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Spain Metals Report Q4 2011
Business Monitor International, Oct 2011, Pages: 48
Business Monitor International's Spain Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Spain's metals industry.
The Spanish steel industry's position as one of the worst performing in Europe is likely to be maintained over the medium term, with a lengthy stagnation of the weak domestic market and a downturn in external markets as Spain finds itself caught up in the Eurozone debt crisis, according to this latest Spain Metals Report from BMI.
In the first seven months of 2011, Spanish crude steel production fell 0.1% year-on-year (y-o-y) to 9.95mn tonnes, making Spain one of the worst performing countries in terms of steelmaking. The contraction is reversing some of the recovery seen in 2010, when output grew 13.8% to 16.35mn tonnes.
According to a host of leading indicator data, Spain's economic recovery remains weak by regional standards, and BMI holds to its forecast for real GDP growth to come in at 0.7% in 2011 following the 0.1% contraction witnessed in 2010.
Aggressive fiscal austerity, rising interest rates, stubbornly high unemployment and ongoing deleveraging within the private sector will keep growth well below potential over the medium term, and at this juncture, BMI does not rule out a foray back into recessionary territory within the next few quarters. As such, domestic finished steel consumption is forecast at 12.45mn tonnes, down 5% y-o-y.
There is a chance that the domestic market will begin to recover in 2012, when GDP is expected to rise 1.3% leading to 3.3% growth in steel consumption to 12.85mn tonnes. There is plenty of downside risk from the eurozone sovereign debt crisis, with Spain regarded as one of the trouble spots.
With the domestic market in the doldrums, the steel industry is reliant on exports for growth. Germany, which has seen a better-than-expected increase in demand, has been the chief target for Spanish output. The decline in the performance of the German manufacturing sector by mid-2011 is therefore having a deleterious effect on export performance with a resulting contraction in the Spanish steel industry.
BMI forecasts a 4.7% fall in exports to 9.36mn tonnes in 2011 followed by a modest 2.1% growth to 9.55mn tonnes. It will be 2015 by the time Spain's steel exports rise above the 10mn tonne level that was typical of pre-recession norms.
BMI does not see a rapid return to pre-recession levels of output. Indeed, by 2015 crude steel output will still be nearly 700,000 tonnes lower than the 2007 peak, at 18.17mn tonnes, as Spanish producers struggle in a highly competitive external market alongside the prospect of a lengthy downturn in the domestic market.
Hot rolled output will face a similar overall decline, with 2015 output 8.9% below 2007 levels at 17.37mn tonnes, prompting producers to consider the possibility of taking capacity offline permanently. Construction materials such as rebar will be affected in particular, with production more than 17% below pre-recession levels as the industry adjusts from years of residential housing boom.
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