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Poland Metals Report Q4 2010
Business Monitor International, Oct 2010, Pages: 53
Business Monitor International's Poland Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Poland's metals industry.
A weak external market, combined with the strengthening of the zloty against the euro, is posing a serious threat to the recovery of the Polish steel industry. To this extent output is showing signs of faltering, according to BMI's latest Poland Metals Report.
Over the first seven years of 2010, Polish crude steel output was up 23.4% y-o-y, to 4.78mn tonnes. However, output has struggled and after monthly production peaked at 827,000 tonnes in May it fell back to levels more typical of H210, with BMI estimating that the country's mills were operating at just twothirds of total operational capacity. Similar trends existed in hot-rolled steel and steel tubes and pipes manufacturing. Economic uncertainty in Europe, and the strength of the zloty against the euro is hurting the Polish steel industry itself, alongside export-oriented steel consuming industries, particularly car manufacturing.
The steel industry will thus be dependent on growth in the domestic market. BMI believes that current trends do not point to a sustained recovery in 2010. We forecast that the finished steel market will grow 12.8%, to 10.2mn tonnes in 2010, albeit from a historically low base. The market should be back on track in 2011, and by 2014 should have reached 17.1mn tonnes, an increase of 47% over 2008. The appreciation of the zloty will encourage growth in imports, while rising raw material costs will put considerable pressure on margins. As such, the industry is not poised for strong growth until Q211, when we expect a return of stronger demand growth levels in the eurozone. On the upside, the construction sector as a whole is currently experiencing a boost, as in 2012 Poland - along with Ukraine - will host the UEFA European Football Championships. The situation also looks positive with the construction industry set to grow 4.6% in value in 2010, after 4.2% growth in 2009. According to data from the Polish steel association, construction activity may rise as much as 9.6%. As a result, a strengthening of demand in Poland is expected for reinforced bars, construction profiles, cold roll-formed sections and hollow sections, a situation that should be sustained over the next five years. On the downside, the positive effects of these developments on the steel market are partly outweighed by the burst in the housing bubble, which had fuelled high growth levels in construction steel until the economic crisis hit.
The country's export-oriented automotive industry will be crucial to determining the market for flat products, which comprise 37% of hot-rolled production volume. With the demise of car-scrappage schemes in most countries in Europe, sales have fallen back to lower levels, ending the short-term increase created by the incentive packages, making the market outlook decidedly bleak. Auto production in Poland declined 3.6% y-o-y, to 867,542 units in 2009, and the latest output figures show manufacturers are still struggling to recover. The long-term growth potential in the market should take Poland's total output to 1.24mn units by the end of 2014, thereby fuelling local demand for flat metal products. The ability of local industry to take advantage of this will be determined by the effect of the zloty's mediumPoland term value on competitiveness, particularly in relation to neighbouring CEE states capable of supplying the Polish automotive industry. With Poland's political stability – relative to the Czech Republic and Hungary – and interest rate hikes expected in 2010, BMI expects a bullish zloty over 2010 and into 2011 that could undermine growth in Polish flat steel and aluminium, and the export-oriented industries they supply.
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