Austria Metals Report Q4 2009
Business Monitor International, October 2009, Pages: 44
Austria Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Austria's metals industry.
The Austrian steel industry is witnessing a slow recovery from the economic downturn, but the sector is plagued by other uncertainties as a result of continued volatility on European markets, according to Q409 Austria Metals Report.
In H109, Austrian crude steel output was down 37.6% year-on-year (y-o-y) to 2.46mn tonnes. However, the industry is slowly recovering from a February low of 349,000 tonnes, reaching 525,000 tonnes in June (down 17.2% y-o-y), amid signs that demand and prices are stabilising. As such, there is an air of growing optimism surrounding the Austrian steel industry. Between 60-80% of Austrian aluminium and steel production is exported, with the hard-hit automotive industry comprising around 25% of sales. Consequently, producers are highly exposed to the economic downturn. While the Austrian economy had held up well against the onslaught of the global credit crunch, we caution that as a result of the real economic costs from the contraction in credit availability and forced deleveraging process, the domestic economy will not be able to deflect a recession in 2009.
Despite reporting a Q1 FY2009/10 earnings before interest and taxes (EBIT) loss of EUR24mn (down from a profit of EUR358mn in Q1 FY2008/09), Austrian steelmaker Voestalpine has stuck to its full-year outlook that it will make a profit at an operating level and will break even on its net profit line. However, Citigroup has been slightly less sanguine, predicting positive EBIT figures for the financial year to March 2010, but a net loss of around EUR9mn. This is based on the assumption of a modest improvement in markets in the US and Europe, particularly for automotive components and infrastructure spending. The German automotive industry, a key market for Austrian steel, experienced strong but artificially inflated domestic demand and may see a significant fall next year. The slump in German demand will mean that carmakers could produce 5% fewer vehicles y-o-y, a decrease in numbers to 4.9mn units, in 2010, according to forecasts. Also, Voestalpine’s long-term price contracts will mean it will suffer for a longer period of time than its rivals and any stabilisation will have a time-lag because of plant shutdowns. However, its raw material negotiating power should provide a buffer in a downturn.
End-user demand for flat products remains weak and the summer season will see a further deterioration. However, buyers are coming back to the market, albeit only for relatively small quantities to replenish their stocks, having run them down in H109. Although producers across Europe have lifted their price offers, buyers are reluctant to accept the increases. With the US dollar weakening against the euro and sterling, imported material is becoming more competitive while exports are less attractive outside the eurozone. The report forecasts a slow and unsteady recovery in monthly volume in H209, but total output for the year will be down by 28% to 5.46mn tonnes, the lowest annual total since 1996. The beginnings of an economic recovery in the eurozone in 2010 offer some respite to the export sector and international credit conditions, although the domestic economy will see zero growth in 2010. This will result in a sluggish recovery in the domestic steel industry with production set to rally from Q210, with output reaching 6.12mn tonnes.
We do not envisage a return to pre-recession levels over the foreseeable future due to increased competition from the CIS and Turkey. By 2013, output should have recovered to 6.59mn tonnes, which is still 13.2% down on 2008 levels. Our forecast is supported by VoestAlpine’s recent statement that a return to 2007 production levels ‘is likely only over a period of several years.’ At the same time, finished steel consumption will increase at a more rapid rate, returning to around 2007 levels (4.75mn tonnes) by 2013, in turn fuelling a rise in imports which, having fallen 39% to 2.5mn tonnes in 2009, will return to the 3.8mn mark by 2013.
Executive Summary
SWOT Analysis
Austria Political SWOT
Austria Economic SWOT
Global Metals Market Overview
Table: World’s Top 10 Steel Producing Countries, 2007 And 2008
Aluminium Outlook
Table: Aluminium Forecast
Copper Outlook
Table: Copper Forecast
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Table: Stock Levels At London Metals Exchange Warehouses, 2001-2008 (tonnes)
Global Mining Outlook
Table: Biggest Chinese Acquisitions In Australia Since 2005
Table: Global Mining – Top Five Companies By Market Capitalisation (US$mn)
Table: Global Mining – Key Players’ Future Investment Plans (selected projects)
Regional Overview
Industry Forecast Scenario
Table: Austria Metals Industry, 2006-2013
Macroeconomic Forecasts
Austria – Economic Activity, 2004-2013
Competitive Landscape
Company Profiles
VoestAlpine
Austria Metall AG
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Table: Global Assumptions, 2007-2013
Table: Developed States GDP Growth, 2008-2010
Table: Emerging Markets GDP Growth, 2008-2010
Table: Commodity Prices, 2007-2010
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