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Czech Republic Metals Report Q1 2010
Business Monitor International, Jan 2010, Pages: 47
The Czech Republic Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Czech Republic's metals industry.
The Czech steel industry will begin its revival in 2010, following a poor performance in 2009 when the sector suffered the effects of a downturn in the automotive and construction sectors, according to the latest Czech Republic Metals Report.
In the first 10 months of 2009, crude steel output was down 34% year-on-year (y-o-y) to 3.74mn tonnes. Although monthly output reached a peak of 462,000 tonnes in September (down 15% y-o-y), up from the low point of 295,000 tonnes in April (down 51% y-o-y), it fell back again in October to 394,000 tonnes (down 2.7%). Capacity utilisation has been slashed across the industry. This comes on top of a 9.5% fall in volume to 6.39mn tonnes in 2008. Semis production fell by 10% to 5.6mn tonnes in 2008, with rolled products falling by 5% to 5.8mn tonnes, according to figures produced by the Czech Steel Federation (HZ). The principle causes of the contraction in the Czech steel industry were the slowdown in construction and the fall in automotive sales, which depressed the country’s domestic car production.
The Czech Metalworkers’ Federation (OS KOVO) has forecast a decline in steel production of up to 20% in 2009. The report forecasts that output will fall 30%, to 4.46mn tonnes. Overleveraging in the steel industry will also be a major obstacle to industry expansion, making it difficult to persuade banks to finance new projects. By end-2014, the Czech Republic’s automotive output should exceed 1.5mn units, up about 20% over 2008 levels, and the industry is expected to operate at or near full capacity. Meanwhile, the construction sector is set to see negative growth of 3.14% in 2009, with lacklustre growth of 1.90% to follow in 2010. However, by 2013 the value of construction activity in local currency terms will up by 29% on 2008.
Strong long-term demand should give domestic steelmakers hope for improved medium- to long-term performance. Yet, domestic steel consumers can easily source from neighbouring Poland and Slovakia, which means that Czech mills will be under pressure to compete, while export markets – particularly in East Asia – are seeing a sharp rise in domestic steelmaking capacities at a time of moderating demand growth. With ArcelorMittal set to close its Ostrava operations, we do not foresee a rapid return to prerecession levels. By 2014, crude steel output will be down 2.0% compared with 2008 levels at 6.26mn tonnes, while hot rolled production will rise 1.9% to 5.35mn tonnes. Heavy sections output should recover momentum due to an expected increase in ship orders, with growth of 12.6% over 2008-14 to 509,400 tonnes in 2014, although a more competitive environment in supplies to the shipping industry could undermine recovery in this segment. Rebar and wire rod are set to be the key stimulants of growth, rising 42.7% and 27.6% over the period, largely due to the resumption in demand from the construction industry in the Czech Republic and European markets. Exports of semis and finished steel products will grow by an estimated 8.9% over the 2008-14 period to 5.75mn tonnes, while imports are forecast to grow 4.2% to 6.14mn tonnes, leading to a 93% decline in the steel trade deficit from US$389mn to US$26mn.
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