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Belgium Metals Report Q2 2010
Business Monitor International, April 2010, Pages: 52
Belgium Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Belgium's metals industry.
Although the Belgian steel industry is set to stage a recovery in 2010, the long-term outlook for the sector is gloomy with output over the next five years likely to remain at least 25% down on pre-recession levels with the likelihood of mill closures over the medium-term, according to BMI’s latest Belgium Metals Report.
According to the World Steel Association, in 2009 Belgium’s steel output fell 48.1% year-on-year (y-o-y) to 5.64mn tonnes, in line with BMI’s forecasts. We estimate that hot-rolled output fell 50.3% y-o-y to 5.78mn tonnes, with exports down 46.2% to 11.8mn tonnes. Finished steel consumption fell 42.3% to 3.54mn tonnes, dragging imports down 39.2% to 9.66mn tonnes. Aluminium consumption, which is heavily influenced by trends in the automotive industry, fell even faster than demand for steel in Belgium, with the market forecast to fall by 55.4% y-o-y to under 233,000 tonnes, though it should recover to around 413,600 tonnes by 2014.
BMI research finds that metals prices in Belgium bottomed out in late 2009, indicating that the market had reached a state of equilibrium. The question is whether demand will support the increase in production as steel mills come back on line. Although inventories at mills and service centres were reportedly low by the beginning of 2010, end users were still suffering financial problems. With metals demand linked to GDP growth, a recovery in consumer spending and investment in both Belgium and the rest of the eurozone is crucial to the recovery of the nation’s metals industry. The recession may be officially over, but the outlook is mixed in 2010. Having emerged from recession in Q309, Belgium has continued to shake off the worst effects of its economic downturn into 2010. Leading indicator data suggest that something of a recovery is underway, with industrial production, trade and business confidence all improving through to the end of 2009. BMI believes that metals output will grow 16.2% in 2010 with monthly output unchanged from H209. This will be largely driven by demand elsewhere in Europe.
However, we do not expect steel output to exceed 8mn tonnes per annum (tpa) over the next five years, with the probability that some mills will shut down. With total production capacity of 10mn tpa of continuous casting slab and 8.5mn tpa of hot rolling mill capacity, ArcelorMittal’s output will determine Belgian steel production in 2010. The three plants under the control of the Russian-Belgian joint venture (JV) Steel Invest and Finance will also face major difficulties, although they are less dependent on the automotive industry and are expected to see output recover more quickly than ArcelorMittal’s plants. Growth will be constrained by the fact that most of Belgium's exports go to other eurozone countries, whose growth will remain lacklustre throughout 2010. Coming after a disastrous 2009, this low growth figure will keep Belgian metals exports and manufactured goods using petrochemical products, well below their 2008 levels. In terms of the domestic manufacturing sector, capacity utilisation is unlikely to reach full capacity in the short to medium term. Yet, as Belgium's export sector is dominated by relatively low technology goods, Belgium will face increasing levels of competition in this area from emerging market exporters such as China and Middle Eastern states, as they seek to move up the value chain. This will put downward pressure on Belgian metals industries. Given Belgium’s dependence on exports, there is a risk of contagion if growth in the US was to drop in 2011 more significantly than we currently forecast, particularly if this fed through into a renewed collapse in demand for and prices of metals products. However, this is not our core scenario.
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