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Poland Metals Report Q1 2011
Business Monitor International, Jan 2011, Pages: 54
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.
The appreciation of the zloty at a time of flagging recovery in the eurozone will undermine the strength of the recovery in Polish metals consumption and production over 2011. However, long-term prospects remain strong with the country likely to continue to play an important role in manufacturing in the EU market, according to this latest Poland Metals Report from BMI.
In 2010, Polish crude steel and hot-rolled output rose 15.8% year-on-year (y-o-y) to 8.26mn tonnes and 6.55mn tonnes respectively. However, output has struggled and after monthly production peaked at 827,000 tonnes in May, it fell back in the following three months as ArcelorMittal stopped production at two blast furnaces during the summer, before clawing back some of the ground lost from September.
BMI estimates that the country’s mills were operating at just two-thirds of total operational capacity at this time. 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 continued appreciation of the zloty will lower the cost of imported goods while at the same time curtailing export growth.
In the aluminium sector, despite the closure of domestic primary production, Polish aluminium net imports grew by around 11.0% to 246,300 tonnes in 2010, following a 31.5% fall in consumption to 407,000 tonnes in 2009. We halved our estimate for consumption growth from 16% to 8% due to the lower than expected growth in the automotive industry with the revival of the market likely to take longer than we had anticipated. Nevertheless, by 2015, demand will approach 750,000 tonnes as the automotive industry picks up speed, up 70% over 2010 levels and representing a new high.
On the supply side, idled steel-making capacity was unlikely to come online in 2010 due to repair works, thereby limiting production. In February 2010, an explosion at the No.5 furnace of ArcelorMittal Poland’s Commodities Branch plant in Krakow led to the idling of the facility. Meanwhile, the company was spending PKN30mn on repairs and maintenance at the No.3 blast furnace at Dabrowa, which was idled in October 2008. It is expected to resume operations in 2011 or 2012, when the steel market is forecast to pick up.
The revival of the Polish steel industry is being led primarily by domestic consumption, with export markets of domestic steel producers set to remain in the doldrums. Domestic longs demand is heavily influenced by the construction industry, which had enjoyed high rates of growth until the economic crisis led to a burst in the housing bubble. Over the forecast period the main driver of construction sector growth will be the UEFA Euro 2012 Football Championships, which is being jointly hosted by Poland and Ukraine. The country’s export-oriented automotive industry will be crucial to determining the market for flat products, which comprise 37% of hot rolled 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 and making the market outlook decidedly bleak. Issues on the production front are worrying. There are likely to be further challenges to the industry in the wake of the eurozone debt crisis, which will lead to fiscal austerity measures that should dampen consumer demand in major export markets, although the Polish industry’s long-term growth potential is considerable.
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