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Boston, MA -- (SBWIRE) -- 03/07/2013 -- BMI's France Metals Report for Q1 2013 examines the long-term challenges facing steelmaking and aluminium smelting in the country and warns that the sectors are at risk of permanent capacity closure. We look at how the country's leading metals producers, ArcelorMittal and Rio Tinto Alcan, are facing up to an increasingly hostile and competitive operating environment and whether France will be able to return to pre-2008 rates of production. We also examine whether the structural shift towards delocalisation that has affected the French automotives industry could extend to metallurgical production.
The relatively strong performance the French steel industry enjoyed in H112 had dissipated in the second half of the year as it struggled with an increasingly sluggish domestic manufacturing sector and an equally listless European scenario. Uncertainty surrounds the future of ArcelorMittal's Florange steel mill, which has turned into an increasingly fraught political dispute. By December 2012, a deal by the government to save the plant from closure with a five-year investment programme appeared to have failed due to technical difficulties, but it seemed unlikely that the government would carry through with its threat to nationalise the facility.
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Over the last quarter, BMI has revised the following views and forecasts:
- While France has been one of Europe's better performing steel-producing nations, output was still 20% below typical pre-2008 levels in 2012 and BMI estimates that utilisation levels are averaging 70-75%. Cuts in crude steel-making capacity are therefore inevitable in order to ensure the long-term stability of both the French and EU steel industries.
- With the steel industry facing output cuts, an economy set to grow by just 0.9% in 2013 and crude steel consumption set to fall 1.8% to 16.03mnt, BMI forecasts just 0.1% growth in crude steel output to 15.87mnt. This is a downward revision from the 16.18mnt previously forecast and BMI warns of considerable downside risk.
- The French steel industry will undergo the same process of 'delocalisation' as other industrial sectors that the government will be largely powerless to stop. By 2017, crude production and consumption should reach 17.5mnt and 17.1mnt, respectively, which is still well down on prerecession levels.
- Cuts in aluminium production mean that we have estimated a 3% decline in primary aluminium output to 429,000 tonnes in 2012, which offsets the growth reported over the previous two years. Modest 0.2% growth is expected in 2013 as the industry remains under pressure due to poor market performance.
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