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Recently Released Market Study: Australia Metals Report Q2 2012

Recently published research from Business Monitor International, "Australia Metals Report Q2 2012", is now available at Fast Market Research


Boston, MA -- (SBWIRE) -- 06/22/2012 -- Latest data suggest that the rebound seen in H111 weakened significantly in the second half of the year. Indeed, slower real GDP growth in several key economies, combined with higher levels of market volatility have seen both production and consumption weaken in Australia. Moreover, our macroeconomic outlook for the Australian and Chinese economies has been tempered somewhat following both deteriorating trading conditions as well as slower growth following monetary tightening cycles over the past few quarters. For some metals we believe output will have contracted in 2011 and forecast only a weak recovery in 2012.

Latest data confirms our view that Australian steel production will decline for the full year. According to Worldsteel, steel output fell by an average of 9.1% in the three months to October 2011, which dragged steel production in the first ten months of the year down 3.8% year-on-year (y-o-y). This is broadly in line with our full-year forecast for a 5% decline in steel production to 6.67mn tonnes in 2011. On a monthly basis monthly production has fallen to an average of 585kt ('000 tonnes), down from the monthly average of 608kt in 2010. In 2012 we only see a small rebound in output of 3.0%, as we expect macroeconomic headwinds as well as micro-level dynamics to weigh on the sector. Morever, we see some downside risks to our forecasts, particularly as base effects from the first few months of the year affect y-o-y growth rates in Q112. The poor performance of the steel sector will continue to have two main implications. First, there are serious risks to the recovery of the domestic steel market and this will lead to continued overcapacity. This could continue to affect profitability at the major steel producers. Second, it will take longer for output to surpass pre-crisis levels over the forecast period, which we only see happening after 2016.

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Despite a rebound in Q111 zinc output, the pace of production has slowed with data for the first nine months of 2011 showing only meagre output growth. The World Bureau of Metals Statistics (WBMS) reported a negligible increase of 0.3% y-o-y in slab zinc output over the period. Nyrstar reported that its smelters were operating at capacity, but this will have been insufficient to make up for the loss in output at the beginning of the year. Meanwhile, no data has been released for Sun Metals' Townsville smelter (owned by Korea Zinc).

We have revised down our forecasts for Australian refined aluminium production in 2011, but have left the 2012 forecast unchanged. We now see growth of 0.7% in 2011, down from 3.0% previously. For 2012 we maintain our forecast of 1.5% growth. Australian aluminium consumption remains weak and we have revised down our consumption forecast for 2011 to 1.0% from 2.0% previously.

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