China has taken action this year to reduce its appetite for steel

The organisation said this growth would continue to be fuelled by China, despite efforts by Beijing to try to cool its runaway consumption this year.

Yet the IISI added that the picture was not perfectly clear and that global demand may be hit by high oil prices.

Higher raw materials costs also remained a challenge, it said.

The IISI estimates that global demand for finished steel products will be between 1.040 billion and 1.053 billion tonnes in 2006, compared with 972 million tonnes in 2004.

Recovering prices

"The strongest growth continues to come from China, which should see a 10% increase in steel demand in 2005 and a further 7% to 10% growth next year," the IISI said.

Back in the spring, global steel producers feared facing a glut in worldwide supplies after Chinese demand cooled, causing a drop in prices.

But consumption is now rising again in China, and worldwide prices have recovered.

In addition to higher oil prices, steel producers are having to cope with greater iron ore costs.

"Global steel prices will continue to rise, but the important factor to note is that the rate of growth appears to be slowing," said steel analyst Stephen Burchell of CRU International.

"Growth is continuing in China, and the US is also likely to grow.

"Not though in Europe, which looks a pretty mature steel market."