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France Metals Report Q3 2009
Business Monitor International, July 2008, Pages: 45
The France Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on France's metals industry
French steel and aluminium production will plunge in 2009 as key sectors – automotive, construction and plant machinery – experience a severe contraction in output, according to the France Metals Report. In the first five months of 2009, French crude steel output fell 42% year-on-year (y-o-y) to 4.75mn tonnes. This sharp decline came on top of a 7.2% fall in output to 17.87mn tonnes in 2008. The steel industry has recovered from its December 2008 low in H109 but crude steel production has not risen substantially above 1mn tonnes per month and in May output was down 41% y-o-y. Output had recovered to 1.05mn tonnes in March but fell sharply in April to 821,000 tonnes before rising again to 992,000 tonnes in May. Some increase in output has been dedicated to restocking, although an increase in production is always expected towards mid-year with the seasonal increase in demand for construction steel. The analyst expects output to drop off again in August. The recovery will be slow as the construction industry will continue to struggle; the report forecasts real industry value growth of - 5.5% in 2009 and -4% in 2010 before staging a recovery in 2011. With BMI’s economic analysis expecting growth of -2.4% y-o-y in 2009 - followed by a small recovery of 0.2% y-o-y growth in 2010 - we do not see any substantial increase in demand from domestic steel users during 2009 and 2010.
The European market situation for flat products remained unchanged throughout H109, characterised by weak demand and destocking with buyers only purchasing for immediate needs. However, by mid-2009 there were signs of price stability, indicating that the market had reached its bottom. Demand for long products has stabilised at a low level with stainless steel longs growing although prices are still under pressure in this segment. Demand for flats remains weak, with no significant improvement expected in 2009 due in large part to the collapse in the automotive industry. The analyst warns that French auto production could continue to be eroded eastwards by companies moving operations to cheaper Eastern European bases, although the government’s five year loan to carmakers and the consequent carmakers’ commitments will ensure that the fall in output is not too drastic.
A strong upturn in demand from metals consumers is expected from 2011. This will have a knock-on effect on French steel and aluminium production, although it will be limited by cheaper supplies from Eastern Europe, in particular Ukraine and Turkey, which are set to stage rapid recoveries from 2011. Based on trends in H208 and into 2009, forecasts show steel output will decline by around 32% to 12.13mn tonnes in 2009. This low-point has not been seen for at least three decades, demonstrating the depth of the European recession and its impact on French manufacturing. Our forecasts anticipate a 40% decline in aluminium output to around 300,000 tonnes, reflecting the downturn in the automotive, machinery and packaging segments. Our forecasts are more pessimistic than the previous quarter due to signs that the economic downturn in France and Western Europe will be deeper and longer than we originally thought. Indeed, Metals output is expected to stagnate in 2010, before making a slow, unspectacular recovery. A restraining factor will be increased global output at a time of slower Chinese consumption. By 2013, steel output should be 15.19mn tonnes, still 15% below 2008 levels. Aluminium should fare better, helped in part by its use in lighter and more fuel-efficient vehicles. By 2013, aluminium production should have recovered to 2008 levels.
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