Boston, MA -- (SBWIRE) -- 12/24/2013 -- Romania's metals sector will continue to see modest growth over the coming years as it slowly recovers from the global downturn. This is primarily the case for steel, the largest sub-component of Romania's metals sector. With modest growth in both autos production and the country's construction sector, we expect modest growth in steel output over the next five years. In addition, with our expectation for steel prices to head broadly lower over the coming years, we see few sources of encouragement for the sector. Therefore, whilst we forecast modest growth in output, it will remain far off 2007 highs.

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Romanian crude steel output demonstrated modest growth in 2012 of 1.0%, however, production is still more than a third less than pre-2008 levels. BMI forecasts similar growth in 2013 at only 1.0% y-o-y, to reach 3.91mnt of crude steel. However, we expect output growth to accelerate to 2.0%, to reach 3.99mnt a year later in 2014. This is owing to the continuing impact of the eurozone crisis on exports. On the upside, steel has benefited from the depreciation of the leu against the euro, sustaining its competitive edge agains Western European producers, but has been undermined by the idling of a 1mntpa blast furnace at ArcelorMittal's Galati complex 'in order to adapt production to market demand'.

With positive growth in the metals-intensive sectors of construction and autos - discussed below in further detail - within Romania, we are fairly optimistic these sectors will offer upside support to Romania's steel industry. We see these industries as helping Romania's economy as a whole begin to gain strength from 2014 onwards when we forecast real GDP growth of 2.8% y-o-y. Over the medium term, BMI forecasts Romanian steel production growth between 2013 and 2017 to show an annual average growth rate of 1.5%.

Growth has been supported by ArcelorMittal Galati's new steel mill in Hunedoara with a EUR43mn rolling mill, which came into operation in Q312. Additionally, the company increased liquid steel production to 700,000tpa to raise output of round semis at its Tubular Products Roman plant. The steelmaker is investing over EUR25.0mn in upgrading and improving production quality at its plate mill No. 2. Following the mill's modernisation, the company will be able to produce new types of plate, which will allow it to enter new markets. These downstream projects will boost the value of Romanian steelmaking.

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