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Netherlands Metals Report Q4 2011
Business Monitor International, Oct 2011, Pages: 44
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 Dutch steel industry was one of the best performing in the EU in 2011 and although growth will face increasing domestic and external economic pressures, the industry’s high level of integration and competitiveness should ensure it sustains output over the medium-term, according to BMI’s latest Netherlands Metals Report.
In the first seven months of 2011, Dutch crude steel output grew 10.4% y-o-y to 4.13mn tonnes, coming on the back of growth in 2010 of 28.5% to 6.65mn tonnes. A more difficult export environment does not appear to be hindering growth in the Netherlands’ steel industry. However, the industry was still operating at around 95% of pre-recession norms. With output holding steady and the Dutch steel industry’s key markets likely to be well supported over H211, BMI maintains its forecast growth in crude steel output at 6.6% y-o-y to 7.09mn tonnes in 2011 and growth in hot-rolled out output of 5.0% to 6.59mn tonnes. The Dutch steel industry will continue to play on its high level of integration and competitiveness, particularly in high-value finished steel products, in order to secure its share of the recovery in eurozone steel markets.
Export demand from outside the eurozone will be challenged by the US economy’s still weak labour market and China’s monetary tightening efforts. As 2009 represented the recent low point for Dutch exports, plunging to 7.71mn tonnes, significant growth in 2010 returned exports to closer to pre-recession levels. Base effects meant that export growth was at a lower rate in 2011, but supported by strong demand from Germany and assisted by the Dutch steel industry’s competitiveness. We estimate that Netherlands’ steel exports grew a further 8% to around 10mn tonnes in 2011, but forecast a modest contraction in 2012 as the eurozone market slows. Over the longer run, the Netherlands' relatively competitive external sector should allow it to take advantage of rising demand in emerging markets, boosting long term growth.
Despite increasing investment, including EUR800mn in increasing liquid steelmaking capacity at Ijmuiden by 500,000tpa to 7.7mn tonnes per annum (tpa) by 2015-16, Tata Steel is implementing costcutting measures that will lead to around 1,000 job losses. This should, however, improve the competitiveness of the company’s Dutch operations.
Domestic steel market growth generated by public spending on infrastructure and external sectors should also wane in 2011, with private consumption having only limited upside potential. Also, a strong rise in imports has accompanied the resurgence of trade in recent quarters and this trend should continue in the coming months as private consumption continues to recover, eroding the ability of domestic producers to expand in the Dutch market. BMI forecasts 6.3% y-o-y growth in steel imports to 7.28mn tonnes. While the growth rate is a downward revision from 11.3% forecast in the previous quarter, total imports are 0.6mn tonnes higher due to recently published import data for 2010, which was better than we estimated.
We forecast 7% growth in domestic consumption of finished steel to 3.55mn tonnes. While the growth rate remains unchanged, 2010 data from the World Steel Association was worse than we estimated leading to a downward revision in our 2011 forecast from 3.72mn tonnes. 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. However, the market will lose some momentum in coming quarters as export growth continues to slow and consumer confidence remains fragile. Moreover, fiscal austerity measures should keep the job market under pressure. Nonetheless, we do not expect the economic recovery to be derailed and forecast real GDP growth of 2.2% in 2011, before a modest acceleration to 2.3% in 2012. As such, we forecast growth in finished steel consumption to 3.8mn tonnes. It will take until 2015 before consumption returns to 2008 levels.
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