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Germany Metals Report Q1 2010
Business Monitor International, Jan 2010, Pages: 45
The Germany Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Germany's metals industry.
German metals producers are set to witness a solid recovery in output in 2010, but ongoing challenges to competitiveness will prove to be major hurdles to the industry in the long term. According to the latest Germany Metals Report, it is unlikely that pre-recession levels will be reached over the next five years. The report estimates that crude steel output fell 27.6% year-on-year (y-o-y) to 33.15mn tonnes in 2009, an upward revision from the 30mn tonnes we forecast in the previous quarterly report and slightly better than the 28% drop to 33mn tonnes forecast by Wirtschaftsvereinigung Stahl (WV Stahl, the German steel industry association). Impressive performance in H209, following Germany’s exit from recession in Q209, prompted restocking in steel-using industries which in turn lifted crude and semis output. Q409 crude output was up 29.8% quarter-on-quarter (q-o-q) to 10.59mn tonnes, although it was still down 5.4% y-o-y. Hot-rolled production in 2009 was down 25.7% y-o-y to 31.33mn tonnes.
The better-than-expected result was due to the success of government stimulus measures and their effect on the German automotive and construction industries. The publisher predicts a 15.7% rise in crude steel to 38.37mn tonnes. The outlook for longs is considerably better than for flats as the construction industry is set to recover, while the automotive sector will continue to contract. This will be better news for the steel industry than for aluminium.
The steel sector should follow the trends seen in the construction, automotive, machinery, packaging and other metals consuming industries. The publisher believes that the steel market should return to trend growth from 2011, with apparent finished steel consumption returning to pre-recession levels by 2014 at 45.75mn tonnes. However, domestic production will lose out to more competitively priced imports. By 2014, crude steel output will be 4% down on 2008 levels at 44.08mn tonnes and hot-rolled output will be down 3% to 40.87mn tonnes. Meanwhile, imports of semi-finished and finished steel will be up 3% to 34mn tonnes. German steel production will be reliant on exports for growth, although it will face a similarly challenging environment. The report forecasts that German steel exports will reach 31.58mn tonnes in 2014, roughly the same level as 2008.
On the upside, the German aluminium market should benefit from increased demand for new applications as a lightweight substitute for steel, particularly in the automotive industry. On the downside, high electricity and environmental costs are undermining the long-term viability of German smelters, with Norsk Hydro reportedly considering closure of the country’s largest primary aluminium producer. Consequently, 2014 primary aluminium output will reach around 489,000 tonnes, which is 14% below 2008 levels, while exports should reach 1.7mn tonnes. However, apparent aluminium consumption will surge to 3.29mn tonnes from an estimated 2.17mn tonnes in 2009, with most of the increase supplied by imports, which will increase to 3.73mn tonnes.
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