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Italy Metals Report Q3 2009
Business Monitor International, July 2009, Pages: 41
The Italy Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Italy's metals industry
The Italian metallurgical industry is facing a deep crisis that showed no signs of ending in H109, due to a collapse in the credit market and its impact on the key automotive and construction markets. The Italy Metals Report forecasts steel output falling by more than a third in 2009. In the first five months of 2009, Italy’s crude steel output fell 43% year-on-year (y-o-y) to 8.09mn tonnes. Monthly output averaged around 1.62mn tonnes. There was very little sign of recovery in demand with any increases related to buyers restocking inventories.
Further down the production chain, steel product manufacturers have been radically cutting output amid plummeting orders. Flat product orders had almost dried up in H109 and longs were also struggling as the steel industry experienced a stronger than expected fall in demand. For example, Q2 output from tube manufacturer Capello Tubi was as low as Q1, when shipments were cut by 30%. Its quarterly welded tube production is expected to remain at around 35,000 tonnes until the end of 2009, operating at around 70% capacity. There was also no sign of recovery in the plate market with prices falling below EUR400 per tonne and purchases said to be small in quantity. Manufacturer surveys revealed that there was little anticipation of a rebound in the plate market any time before end-2009.
The report forecasts crude steel output of 19.64mn tonnes in 2009, down 35% y-o-y. Output is expected to remain at an average of just over 1.6mn tonnes. Although a seasonal downturn is expected in August, the market is already bouncing along the bottom of a trough and no significant further downturn is expected in H209. The domestic metals market is being dragged down by a sharp recession.The report forecasts Italy’s economy will contract by 3.9% this year, which is greater than the expected 3.6% decline in eurozone real GDP volumes. The prolonged nature of the decline in business confidence is likely to mean that there will be no early let-up for investment spending, and is likely in turn to result in a sustained reduction in metals purchases, as well as a proliferation of smaller purchases for the sake of maintaining stocks and keeping costs down.
In February 2009, Prime Minister Silvio Berlusconi announced EUR2bn in incentives for the car and home appliance industries in an effort to revive production. The analyst does not believe this will have a major effect, even if it achieves its intended results. It will take until the end of 2009 for steel producers to completely destock their finished products and raw materials reserves, having built up a high level of inventories at a time of sharply falling demand in Q408. Even if the automotive industry begins its revival in H209, carmakers such as Fiat have closed their contracts for the year, which means steelmakers will need to clear their inventories by seeking alternative markets.
The analyst does not envisage metals output levels returning to pre-recession levels. It is likely that inefficient Italian industries will have cut production or closed completely during the recession, while prices will be kept down by rising supply from more competitive Eastern European producers, particularly in Turkey and the Commonwealth of Independent States (CIS). Growth in domestic and external demand, albeit tentative, is 2010 should lead to a 7.5% growth in steel products output from a very low base, with crude steel rising to 21.12mn tonnes. The analyst expects the effects of the recession to have a long-lasting impact on the Italian steel industry. By 2013, crude output should rise further to 26.74mn tonnes, which is still 12.3% down on 2008.
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