Tuesday, May 3, 2011

New market study, "France Metals Report Q2 2011", has been published

PRLog (Press Release)– May 02, 2011– French steelmaking will be undermined by a decline in competitiveness as the slowing rate of consumption growth will benefit imported steel products over domestically produced steel, while margins will be put under pressure by the rising costs of raw materials.

In 2010, French crude steel output grew 20.1% y-o-y to 15.41mn tonnes as trade fuelled growth in production. BMI estimates that French finished steel consumption grew 15.2% year-on-year (y-o-y) to 14.76mn tonnes, but was still 24% down on the 2007 peak. The closure of two French mills by ArcelorMittal depressed output in H210. France's basic steel product and ferroalloy exports totalled EUR9.51bn buick , an increase of 24.6% y-o-y.

France's steel exports value in 2010 was still 20.9% below 2008 levels. Despite growth in exports, the country's trade surplus in steel products narrowed as imports of basic steel and ferroalloy products grew 30.5% y-o-y to EUR8.91bn, with double-digit growth reported in all segments.

Trade figures suggest that French steelmaking is failing to co acura mpete both domestically and in eurozone markets. Production has so far failed to return to pre-recession levels, with output in 2010 still 20% down on 2007 levels and not expected to return to capacity any time soon. The impetus for metals production growth, namely the construction and automotive sectors, appeared to be stalling by Q111 as austerity measures across the eurozone kicked in. While overall domestic economic growth should remain strong in 2011, this growth is less likely to spur domestic steelmaking than it is to suck in imports of steel products. The French steel industry will undergo the same process of 'delocalisation' as other industrial sectors. Moreover, consumption levels will be subdued as France's autos production stalls due to weakness in European demand. With car production moving east, it is unlikely that French car making will return to pre-crisis levels, limiting the scope for growth in the domestic consumption of metal products used in the automotive sector.

While the French automotive industry is likely to dampen consumption of flat products, this will be counterbalanced by a surge in growth in construction, which will generate demand for long products. BMI anticipates 4.5% growth in construction in 2011, up from 0.4% in 2010. However, given the loss in competitiveness demonstrated in 2010, it is unclear how much this will benefit domestic steelmaking and BMI believes long product imports will grow faster than domestic output.

As a result of the uncertainties surrounding French steel-consuming industries and whether domestic steelmakers will benefit, BMI has reduced its forecast for crude steel output for 2011 from 16.4mn tonnes to 15.73mn tonnes (up 2.0% y-o-y) and hot-rolled output from 15.1mn tonnes to 14.76mn tonnes (up 1.9% y-o-y). By 2015, crude and hot-rolled output should reach 17.08mn tonnes and 15.97mn tonnes respectively, which is still well down on pre-recession level. Aluminium should fare better, helped in part by its use in lighter and more fuel-efficient vehicles. By 2015, aluminium production should have recovered to 2008 levels, provided there is no closure of capacity.

For more information or to purchase this report, go

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