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Spain Metals Report Q1 2010
Business Monitor International, Jan 2010, Pages: 50
The Spain Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Spain's metals industry.
The report estimates that in 2009, Spanish crude steel output fell 25.6% year on year (y-o-y) to 13.82mn tonnes with output in Q409 up 32.2% y-o-y and 33.9% quarter on quarter (q-o-q) to 4.19mn tonnes. This was slightly better than the 13.73mn tonnes (down 26.1% y-o-y) we forecast in the previous quarter. With crude output near pre-recession levels, the Spanish steel industry was feeling the benefits of restocking following the depletion of inventories. However, the publisher warns that the industry is not out of the worst of its problems, with this tentative recovery likely to be undermined by a continuing slump in residential housing construction and a lacklustre performance in the automotive industry.
The Spanish government’s EUR4.1bn (US$5.3bn) stimulus package to revive the domestic market and in turn the local automotive production, provided a temporary fillip to the domestic market. The Spanish market was one of the worst hit in Western Europe, in H109, although most automotive output is exported. Residential construction was also very depressed, with home sales plummeting 34.9% year on year (y-o-y) in H109. In H209, a sense of cautious optimism was building within the Spanish steel industry following the approval in May by the European Investment Bank (EIB) of loans totalling EUR1.74bn for infrastructure projects, including: the development of the rail network; the electricity distribution grid; and, road projects. All of these will require long steel over the medium-term. This will only partly offset the effects of the collapse in the residential construction sector, which was already undergoing correction before the recession hit, after years of booming property demand. It will take until 2011 before demand for homes begins a sustained recovery.
Spain's economy contracted for a sixth consecutive quarter in Q309, at a time when the eurozone economy as a whole, posted a positive figure (of 0.4% q-o-q). This is in line with our core view that Spain is likely to under-perform its major European peers in the recovery. If anything, we have become more optimistic on the prospects for France and Germany in recent months, given fairly encouraging incoming data in those states. Consequently, any sustained growth in the Spanish steel industry will be led by exports to stronger European economies. With 20mn tonnes per annum (tpa) of crude steel capacity coming back online across the EU by the beginning of 2010, Spanish mills will face competitive challenges and depressed prices. Much will depend on the strength of the French, German and UK markets though recovery is weak and faltering. The outlook for 2010 is moderately positive with the report forecasting 5.6% growth in crude steel output to 14.6mn tonnes and hot-rolled output up 6.2% to 15.37mn tonnes, as cold rollers supplying the automotive industry begin to revive orders. As rebar output will fall to low base, we expect high rates of production growth in this segment with a rise in new homes starts expected from H210.
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