Boston, MA -- (SBWIRE) -- 09/24/2013 -- The latest annual steel production figures released by the World Steel Association (WSA) show that the country's steel output fell further than expected in 2012, contracting by 9.2% year-on-year (y-o-y) to 5.07mnt. We are forecasting further decline in Czech steel production in 2013 which follows the decision by one of the country's largest steel producers, Evraz, to suspend production for a second time this year, in July 2013. We forecast the country's steel production to shrink by 0.8% year-on-year to 5.03mnt in 2013 while consumption is set to grow by just 1% to 6.91mnt.

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. With construction set to remain weak into 2014, we see little hope of a boost in outside stimulus this year. Meanwhile, an oversupply of steel globally is set to weigh further on overseas demand. While the country's metal producers could be buoyed by increasing demand from Turkey and Poland, overall the outlook is bleak.

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With little upturn in the eurozone in sight we caution there is further downside risk for the Czech Republic's metals sector over the medium term, particularly given the Czech Republic's exposure to volatile external markets, although the industry's competitiveness should work in its favour. With rumours that further companies including ArcelorMittal are set to introduce cutbacks at their Czech facilities, BMI does not rule out a return to the lows seen in 2009 when output fell to 4.6mnt.

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