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United Kingdom Metals Report Q4 2012
Business Monitor International, October 2012, Pages: 51
The United Kingdom Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on United Kingdom's metals industry.
BMI's UK Metals Report for Q4 2012 examines how British steelmakers are responding to a high cost,
high risk environment in the short-term and the long-term challenges posed by a structural change in the global steel market with a great focus on quality and niche production over large volume continuous casting. The report also assesses prospects for growth in an increasingly volatile external market as well as domestic stagnation, but warns the chief challenge to competitiveness will remain the UK’s high electricity prices, which are putting margins under pressure.
In the first seven months of 2012, British crude steel output fell 2.9% y-o-y to 5.63mn tonnes (mnt), one of the worst performances in the EU. This follows declines of 2.4% and 3.6% in 2011 and 2010,
respectively, underlining the ongoing weakness of the steel industry as it struggles with a stagnant domestic economy and poor export performance. However, performance from May strengthened, due in large part to the restart in April of slab production at the Sahaviriya Steel Industries’ (SSI) plant in Teesside.
Production will be dragged down by continued weakness in domestic manufacturing. A sustained contraction in the construction industry going into 2013 represents a significant downside risk for British steelmaking. Austerity measures introduced by the new coalition government have compounded the uncertainties facing the construction industry with fears that reduced spending will depress steel demand.
Although a recovery is anticipated in 2013, production levels are still well down on the levels seen before the 2008 financial crisis, which led to a collapse in activity in the steel industry. Strong growth will come from a low base and the industry will not return to pre-2008 levels over the forecast period.
Over the last quarter BMI has revised the following forecasts/views:
- SSI’s contribution to overall production has prompted BMI to revise its crude steel output growth forecast for 2012 from -3.0% to -1.5%.
- A stabilisation of the economy, restocking and plant restarts should lead the recovery in the British steel industry in 2013 when BMI forecasts output should increase 10% to 10.3mnt and domestic crude steel consumption rise 4.5% to 10.1mnt.
Executive Summary 5
SWOT Analysis 6
United Kingdom Business Environment SWOT 6
Europe Metals Overview 7
Industry Forecast 13
Table: United Kingdom – Steel Production & Consumption ('000 tonnes, unless stated otherwise) 16
Table: United Kingdom – Steel Industry Historical Data ('000 tonnes, unless stated otherwise) 16
Macroeconomic Outlook 17
Economic Activity I 17
Economic Recovery: Down But Not Out 17
Table: United Kingdom – Economic Activity 18
Economic Activity II 19
Weak Productivity Risks Locking In Low Growth 19
Commodities Forecast 21
Steel Price Forecast – Steel To Average US$360/tonne In 2013 21
Table: Steel Forecast 21
Table: Steel Forecasts 27
Commodity Strategy – Monthly Metals Update 28
Aluminium: Support At US$1,800/tonne Likely To Hold 29
Copper: Relative Outperformer But Still Weak 31
Iron Ore: Don't Bet On A Sustainable Recovery 33
Lead: Potential For Short-Term Rally 35
Nickel: No Turnaround Coming 36
Steel: More Pain Ahead 37
Tin To Outperform 38
Zinc: Little Room For Optimism 40
Table: Select Commodities – Performance & BMI Forecasts 41
Competitive Landscape 42
Government Policy 44
Company Profiles 46
Rio Tinto 46
Table: Rio Tinto – Key Financial Data 49
BMI Methodology 50
How We Generate Our Industry Forecasts 50
Cross Checks 50