Boston, MA -- (SBWIRE) -- 07/27/2012 -- BMI's Czech Republic Metals Report examines the long-term potential of the local steel industry, but flags short-term concerns about the impact of the eurozone crisis and the strong koruna on output.
The report examines how export-oriented Czech steelmakers are responding to the trends in the German market and also explores its response to domestic manufacturing industry trends, particularly in the automotive sector. The report also analyses the growth and risk management strategies being employed by the leading players in the steel industry as they respond to the challenges ahead.
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In the first four months of 2012, Czech crude steel output declined 3% y-o-y to 1.83mn tonnes (mnt). However, production improved on the performance seen in H211. Although BMI expects monthly output to decline over the rest of the year due to the impact of slow German growth and the eurozone crisis, the decline will be less sharp than previously expected. Eyes will be on ArcelorMittal's plans with potential for further production cut-backs at its Czech facilities, in line with trends seen elsewhere in Europe.
Weakened external demand combined with ongoing fiscal austerity and no real recovery in consumer spending will combine to produce stagnant growth this year. Nevertheless, we have put back the full recovery to pre-2008 levels to 2016 with a long period of slow recovery as the problems in external markets are unlikely to abate significantly. The Czech steel industry's dependence on longs production, which represents two-thirds of Czech output, means it will mirror the flatlining European construction industry. Precluding a more dour outlook is our expectation for the global recovery to take hold towards the tail-end of the year.
Over the last quarter BMI have revised the following forecasts/views:
- Instead of a contraction of 10%, BMI now forecasts output declining 7% to 5.2mnt in 2012. There are significant downside risks, particularly given the Czech Republic's exposure to volatile external markets, although the industry's competitiveness should work in its favour.
- Domestic consumption of crude steel products is set to decline in 2012, by 6% to 6.5mnt, although consumption and export figures are not, at this stage, likely to fall back to the 2009 low.
- A strong koruna could hit the margins of Czech steelmaking and potentially lead to greater cuts in output than we currently envisage. The situation is likely to deteriorate if the koruna remains strong in the context of the eurozone crisis.
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