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Netherlands Metals Report Q3 2010
Business Monitor International, July 2010, Pages: 49
The Netherlands Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on the Netherlands' metals industry.
The Dutch steel industry is best placed to take advantage of inventory restocking and a modest uplift in overall demand, due to its greater reliance on iron ore feedstock as opposed to scrap and the size and integrated nature of the sector.
In Q110, the Netherlands’ crude steel output grew 63.3% year-on-year (y-o-y) to 1.55mn tonnes, but on a quarter-on-quarter (q-o-q) basis production was down 3.7%, with monthly output steadily declining to 478,000 tonnes in March, the lowest level in nine months. The industry was still performing at just 80% of pre-recession levels. The poor performance was mainly the result of production losses caused by planned repair works at blast furnace No. 7 at Corus’s operations in IJmuiden. The industry is facing a likely slowdown in H210, caused by EU-wide fiscal austerity measures and the expected slump in carmaking following the withdrawal of purchase incentives and the slow revival in construction. Nevertheless, we retain our crude output forecast of 6.11mn tonnes in 2010 (up 17.6% y-o-y) and hotrolled output of just over 4.79mn tonnes (up 6.1%).
Having grown marginally in Q110, the Dutch economy is expected to grow 0.6% overall in 2010, which given the scale of the recession in 2009 is unlikely to help Dutch metals producers claw back their position on the domestic market. The external sector has largely led the rebound in Dutch growth. External demand has been particularly strong from non-EU states and weaker prospects for the euro will likely see this trend persist, due in large part to the eurozone debt crisis coupled with an expectation that the ECB will maintain a loose monetary policy for an extended period. However, a reliance on external demand, particularly from other eurozone members, will likely constrain the recovery in the metals sector. Indeed, we see the eurozone as the weak link in the global demand story going forward. With around 98% of Dutch crude steel production through oxygen blown conversion – the highest rate in Europe – and just 2% in electric arc furnaces, the country’s steel industry will be heavily determined by the price of iron ore feedstock as opposed to scrap. With the EU average of around 57% of steelmaking based on oxygen blast furnaces, the Dutch steel industry stands to become highly competitive in the European market provided scrap prices rise at a faster rate than iron ore. The disadvantage is that, during the recession, the industry was locked into contracts that undermined the cost of production from iron ore compared with steel produced from scrap in EAFs. Economic recovery means that scrap values should increase, thereby improving the prospects of producers using iron feedstock. However, volatile Asian markets and a fragile recovery means that iron and scrap prices are unpredictable and it is too early to say whether Dutch steelmakers will see any advantage in 2010. As such, crude producers are likely to hold back from pushing for full operating rates until they can be certain of a eurozone market recovery, which may not happen until 2011.
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