Conventionally, the economic impact of an industry is measured by its contribution to GDP (Gross Domestic Product), i.e. gross value added from the industry – the difference between the value of output and intermediate inputs. Another important indicator is the number of people working in the industry. These indicators help to describe the direct impact. The steel industry has a gross value added of US$500 billion, which is 0.7% of global GDP and employs just over 6 million people.
But the true magnitude of the steel industry’s impact on society and the economy would not be complete without taking into consideration the impact it has in its value chain both from input suppliers and output customers. This is enormous when you consider how key steel as a material is to so many industries. To evaluate the economic impact of our industry on the global economy, worldsteel has commissioned Oxford Economics.
The supply chain impact is called ‘indirect impact’. In the case of suppliers, it refers to the impact of the steel industry on the economy due to its purchases of inputs from not only raw materials but also, manufactured goods, energy and services. Downstream, a wide range of steel using sectors, such as construction, automotive, mechanical machinery, transport, energy and others depend on steel for their production activities.
There already exist several studies that evaluate the impact of various economic sectors on a particular national or regional economy for example recently the America Iron and Steel Institute (AISI) for the USA and EUROFER for Europe. A common background approach to such estimation is to use input-output tables, which contain detailed data about the interaction with relevant sectors. There are some differences in methodology used, which are mostly related to the definition of the steel industry and the way of treating the inter-regional links.
The worldsteel study differentiates itself from the existing national studies by taking a global approach. Trade and the scope of impact is not limited to national borders and takes into consideration global supply chains and steel using sectors. It underlines the complexity of the role which the steel industry plays in the global economy.
The overall impact of the steel industry is US$2.9 trillion value added, and 96 million jobs globally.
An executive summary of the report can be downloaded from our website, I think you will find it interesting reading.