Spain Metals Report Q4 2012

The 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.

BMI’s Spain Metals Report for Q4 2012 examines the effects of the eurozone crisis and domestic recession on the steel industry and warns that the sector will witness a protracted downturn that could permanently affect the industry's structure. The report examines how key market segments, such as the construction and automotive sectors, are affecting consumption and production and the long-term impact on the industry.

The Spanish economy is falling deeper into recession and is expected to worsen as austerity measures introduced in response to the eurozone debt crisis cut into domestic demand for steel. The weak outlook for the steel industry is evident in recent data, with industrial production stuck in decline. This has come about not only on account of negligible prospects for government-led investment projects but also due to rapidly deteriorating credit channels within the private sector. As a result, in the first seven months of 2012, Spanish crude steel output fell 12.0% year-on-year (y-o-y) to 8.53mn tonnes (mnt). Poor performance in 2012 follows a 4.6% drop in production in 2011, when production totalled 15.6mnt.

We believe that appetite for large-scale infrastructural projects that would boost long steel output,
languishing as a result of the collapse in residential construction, is severely limited and will likely remain so for the next couple of years. Any revival in long steel production will have to come from growth in demand in presently over-supplied external markets. Another crucial market for the Spanish steel industry is the export-oriented automotive sector, which is set to shrink over coming quarters. More worrying for the Spanish flat steel market is the forecast that the automotive industry is unlikely to fully recover from the collapse in 2012 over the next four years, again requiring a boost in exports for growth. Additionally,
packaging and consumer durables will be hit by high unemployment, thereby depressing demand for flat steel and non-ferrous metals.

Over the last quarter BMI has revised the following forecasts/views:

- Given the trends seen in recent months in terms of both output and the state of domestic and external markets, BMI has downgraded its forecast for Spanish crude steel output growth for 2012 from -5% to -9% and is unlikely to return to 2010 levels of output until 2017.

- Over the longer run, we believe economic growth in Spain will prove moribund and the local steel market will fail to return to pre-recession levels of consumption. In 2012, domestic crude steel consumption is forecast to fall 10% to 11.63mnt, a downward revision from 12.32mnt previously forecast and demand will remain at least 50% down on pre-crisis levels. SHOW LESS READ MORE >

Executive Summary 5

SWOT Analysis 6

Spain Business Environment SWOT 6

Europe Metals Overview 7

Steel 7

Aluminium 10

Industry Forecast 13
Table: Spain – Steel Production & Consumption ('000 tonnes, unless stated otherwise) 15
Table: Spain – Steel Industry ('000 tonnes, unless otherwise stated) 16

Macroeconomic Outlook 17

Growth Downgrade As Bailout Looms 17
Table: Spain – Economic Activity 19

Commodities Forecast 20

Steel Price Forecast – Steel To Average US$360/tonne In 2013 20
Table: Steel Forecast 20
Table: Steel Forecasts 26

Commodity Strategy – Monthly Metals Update 27

Aluminium: Support At US$1,800/tonne Likely To Hold 28

Copper: Relative Outperformer But Still Weak 30

Iron Ore: Don't Bet On A Sustainable Recovery 32

Lead: Potential For Short-Term Rally 34

Nickel: No Turnaround Coming 35

Steel: More Pain Ahead 36

Tin To Outperform 37

Zinc: Little Room For Optimism 39
Table: Select Commodities – Performance & BMI Forecasts 40

Competitive Landscape 41

Aluminium 41

Steel 41

Company Profiles 43

Alcoa 43

Financial Data 46
Table: Alcoa – Financial Data 46

ArcelorMittal 47
Table: ArcelorMittal – Key Financial Data 49

BMI Methodology 50

How We Generate Our Industry Forecasts 50

Cross Checks 50