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Italy Metals Report Q1 2010
Business Monitor International, Jan 2010, Pages: 45
The Italy Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Italy's metals industry.
The latest Italy Metals Report estimates that in 2009 Italian crude steel output was down 36% year on year (y-o-y) to 19.52mn tonnes. According to the statistics released by Italian steel producers’ association Federacciai, in November 2009 Italy’s crude steel output amounted to 1.92mn tonnes, a fall of 17.2% yo- y and down 11.4% month on month (m-o-m). Federacciai reported that the country’s long product output in October totalled 1.17mn tonnes, down 11.9% y-o-y but up 6.4% over September. Meanwhile, in October, Italian flat steel production fell by 22.8% y-o-y but was up 0.7% m-o-m.
The decline in steel output came in the context of a 3.9% contraction in real GDP in 2009. Italy’s recovery is lagging its key eurozone peers, Germany and France, which both left recession in Q209, by a quarter. The signs in Q409 were pointing to the Italian economy having reached its trough, with growth set to resume at a slow but steady pace from 2010. Although industrial output appeared to begin a tentative recovery from mid-2009, the steel industry was lagging behind, indicating that inventories needed to be run down further before output resumed sustained growth. Data trends point strongly towards crude steel output remaining at an average of around 1.75mn tonnes per month in 2010, with the total for the year rising 7.8% y-o-y to 21.05mn tonnes with hot-rolled output up 8.1% to 22.67mn tonnes. This is based on output levels seen in H209 continuing well into 2010 with little or no growth, in the context of domestic real GDP growth of just 0.7% and EU growth of 0.4%.
Beyond 2010, there is scope for a couple of years of above-trend growth because of the depth of the recession, and the high output gap which has developed. The low long-term growth rate also makes it relatively easy for the Italian economy to ‘outperform’ on a national basis. However, the international comparison remains far from favourable. From 2011 onward, crude steel output should expand with a compound annual growth rate of 8.04%, but production will struggle to recover to pre-recession levels over the medium-term.
The aluminium sector should experience a similar trend. Although apparent consumption will recover to 2008 levels by 2014 at 2.29mn tonnes, domestic primary aluminium production will remain below the pre-recession rate of 180-195,000 tonnes per annum (tpa). This is due in large part to increasing competition on external markets with Italian aluminium failing to rise much above 460,000tpa over the forecast period, compared to over 504,000 in 2008. Meanwhile, imports will recover at a faster rate with domestic producers losing market share to increasingly competitive foreign production from emerging markets. As such, the publisher casts doubt on the future viability of Alcoa’s 44,000tpa primary aluminium smelter at Fusina.
The main problems Italy will face over our forecast period are similar to those seen over the past 20 years: low business productivity, insufficient investment in high technology industries, disadvantageous demographics, and of course the labour market. It is likely that inefficient Italian industries will have to cut production or closed completely during the recession, while prices will be kept down by rising supply from more competitive Eastern European producers, particularly in Turkey and the Commonwealth of Independent States (CIS).
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