July 18, 2011 -
PRLog -- In 2010, German crude steel output grew 34.1% year-on-year (y-o-y) to 43.82mn tonnes, with hot-rolled steel output up 31.9% to 39.02mn tonnes. BMI estimates that finished steel consumption grew 32.4% yo- y to 35.90mn tonnes. The steel industry was operating at 84% capacity. Growth was generated by flat steel production, with demand fuelled by a growing automotive industry. In 2010, Germany's total passenger car output reached 5.55mn units, up 12% y-o-y, assisted by a 24% rise in exports to 4.24mn units. The German steel industry started 2011 on a positive note, with stocks at end-users and distributors at a low to normal level relative to downstream activity. In the January-February period, the German steel federation Wirtschaftsvereinigung Stahl (WV Stahl) reported that crude steel output reached 7.33mn tonnes, up 6.1% y-o-y. In January, Germany's total hot rolled steel product output amounted to 3.15mn tonnes, up by 11.1% y-o-y, including 2.24mn tonnes of flat steel products (up 14.5% y-o-y) and 909,000 tonnes of long steel products (up 3.4% y-o-y). BMI forecasts 3.8% growth in crude steel output to 45.50mn tonnes in 2011 and 3.9% growth in hotrolled production to 40.55mn tonnes, driven by higher output from carmakers, but steadily broadening out into other sectors. This is an upward revision from growth of 1.9% forecast in our previous quarterly report and is due to a brightening outlook. The underlying fundamentals are strong, with January 2011 witnessing a stronger than expected rise in German industrial orders with growth of 2.9% m-o-m, although this followed a decline of 3.6% m-o-m in December. BMI believes that with domestic demand for intermediate goods increasing sharply and eurozone demand for German goods on the up despite fiscal austerity, output levels will be sustained. Moreover, there is a stronger recovery in the domestic market with domestic industrial orders rising 4.5% in January and demand for intermediate goods jumping 5.8%. On the downside, there is a high chance of interest rate rises in 2011 in order to reduce inflationary pressures in the eurozone and this could limit full-year growth. In terms of the long-term outlook, BMI shares WV Stahl's concerns about the EU's latest carbon emissions benchmark allowances, which threaten the competitiveness of European steelmakers at a time of surging energy and raw material prices. As steelmakers are already facing short-term pressures on margins due to the high costs of electricity and raw materials, the long-term disadvantage of the emissions trading scheme may be enough to prompt steelmakers to close some capacity. However, Germany has some significant advantages such as economies of scale, integration between crude steel and downstream processing units and a high level of technological sophistication and product diversification. Nevertheless, BMI believes there are grounds for concern over the future of some operations. In 2010, primary aluminium production grew 54.2% to just under 450,000 tonnes and aluminium packaging output, including foil, tubes, flexible packaging and aerosol and beverage cans, rose 13.6% yGermany o-y to 405,100 tonnes. Export sales accounted for 70% of the turnover of German aluminium packaging production in 2011. BMI sees primary output growing 5.7% in 2011 to just under 475,500 tonnes, with long-term prospects set to be bolstered by the growing number of applications for aluminium as a lightweight substitute for steel. On the downside, high electricity and environmental costs are undermining the long-term viability of German smelters, with Norsk Hydro reportedly considering the closure of the country's largest primary aluminium producer. Consequently, primary aluminium output will reach around 605,000 tonnes in 2015, close to 2008 levels, while exports should reach 1.89mn tonnes. However, apparent aluminium consumption will surge to 3.35mn tonnes from an estimated 2.70mn tonnes in 2010. Most of this increase will be supplied by imports, which will rise to 3.29mn tonnes in 2015 in addition to domestic recycling.
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