.38%,
whereas the USA have 5.66%, Italy 3.17% and UK 2.68%. Better economic performance
about annual growth of GDP and GDP per capita is mainly in China, USA, UK and
France.
Table 2 Average annual relative rates of growth (%) per countries (Part I)

Italy* France* Germany* UK* Japan* USA* China **

Total production of crude steel p
% (1975–2009) (a)
0.83 # 0.75 0.98 0.54 0.68 9.75

Steel crude use equivalent %

1.95 0.69 p 0.96 1.15 0.67 0.70 p 8.37
(1975–2008) (a)
Steel use finished products %
1.65 0.70 1.58 # # 1.40 9.38
(1975–2008) (a)
Imports of semi-finished and
finished steel products % 5.05 3.1 2.79 2.98 3.15 13.23 6.28
(1975–2008)(a)
Exports of semi-finished and
finished steel products % 3.17 2.15 1.76 2.68 # 5.66 20.38
(1980–2008)(a)
GDP per capita PPP % (current
3.65 3.69 3.48 4.33 3.32 3.70 9.38
international $) (1975–2002) (b)
Notes: # values not significant; p = 1982–2008 period;  = 1980–2006. * Linear
models are applied to estimate trends; Average annual relative rates of growth
is calculated by equation (3); ** Exponential models are applied to estimate
time series; Average annual relative rates of growth is calculated by
equation (6).
Sources: (a)World Steel Association (2011); (b)World Bank (2008)
 Steel market and global trends of leading geo-economic players 43

Vital findings are from the comparison of values per capita of steel variables per
countries over time. Figures 1–6 show evolutionary trends of GDP and steel indicators
across countries and provide main results about their industrial structure and competitive
behaviour in a worldwide setting. In particular, Figure 1 shows GDP per capita trends
across leading worldwide players: the highest economic performance of this structural
indicator (over 1999–2009) is by USA and UK, lower values are in Italy and Japan.
China has a lower flat trend because of the huge amount of its population (more accurate
information about their annual rate of growth is in Table 2; cf. also Coccia, 2013b).

Figure 1 GDP per capita $ across leading countries (see online version for colours)

40,000
GDP-PPP per capita (current international $)

▲ USA

35,000

30,000 UK

▬ Germany

25,000
■ Japan Italy

20,000 o France ■ Japan

15,000 UK

10,000

5,000
China

0
1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

Italy France United Kingdom Germany Japan USA China

Figure 2 Crude steel production per capita (kg) across countries (see online version for colours)
44 M. Coccia

Figure 3 Crude steel use per capita (kg) across countries (see online version for colours)

850.00
800.00
750.00
700.00
650.00
Crude Steel Use per capita (kg)

Japan Japan
600.00 Italy
550.00
Italy Germany
500.00
450.00 USA
400.00
350.00 o France China
300.00
UK
250.00
200.00 UK

150.00  China
100.00
50.00
0.00
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Italy France United Kingdom Germany Japan USA China

Figure 4 Use finished steel products per capita (kg) across countries (see online version
for colours)

800.00
Use finished steel products per capita (kg)

750.00
700.00
650.00
Japan
600.00
550.00 Italy

500.00
Germany
450.00
400.00 USA

350.00
China
300.00 o France
250.00
200.00
UK
150.00
China
100.00
50.00
0.00
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Italy France United Kingdom Germany Japan USA China

Figure 5 Imports of semi-finished and finished steel products per capita (kg) (see online
version for colours)

450.00
Imports of semi-finished and finished steel products per capita (kg)

Italy

400.00

350.00 ▬Germany

300.00

250.00 o France

200.00

150.00 UK

100.00 ▲USA

50.00 ■Japan

China
0.00
1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Italy France United Kingdom Germany Japan USA CHINA

 Steel market and global trends of leading geo-economic players 45

Figure 6 Exports of semi-finished and finished steel products per capita (kg) (see online
version for colours)
Exports of semi-finished and finished steel products per capita (kg)

400.00

Germany
350.00

300.00 oFrance

250.00 ■Japan

Italy
200.00

UK
150.00

100.00

◊ CHINA
50.00 ◊ CHINA
▲USA

0.00
1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Italy France United Kingdom Germany Japan USA CHINA

As far the evolutionary dynamics of steel, Figure 2 shows that higher trends of crude
steel production per capita (kg) are in Japan, Germany and Italy, whereas lower trends
are in the UK and the USA. Figure 2 also shows the negative effects generated by global
economic downturn over 2007–2010 with declining values across all main countries.
Figure 3 shows the evolutionary trends of crude steel use per capita. Higher
performances over time are given by Japan, Italy and Germany. Crompton (2000, p.103)
claimed that: “crude steel consumption in Japan will fall from 82.1 million tonnes in
1997 to around 73.1 million tonnes in 2005. The cause of this reduction in consumption
is cyclically low GDP growth and further permanent reductions in the steel intensity of
Japanese production over the forecast period”. It is important to note the exponential
growth of China that from 2005 has overtaken the consumption of UK and France, as
well as the declining value of the USA, from 2007 onwards, that may be due to strong
effects of last economic recession. Chinese steel crude use equivalent has an average
growth per annum roughly of 8.3% (Table 2), higher than previous forecasts. In fact,
Chen et al. (1991, p.196) argue that: “Chinese steel demand wills growth from 60 million
tonnes in the late 1980s to 100 million tonnes by the year 2000. . . . After a strong
recovery in 1992–93, steel demand will then grow at 5% per annum in the second half of
the 1990s”. Ma et al. (2002) analyse the Chinese growth and show the main role of
technical efficiency and productivity change of China’s steel industry. Wu (1996,
p.235ff) shows that technical efficiency and firm attributes in the Chinese iron and steel
industry are closely related to factors such as firm scale, ownership, vintage of capital,
investment composition, credit condition, incentive system and economies of
agglomeration. Zhang and Zhang (2001), also, analyse the technical efficiency of iron
and steel industry in China and show the sources of diverse performance by enterprises in
these key sectors.
Instead Figure 4 (use finished steel products per capita) shows similar results to
previous Figure 3 because these two variables of steel consumption have a high positive
correlation.
46 M. Coccia

Figure 5 displays interesting results on imports of semi-finished and finished steel

products per capita. The highest trend, from 1997, is by Italy, followed by Germany and
France. Lower performances in terms of imports are by the UK and USA. This indicator
also shows the effects of global economic downturn from 2007.
Instead, Figure 6 shows the exports of semi-finished and finished steel products
per capita. Germany and France have higher trends, although from 1997 Italy has an
exponential growth, passing, in 2008, both Japan and France.
Results: The analysis of long-term relationship between steel consumption and
economic growth is represented in Tables 3 and 4. First of all, as the relationship between
economic growth and steel consumption has provided conflicting views (cf. Huh, 2011,
p.107ff; Evans, 2011, p.97ff), Table 3 displays the correlation that analyses the main
association between these two critical variables of the economic system. In particular,
Table 3 shows the high positive correlation between GDP per capita and use crude steel
per capita in Italy, Germany and China (significant at the 0.01 level), whereas there is a
negative association in the UK, USA and France. In addition, the correlation GDP per
capita/use finished steel per capita has high positive coefficient in Italy and Germany
(significant at the 0.01 level), China and the USA (significant at the 0.05 level).
Table 3 Pearson Correlation GDP per capita/consumption of steel per capita

Correlations
Use crude steel Use finished steel
(per capita) (per capita)
GDP per capita PPP current international $ 0.85** 0.75**
Italy Sig. (2-tailed) 0.00 0.00
N(YEARS) 34 34
GDP per capita PPP current international $ 0.50** 0.31
France Sig. (2-tailed) 0.00 0.11
N(YEARS) 34 29
GDP per capita PPP current international $ 0.78** 0.87**
Germany Sig. (2-tailed) 0.00 0.00
N(YEARS) 29 29
GDP per capita PPP current international $ 0.74** 0.03
UK Sig. (2-tailed) 0.00 0.89
N(YEARS) 34 29
GDP per capita PPP current international $ 0.33 0.11
Japan Sig. (2-tailed) 0.06 0.57
N(YEARS) 34 29
GDP per capita PPP current international $ 0.64** 0.43*
USA Sig. (2-tailed) 0.00 0.02
N(YEARS) 34 29
GDP per capita PPP current international $ 0.95** 0.97*
China Sig. (2-tailed) 0.00 0.02
N(YEARS) 27 27
Notes: ** Correlation is significant at the 0.01 level (2-tailed); *Correlation is
significant at the 0.05 level (2-tailed).
 Steel market and global trends of leading geo-economic players 47

Table 4 Average annual relative rates of growth (%) per countries (Part II)

Italy* France* Germany* UK* Japan* USA* China **

λ (Elasticity) 1975–2008 ◊
0.37 0.19 p 0.28 0.20 0.16 0.18 p 0.72
Ln Crude Steel Use = f(Ln GDP) (a)
GDP per capita PPP %
3.65 3.69 3.48 4.33 3.32 3.70 9.38
(current Int. $) 1975–2002 (b)
GDP PPP (current Int. $) %
3.85 4.22 3.65 4.55 3.51 4.60 10.63
(1975–2002) (b)
Population (%) 1975–2008 (b) 0.23 0.59 0.18 0.26 0.38 1.04 1.12
GDP constant 2000 US$ (%)
1.39 1.93 1.68 2.42 1.29 2.98 n.a.
1989–2006 (b)
GDP per person employed
(constant 2000, PPP $ -%) 1.25 1.42 1.30 2.09 1.09 1.90 n.a.
(1989–2006) (b)
Population employed 1989–2006 (c) 0.66 0.69 0.30 0.52 # 1.16 n.a.
Notes: # values not significant; p = 1982–2008 period;  = 1980–2006; ◊ = λ is
calculated by equation (3); n.a. = not available data. * Linear models are
applied to estimate trends; Average annual relative rates of growth is calculated
by equation (3); ** Exponential models are applied to estimate time series;
Average annual relative rates of growth is calculated by equation (6).
Sources: (a)World Steel Association (2011); (b)World Bank (2008); (c)OECD (2011)
The economic literature shows that the relationship between steel consumption and GDP
has a causality running from GDP to total steel consumption. Considering this
background, the study here intends to test the following hypothesis:
Hypothesis 2: Average elasticity of steel consumption on national income is positive.
The purpose is to see whether statistical evidence supports this hypothesis in order to
analyse the extent to which changes in economic growth affect the pattern of steel
consumption and, as a consequence, the reaction of the industrial structure to economic
shocks. Results are in Table 4 and Figure 7. In short, elasticity of crude steel
consumption is higher in China 0.72, Italy 0.37 and Germany 0.28, vice versa there is a
negative elasticity of steel consumption in the UK (Table 4). In addition, last three rows
of Table 4 show interesting findings: real GDP growth over 1989–2006 is, almost utterly,
due to productivity growth (GDP per person employed) in the UK, Germany and
France, since the population employed has a moderate growth in the range 0.30–0.69% over
1989–2006.
Figure 7 Average elasticity of steel consumption on national income across leading countries

UK = 0.2

D =0.28 

US =0.18  FR =0.19
JP =0.16
IT =0.37 CH =0.72

 
48 M. Coccia

5 Discussion and concluding observations

Steel trends play a main role to assess the industrialisation of some economies and stage
of economic development. Steel industry represents the foundation of the industrial
structure of several modern countries since it supports the manufacturing sector. The
study here, analysing the steel trends of some leading countries, provides interesting
results to policymakers useful to support economic growth. Empirical evidence confirms
the growing role of China in the production and consumption of crude steel as well as in
steel use finished products and exports of semi-finished and finished products; whereas
the USA have the highest annual relative growth of imports of semi-finished and finished
steel products. In this worldwide scenario, the study shows the competitive position of
Italy that has the engine of the economic growth in the manufacturing sector (including
steel industry), driven mainly by small and medium enterprises. In particular, Italy has a
higher annual relative growth in the production and consumption of crude steel, steel use
finished products, imports and exports of semi-finished and finished steel product in
comparison with other European countries and Japan. Figures 8 and 9 show the
interesting trends of Italian case study. In addition, from the second half of 1990s, Italy
has a growing consumption per capita of crude steel that in 2007, before the economic
downturn, is about 648kg per capita (France 301 kg, Germany 560 kg, UK 239 kg,
Japan 670 kg, China 222 kg and USA 377 kg). Similar trend for the import of semi-
finished and finished steel products that has passed in 1994 the trend of the export (in
2007 the import per capita in Italy is roughly 414 kg).
Figure 8 Production and use crude steel per capita in Italy (see online version for colours)
700.00
650.00
600.00
550.00
Kg of Steel

500.00
450.00
400.00
350.00
300.00
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008

STEEL PRODUCTION PER CAPITA USE CRUDE STEEL PER CAPITA

Figure 9 Export-import of semi-finished and finished steel products in Italy (see online version
for colours)
450.00
400.00
350.00
300.00
Kg of Steel

250.00
200.00
150.00
100.00
50.00
0.00
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008

EXPORT S‐FINISHED AND FINISHED STEEL PRODUCTS PER CAPITA
IMPORT S‐FINISHED AND FINISHED STEEL PRODUCTS PER CAPITA
 Steel market and global trends of leading geo-economic players 49

The study shows that Italian economy, driven by its manufacturing sector, is one of the
largest consumers of crude steel in comparison to other countries. The Italian strong
manufacturing sector represents the backbone of the economic system and one of the
main drivers of economic growth, but this sector is also vulnerable to downturn of
business cycles and in phase of economic and financial turbulence it does not support
economic growth of GDP (Coccia, 2010b). In fact, average annual relative rate of growth
of the GDP per capita in Italy is 3.65%, whereas in the UK is 4.33%, which has a rather
developed service sector.
Correlation analysis seems to show a strong positive coefficient between economic
growth and steel consumption in Italy, Germany and China, whereas there is a negative
association for GDP per capita/steel consumption mainly in the UK, the USA and France.
In addition, the sensitivity (λ) of the demand of steel consumption to a change in the
national income shows that shocks in GDP may have a higher impact in Chinese and
Italian steel consumption, whereas it is lower in Germany, France, USA and Japan.
However, it is also important to note that Italian position has changing due to austerity
economic policy to respect stability programme of European Union, which negatively
affects the overall competitiveness of the economic system (cf. Coccia, 2013a; Coccia,
2007). In addition, an other weakness of Italy is the reduction of the steel production of
the ILVA, Europe’s biggest steel plant located in the South of Italy, due to heavy
pollution of air, soil, surface and groundwater.
As far as the UK is concerned, the analysis tends to display a negative correlation
coefficient for GDP per capita/steel consumption; in addition, the UK is the only country
with negative national income elasticity of steel consumption. UK economy has also a
negative annual growth about the total production and consumption of crude steel,
although GDP per capita has a higher rate of annual growth. In fact, the decline of steel
trends for the UK, as well as the negative association between GDP per capita and steel
consumption, is due to the structural change of the industrial structure of the UK
economy. This result may be caused by growing share of service sector within the UK
economic system, by diffusion of Information and Communication Technologies that
substitute the steel with new materials (such as plastic) and by current ground-breaking
technological innovation pathways that support the production of same goods with lesser
resources (cf. Evans, 2011, p.99ff; cf. also Coccia, 2004; 2005a; 2005b; 2008; 2010c;
2010e; 2009c; 2012e). UK case study confirms that the relationship between steel
consumption and national income can change over time and across geo-economic space.
Although current technological innovation has a main role in reducing steel
consumption by saving input resources, the current ratio between consumption of steel
and national income seems to be relatively high. In addition, the persistence of high
unemployment (such as in Europe), increased with the economic downturn 2007–2009,2
has induced a political economy of growth based on higher public spending in
infrastructure that uses resources of modest economic value and in the production of
various durables that have the steel as input. This industrial policy could reinforce the
relationship of income growth as determinant for steel consumption, although it is
difficult to prosecute this strategy because several countries have increased the public
debt and generated macroeconomic instability over 2012–2013 by balanced-budget rules
to cope with (and to reduce) high sovereign debts (cf. Stockman, 2001). In addition,
economic policy, based on higher taxation for population, has triggered a crisis of under-
50 M. Coccia

consumption in several European countries that is generating the collapse of several

firms and/or their financial crisis and as a consequence an enduring unemployment and
changeable and feeble pattern of economic growth.
In general, global demand of steel may continue to growth by roughly 5%, driven
mainly by strong demand of emerging economies such as BRIC countries (Brazil,
Russian Federation, India and China – cf. Ghosh, 2006, p.10 for Indian case study). As a
matter of fact, current fluctuation of business cycle (Coccia, 2009b; Coccia, 2010b)
across main advanced economies may reinforce the hypothesis of growth rates of the
steel consumption, in the next decade, similar to average relative growth described in
Table 2, considering a stable growth of world population. However, future industrial
policies of countries have to be focused on higher innovations and a sustainable steel
production to reduce pollution and cancer diseases of some industrialised geo-economic
areas (Coccia, 2013c; 2012b; 2012c; 2012e).
In all, the ratio between increase of steel consumption and increase of real income
may be lower in the long-run, if and only if, the development of world economy will be
supported by new technological paradigms (Freeman and Soete, 1987; Coccia, 2009a;
Coccia, 2010a; Coccia, 2011; Coccia, 2012; cf. also Coccia, 2012d; 2010c; 2010e;
2009c; 2008; 2005a; 2005b; 2004) as well as by a stability of economic and financial
systems that should allow a rational use of labour force and the efficiency of resource
utilisation for a sustainable steady-state patterns of economic growth.3

Acknowledgements

I thank Enrico Filippi (University of Torino, Italy) and John Walsh (Georgia Institute of
Technology, USA) for valuable suggestions and comments to improve the preliminary
version. Diego Margon provided excellent research assistance. I also thank the staff of
Ceris-CNR (Italy) and of Georgia Institute of Technology (USA) for fruitful discussion
on these topics and main research support. The usual disclaimer applies.

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Notes
1 Cf. Lenti (1972), Chapter XI, pp.1055–1206; Coccia (2010b).
2 See Goldstein and Hillard (2009, pp.263–267) for an heterodox approach to macroeconomics
to analyse these issues.
3 Cf. Coccia (2010a) for a foresight of technological determinants and primary energy resources
of future economic long waves (see also Coccia, 2010d).