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France Metals Report Q3 2010
Business Monitor International, July 2010, Pages: 51
The France Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on France's metals industry.
While French metals producers are putting idled capacity back online, the industry still faces the hurdles of volatile end-markets and the uncertainty created by relatively high electricity prices and the rising cost of raw materials. In Q110, French crude steel output grew 27.6% year-on-year (y-o-y) to 3.74mn tonnes, but was down 1.1% quarter-on-quarter (q-o-q), despite March output being the highest monthly rate of production since October 2008. Output was compromised by the closure of ArcelorMittal’s Fos-sur-Mer plant, which had one blast furnace stopped for repair.
Nevertheless, if output remains at these levels, crude should reach 15.08mn tonnes for the year, as BMI has forecast. Given that crude is the industry bellwether, we have also not made any significant changes to hot-rolled output, which we continue to forecast at 14.5mn tonnes in 2010, up 15.6% y-o-y. Doubledigit growth will only partly offset the massive decline seen in 2009, when French crude steel output fell 28.2% y-o-y to 12.84mn tonnes, although this was less than expected. In historical terms, these are still poor results and BMI does not envisage a return to pre-recession levels until 2013 or 2014, although there is a possibility of some plant and furnace closures that could lead to lower output levels. By 2014, crude steel output should be around 18.1mn tonnes, which is around 1.1% above 2008 levels. Aluminium should fare better, helped in part by its use in lighter and more fuelefficient vehicles. By 2014, aluminium production should have recovered to 2008 levels, provided there is no closure of capacity. The economic downturn hit demand in crucial end-user industries such as the automotive and construction industries.
The recovery will be slow as the construction industry will continue to struggle – BMI’s infrastructure team forecasts real industry value growth of -9.7% in 2009 and -0.9% in 2010, before a recovery is staged in 2011. Meanwhile, BMI warns that French autos production could continue to be eroded eastwards by companies moving operations to cheaper Eastern European bases, although the government’s five-year loan to carmakers and the carmakers’ consequent commitments will ensure that the fall in output is not too drastic. Production focused on small cars will in turn limit domestic demand for steel and aluminium flat products, although the latter will be mitigated by the rising use of aluminium as a lightweight substitute for steel. However, there is little sign of a revival in metals demand from this industry until 2011 at the earliest.
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