|
|
 |
|
Viewing report
|
|
|
|
Italy Metals Report Q1 2011
Business Monitor International, Jan 2011, Pages: 49
Business Monitor International's Italy Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Italy's metals industry.
The growth rate seen in Italian metals consumption and production will diminish in 2011 as the domestic market approaches pre-recession levels and export markets tail off, but the recovery could be undermined by a possible return to recession, warns this latest Italy Metals Report from BMI.
In 2010, crude steel output grew 35.1% year-on-year (y-o-y) to 26.36mn tonnes, with October output the highest level since the same month in 2008 at 2.47mn tonnes, according to data from the World Steel Association. However, output was still only 84% of pre-recession levels, indicating the Italian steel industry has some way to go before it fully recovers. Likewise, primary aluminium output was up 50% to just under 134,800 tonnes in 2010, recovering much of the decline seen in 2009. BMI estimates finished steel consumption growth of 29.3% to 33.94mn tonnes and aluminium consumption growth of 22.1% to 1.76mn tonnes.
The Italian economy lost some momentum in H210, highlighting the fragility of the recovery and hampering prospects for domestic demand for metal products. Much will depend on the ability of the export sector to gain market share abroad, but troubling for Italian producers is the pace of import growth, which exceeded export growth in 2010. BMI estimates that total exports were up 23.2% to 16.60mn tonnes, while imports grew 38.3% to 16.67mn tonnes, leading to a small trade deficit in volume terms, compared with a surplus of 1.42mn tonnes in 2009.
Going into 2011, sovereign debt stresses across the eurozone pose a serious cause for concern, thereby limiting exports, which are pivotal to the steel industry’s recovery. Given that most countries in Europe are attempting to engineer export-led recoveries to help rebalance away from debt-fuelled domestic spending, competition in foreign markets is heating up. To Italy's credit, production costs have been pushed down, with the real effective exchange rate depreciating by around 5% over the last 12 months, nearly matching Germany’s 6% fall. Gaining a cost advantage in international markets is crucial, especially given that global demand is weaker than before the crisis and that the likes of the US, the UK and Japan have adopted ultra-loose monetary policies (causing currency depreciation) which have increased the attractiveness of their goods in foreign markets. Moreover, the US Federal Reserve has recently committed to a fresh US$600bn bout of quantitative easing, which will weaken the dollar and potentially undermine Italian exports outside the EU. As such, BMI expects Italian metals margins to come under severe strain over 2011. We have forecast aluminium export growth of 4.1% to just under 470,000 tonnes in 2011, down from 39.9% growth in 2010, and 3.0% steel export growth to 17.95mn tonnes.
The economic backdrop will deter large-scale capital investments, meaning that a strong rebound in the steel market may be difficult to attain. As such, we have restricted our steel consumption growth forecast to a modest 4.0% y-o-y, reaching 35.29mn tonnes in 2011. We forecast aluminium consumption growth of 5.3% to 1.85mn tonnes in 2011. However, following strong growth in 2010, this should be enough to ensure that consumption levels return to pre-recession levels. This could be undermined by any return to recession, with the precarious state of the Italian economy threatening a contraction in metals consumption in 2011. We warn that consumer spending could weaken significantly as the fiscal stimuli are removed. The government, having continued to spend during the recession in a bid to support demand and prevent a more precipitous economic decline, now appears to be pulling on the reins. With governments across the region under increasing pressure to consolidate public finances to ward off higher external borrowing costs, we similarly expect the Italian government to cut the budget going forward, which will further weigh on domestic growth. In particular, we warn that the removal of car scrappage incentive schemes in Italy and elsewhere in Europe could cause a major dip in automotive production, and therefore sales of flat steel and aluminium products going forward.
Product samples
A sample for this product is available. Please Login/Register to download this sample.
|
|
|
|
