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United Kingdom Metals Report Q1 2013
Business Monitor International, January 2013, Pages: 50
BMI's UK Metals Report for Q1 2013 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 10 months of 2012, British crude steel output grew 0.7% y-o-y to 8.19mn tonnes (mnt). While the rate of growth appears unimpressive, it was markedly better than the EU average. Output was bolstered by the restart in April of slab production at the Sahaviriya Steel Industries' (SSI) plant in Teesside, formerly known as Teesside Cast Products (TCP) and recently acquired from Tata Steel in 2011.
The outlook for 2013 is poor due to EU-wide synchronised austerity programmes and an unresolved banking and sovereign debt crisis. With European steel demand remaining 25% below pre-recession norms and further declines in demand predicted, a sustained contraction 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.
Over the last quarter BMI has revised the following forecasts/views:
- BMI estimates that crude steel output grew 3.0% to 9.81mnt in 2012 with base effects helping to boost growth figures in Q412. It follows declines of 1.9% and 3.6% in 2011 and 2010 respectively.
- While the growth rates were reassuring following the effects of weaknesses caused by a stagnant domestic economy and poor export performance, the situation could deteriorate in 2013 and BMI has forecasted just 1.0% growth in steel output over the year with average monthly production set to decline slightly from the levels seen in Q412.
- Tata Steel is pressing ahead with the restart of a blast furnace at Port Talbot in 2013 as part of a GBP250mn programme. The additional capacity will see the company restart a hot-strip rolling mill at nearby Llanwern, which was mothballed in December 2011. Together with the steel mill on the Port Talbot site, the company will be able to process the output of the two blast furnaces.
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
Still Treading Water 17
Table: United Kingdom - Economic Activity 19
Commodities Forecast 20
Monthly Metals Update 20
Table: Select Commodities: Performance & BMI Forecasts 32
Steel Forecast 33
Steel To Average US$360/tonne In 2013: Short-Term View 33
Table: Steel Forecast 33
Table: Steel Forecasts 39
Competitive Landscape 40
Government Policy 43
Company Profiles 45
Rio Tinto 45
Table: Rio Tinto - Key Financial Data 48
BMI Methodology 49
How We Generate Our Industry Forecasts 49
Cross Checks 49