Boston, MA -- (SBWIRE) -- 06/07/2012 -- The Czech steel industry is likely to enter recession in 2012 as exports come under pressure amid a slump in European demand, according to BMI's latest Czech Republic Metals Report.
In 2011 Czech crude steel output grew 7.8% y-o-y to 5.58mn tonnes, which followed a year when production was up 12.7% to 5.18mn tonnes. Czech monthly output began declining after a peak of 489,000 tonnes in March, falling to 368,000 tonnes in November before staging a modest return to growth in the subsequent two months. The decline in production coincided with a consistent fall in product prices that squeezed margins, despite falling raw material costs. This prompted ArcelorMittal to announce in December 2011 that it was seeking to reduce its Czech workforce by around 10%, implying production cut backs. However, it stopped short of idling facilities, as it plans to do in neighbouring Poland.
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Given the downturn in the Czech Republic's main export market, Germany, and plans by ArcelorMittal to further scale back production, BMI expects a contraction in the steel industry in 2012. Crude steel is forecast to fall by around 10%, a slight revision from the previous forecast of an 11% drop. Therefore crude output will total around 5mn tonnes in 2012. Meanwhile, hot-rolled output will fall 10% to 4.4mn tonnes in 2012, a slight downward revision from the previously forecast 4.46mn tonnes. A contraction will reverse many of the gains made over the past two years and ensures that the Czech Republic will struggle to return to the kind of production volumes seen before the 2008 crisis.
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