World steel market will remain strong while global steelmaking capacity will rise from 1,560 million tonnes in 2007 to 1,849 million tonnes in 2010, representing an 18.6 per cent increase, the OECD's steel committee meeting in Paris said in a release.

Despite signs of a global slow-down, demand for steel will increase with consumption in emerging economies like India, China, Brazil and Russia growing in two-digits, industry and government officials at the OECD's steel committee meeting said.

''Global steel demand growth continues to be led by emerging economies, to meet the requirements of expanding industrial sectors and infrastructure growth. Demand growth in many mature economies has slowed in line with weaker economic activity. Global steelmaking capacity continues to increase rapidly. This could impact the market negatively if demand growth slows more than expected.'' said Risaburo Nezu of Japan, who is the current chairman of the OECD Steel Committee.

In China, apparent steel use rose by 13 per cent in 2007, to a level of 408 million tonnes. Growth in machinery and automotive manufacturing, shipbuilding and construction are likely to continue to support steel demand going forward, he said.

In India, apparent steel use increased to 51 million tonnes in 2007, an 11.3 per cent increase from the previous year. A growing industrial sector and expanding infrastructure building should continue to support steel use in India, it said

In Russia, apparent steel use reached almost 40 million tonnes in 2007 (a 13.5 per cent increase), and demand should continue to be supported by the oil and gas industry as well as rising household incomes.

Brazilian steel demand is increasing significantly from its current level of 22 million tonnes (up 18.6 per cent), reflecting the buoyant domestic construction, automotive and capital goods sectors.

The Middle East and Africa are experiencing very strong growth in steel demand, to meet the requirements of investments in oil and gas projects and expanding construction activity. Apparent use reached 25 million tonnes in Africa and 44 million tonnes in the Middle East in 2007.

In the mature steel markets of North America, the European Union and Japan, steel demand growth will remain modest in the near term, reflecting the economic slowdowns in the these countries. Housing market weakness is one factor limiting consumption growth in North America and Japan. Consumption growth in the EU is firmer, though it is beginning to slow noticeably.

Global steelmaking capacity continues to expand rapidly, a trend that is being supported by generally higher producer profitability and positive demand prospects. This development has been enhanced by increased flows of foreign direct investment, as steel companies expand their operations, particularly to emerging economies which allow such investment and where steel consumption is increasing rapidly. Although demand and cost-related considerations are the main factors determining the location of investment by the steel industry, concern has been expressed that differences in existing and prospective CO2 compliance standards may also play a role, it said.

Global steelmaking capacity is projected to rise from 1,560 million tonnes in 2007 to 1,849 million tonnes in 2010, representing an 18.6 per cent increase. Most of this increase will take place in Asia. China will account for around half of the global capacity addition in the 2007-10 period. Several emerging economies, such as India, Vietnam and, to a lesser extent, Thailand, also have ambitious plans to expand capacity.

In the Middle East, producers are planning to expand capacity significantly to meet growth in demand, especially in the long products segment such as reinforcing steel. Iran is the major producer in the region and plans to more than double its capacity by 2010.

In the CIS region, steel will be needed to replace aging infrastructure. Russia, which is aiming to completely phase out its open hearth furnaces by 2015, is expanding capacity with several important mini-mill projects and through significant modernization of existing facilities.

Latin American production capacity is also expected to increase rapidly, especially in Brazil where significant expansion of domestic demand and projects to produce semi-finished products for export are  attracting investment, including by foreign firms.

Capacity expansions are expected to be limited in many developed economies. In the EU-27, there are only few capacity expansions foreseen over the next few years. In some advanced Asian economies and North America, capacity is also expected to increase modestly.

Markets for steelmaking raw materials continue to tighten in response to growth in demand from steelmakers and short-term supply side difficulties. This is especially the case for coking coal, where severe flooding and infrastructure problems have hampered supplies from Australia. This has significantly affected steel production costs.

Production of principal steelmaking raw materials has increased, and numerous capacity expansion projects have been initiated, especially in Australia and Brazil. These new projects will take some time to come on stream, however, with the effect that supply of raw materials is likely to remain tight in the short term. At the same time, policy factors, ranging from investment restrictions and government policies to restrict exports to increasing regulatory burden, have placed additional strains on raw material markets.