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Romania Metals Report Q2 2010
Business Monitor International, April 2010, Pages: 56
Romania Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Romania's metals industry.
The Romanian steel industry was the worst-performing in the EU in 2009, but this latest Romania Metals Report from BMI forecasts strong growth in the medium term as investors continue to boost capacities in a country that has significant competitive advantages over its peers in Central and Eastern Europe (CEE). In 2009, Romanian crude steel output fell 51.4% year-on-year (y-o-y) to 2.45mn tonnes. Q409 output totalled 800,000 tonnes, up 49.5% quarter-on-quarter (q-o-q) but still down 0.1% y-o-y. While an upward trend was perceptible, there were doubts about its sustainability with key steel-consuming industries – automotive and construction – showing signs of volatility.
BMI estimates that concrete reinforcing bar output fell 48.7% y-o-y in 2009 to 396,500 tonnes and will recover by 4.5% to over 414,200 tonnes, with serious recovery only likely from H210. Meanwhile, heavy sections production has seen orders collapse as the result of a freeze on new ship orders and a postponement of existing orders, with output down 34% to around 157,000 tonnes. As new ship orders will lag behind economic recovery, BMI expects a further fall in heavy plate output to 145,000 tonnes in 2010, before it rebounds from 2011. The situation facing the automotive industry was brighter due to a surge in exports, helped by the car scrappage incentive programmes in the EU and particularly in France, the Romanian automotive industry’s chief market. Dacia was expected to boost production by 23% y-o-y to nearly 300,000 units in 2009, with its exports rising by over 50% to around 258,000 units. This helped support cold-rolled flat production and aluminium.
Despite vulnerability in the short-term, BMI remains optimistic about the domestic and external outlook for the Romanian steel industry over the medium-term. Romania’s competitive advantages in steel production should assist rapid growth from a very low base from 2010. BMI forecasts 2014 output at 6.74mn tonnes, an increase of a third over 2008 levels and exceeding previous highs, driven by capacity expansion. Romania’s aluminium industry is also set to see a recovery from the sharp downturn in output in 2009. Romanian aluminium producer Alro planned to produce 201,225 tonnes of electrolytic aluminium in 2009, down 24% over 2008 at an operating rate of around 70%. This reduction is largely related to the shutdown of one pot line, implemented at the end of 2008. BMI estimates that primary aluminium production growth was flat in 2008, totalling around 263,000 tonnes. A 30% fall was estimated in 2009, with output down to just under 171,000 tonnes. A key contributor to the decline will be the automotive sector, but car assembly will also secure the sector’s revival with output set to approach 300,000 tonnes by 2014 as Ford boosts output at Craiova.
Optimism is feeding into continued positive investor sentiment. In Q110, it was reported that ArcelorMittal Hunedoara would invest about EUR43mn for the construction of a new rolling mill, which is part of its EUR69mn investment program for the 2004-2011 period. With this investment, ArcelorMittal Hunedoara aims to almost double its annual production capacity to 700,000 tonnes per annum. Meanwhile, Russia’s Mechel has indicated it would acquire the Laminorul Braila steel mill. The transaction, expected to amount to US$20mn, was being examined by the Romanian Competition Council in February. The acquisition of the 400,000tpa Laminorul Braila steel mill will allow Mechel to significantly extend its product range and to achieve synergy with its other Romanian subsidiaries, namely, Mechel Targoviste, Mechel Campia Turzii, Ductil Steel Buzau and Otelu Rosu, which are specialised in the production of longs and hardware.
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