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Netherlands Metals Report Q1 2011
Business Monitor International, Jan 2011, Pages: 44
Business Monitor International's Netherlands Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Netherlands's metals industry.
The strong rebound in Dutch steelmaking is likely to level off in 2011 as export growth, which generated much of the increase in production in 2010, cools and upside pressure on the euro erodes the competitive advantages domestic plants had enjoyed, according to this latest Netherlands Metals Report from BMI.
In 2010, the Netherlands’ crude steel output grew 29.3% year-on-year (y-o-y) to 6.72mn tonnes, with production peaking in November at 610,000 tonnes – the highest level since September 2008 – despite a more difficult export environment. The industry was still performing at just 80% of pre-recession levels in 2010, although it did not experience the expected slowdown in H2 due to healthy exports and consistent domestic industrial growth. Hot rolled output grew 22.4% to 5.53mn tonnes. The performance of the Dutch steel industry has been held back by planned repair works at blast furnace No.7 at Corus’s operations in Ijmuiden. Steel market growth generated by public spending on infrastructure and external sectors should wane in 2011, with private consumption having only limited upside potential.
In terms of the domestic market environment, consumer sentiment has been bolstered by an apparent stabilisation in the unemployment rate, which has encouraged modest growth in household spending on consumer durables and housing, thereby lifting consumption of finished metals goods. BMI estimates that Dutch finished steel consumption grew 30.6% to 3.47mn tonnes in 2010, although this was not enough to return the market to pre-recession levels. A deceleration in growth in H210 reinforces our view that growth will remain stuck in a low gear over the medium term. In our view, consumption growth rates will come under pressure in the coming quarters, as some of the key drivers of the recovery are likely to lose some momentum. In 2011, we expect finished steel consumption growth of 3.0% to 3.58mn tonnes with single-digit growth expected over the remainder of the forecast period.
The onset of fiscal austerity in eurozone economies should constrain consumer demand and hamper Dutch export growth. In 2010, BMI estimates that semi-finished and finished steel exports grew 25.7% yo- y to 9.46mn tonnes. Capital goods output, largely driven by German industry and global demand, has far outperformed the more domestically-oriented consumer durables sectors and took up the largest amount of metals activity in the Netherlands in 2010. Although sovereign risks remain prevalent, we do not foresee a renewed bout of euro-depreciation to match that seen in mid-2010.
While demand from outside the eurozone should hold up better, our bearish outlook on the US dollar means that Dutch exports could suffer from reduced competitiveness. Indeed, we have upwardly revised our euro forecasts for 2010 and 2011, and modestly for 2012. This is due to our expectation that interest rate differentials will keep the dollar under pressure against the euro in the coming quarters, despite lingering concerns over European sovereign debt issues.
Therefore, the increase in competitiveness enjoyed by steel exporters in 2010 is unlikely to be replicated in the near future. Export growth, which led steel production activity in 2010, will wane over the medium term and we see limited scope for domestic drivers to pick up the slack. However, over the longer run the Netherlands’ relatively competitive steel sector should allow it to take advantage of rising demand in emerging markets, boosting long-term growth.
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