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Czech Republic Metals Report Q3 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: July 2009 Product Code: R302-7165 Description The Czech Republic’s steel industry continues to languish in the doldrums, according to BMI’s latestCzech Republic Metals Report, while its long-term potential for growth looks set to diminish asproduction capacity is shifted to Poland.In the first four months of 2009, Czech crude steel output plummeted 46.1% year-on-year (y-o-y) to1.3mn tonnes, according to statistics from the World Steel Association. April marked a new low withoutput down 55.9% y-o-y to just 265,000 tonnes. This comes on top of a 9.5% fall in volume to 6.39mntonnes in 2008. The principle causes of the contraction in the Czech steel industry were the slowdown inconstruction and the fall in automotive sales, which depressed the country’s domestic car production. ArcelorMittal was reportedly operating its Ostrava steelworks at 65% capacity in Q109, with someproduction relocated to Poland. By May, two of four furnaces at Ostrava had been shut down and a thirdwas scheduled to shut in June. Sanjay Samaddar, ArcellorMittal Czech Republic general director,confirmed reports that production at Ostrava was to be discontinued and transferred to Sosnowiec insouthern Poland. At the same time, production will be moved from a rolling mill in Dabrowa Górnicza,Poland, to Ostrava. The Czech Metalworkers’ Federation (OS KOVO) has forecast a decline in steel production of up to 20%in 2009. BMI forecasts that output will fall 20.8% to 5.06mn tonnes as the Czech Republic is hit by thecrisis in the car industry. Overleveraging in the steel industry will also be a major obstacle to industryexpansion, making it difficult to persuade banks to finance new projects. BMI believes that the combination of a domestic downturn and a recession in the rest of Europe is boundto have a negative impact on Czech car production, although this will only have a short-term effect on themetals industry. Construction will also be temporarily depressed but by 2013, the value of constructionactivity in local currency terms will be over 29% up on 2008. Strong long-term demand should givedomestic steelmakers hope of improved medium- to long-term performance. Yet, domestic steelconsumers can easily source from neighbouring Poland and Slovakia, which means that Czech mills willbe under pressure to compete, while export markets - particularly in East Asia - are seeing a rapid rise indomestic steelmaking capacities at a time of moderating demand growth. As such, we do not foresee arapid return to pre-recession levels. By 2013, crude steel output will be up by just 8% over 2008 levels at6.90mn tonnes while hot rolled production will rise 6.1% to 5.57mn tonnes. Heavy sections output will beparticularly disappointing, with growth of just 2.4% over 2008-2013 to 463,300 tonnes in 2013 as a resultof a more competitive environment in supplies to the shipping industry. Rebar and wire rod are set to bethe key stimulants of growth, rising 28.7% and 17.2% over the period, largely due to the resumption indemand from the construction industry in Czech Republic and European markets. Exports of semis andfinished steel products will grow by an estimated 8.5% over the 2008-13 period to 5.73mn tonnes, whileimports will are forecast to grow 9.0% to 6.42mn tonnes, leading to a modest rise in the steel trade deficitfrom US$380mn to US$420mn. Table of Contents
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