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France Metals Report Q1 2010
Business Monitor International, Jan 2010, Pages: 51
This 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.
The publisher estimates that French crude steel output fell 20.5% year-on-year (y-o-y) to 14.21mn tonnes in 2009, albeit remaining higher than our original forecast of 12.46mn tonnes. However, output recovered stronger than expected in H209 as European inventories were depleted and restocking began, though monthly output remained down on 2008 averages. A similar trend was observed in the aluminium industry, where Rio Tinto Alcan reduced alumina output at its Gardanne refinery by 15% and slashed output at its Saint- Jean-de-Maurienne and Dunkerque smelters in early 2009. The publisher estimates that aluminium output declined 6.3% y-o-y in 2008 to 495,000 tonnes and by a further 19.2% to 400,000 tonnes in 2009.
The publisher believes that the French metals industry will slowly return to growth in 2010 with metallurgical and trade companies already announcing a rally in European demand for some segments in H209. The publisher forecasts crude output rising 6.3% to 15.11mn tonnes and hot rolled production falling by 6.5% to 14.6mn tonnes in 2010. In historical terms, these are still poor results and the publisher does not envisage a return to pre-recession levels until 2013 or 2014, although there is a possibility of some plant and furnace closures that could lead to lower output levels. By 2014, crude steel output should be around 16.87mn tonnes, which is around 2008 levels. Aluminium should fare better, helped in part by its use in lighter and more fuel efficient vehicles. By 2014, aluminium production should have recovered to 2008 levels, provided there are no reductions in capacity.
There was positive news for the steel industry in December 2009, when Tata Steel subsidiary Corus announced that it would invest EUR35mn in its steel mill at Hayange to expand its capacity from 300,000 tonnes per annum (tpa) to 340,000tpa. The announcement came after Corus secured a EUR350mn contract to supply 108m long rails to French railway operator SNCF over the 2010-14 period, with the option of continuing for another two years.
However, the aluminium industry continues to face challenges. In October 2009, Rio Tinto Alcan indicated that it was considering reorganising its French operating structure and adopting additional cost reduction measures for its aluminium and specialty alumina operations in light of its challenged cost structure. This is expected to include 350 job losses. Rio Tinto said its operations in France are particularly disadvantaged by a structural deterioration in their competitiveness. This affects all sites, especially the Saint-Jean-de-Maurienne facility. The company enacted cost reduction measures at the start of the economic crisis, but these have proven insufficient.
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