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Germany Metals Report Q3 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: July 2009 Product Code: R302-7218 Description Economic recession, the collapse in the automotive and construction industries and soaring electricityprices will lead to a massive slump in German metals production in 2009, with BMI’s Germany MetalsReport forecasting a 40.9% drop in crude steel production to 27.09mn tonnes and a 56% slump inaluminium production to 220,000 tonnes. However, a recovery in output is expected in 2010 as theindustry’s main users start restocking and demand recovers.Germany has four aluminium smelters with total capacity of 613,000 tonnes per annum (tpa). Germanaluminium producers have cut capacity utilisation in response to the market downturn. In January, NorskHydro announced that it would cut production of primary aluminium at the country’s largest smelter, the220,000tpa Neuss smelter, by 30,000tpa - equivalent to 13% of the plant’s annual capacity. However, byFebruary the situation had worsened considerably and the company announced that it was preparing tomothball the electrolysis facility within two months. The plant’s casthouse would continue remeltoperations, producing sheet ingots to serve nearby customers. Trimet Aluminium also cut aluminiumoutput by about 30% at its smelters. Germany produced 45.83mn tonnes of crude steel in 2008, of which 69.1% was produced by the oxygenmethod and 30.9% in electric arc furnaces. Large users of steel in industries such as construction,engineering and cars have massively scaled back on orders since the onset of the global financial crisis inSeptember 2008, leading to a big decline in steel output and triggering a large fall in prices. In theGerman steel industry alone, new orders slumped by 47% y-o-y in Q408, the worst drop since 1945. For2008 as a whole, crude steel output was down 5.6% to 45.83mn tonnes. In the western German states,mills reduced steel production by 5.0% to 39.41mn tonnes. In eastern Germany, output totalled 6.42mntonnes, and saw a steeper drop from 2007, by 8.9%. Aside from the current market downturn, the main risk factor facing German aluminium smelters and to alesser extent the steel industry - principally in electric arc furnaces - is the high price of electricity, whichmakes up more than 40% of the cost of primary aluminium production. Producers claim that this is agreater long-term threat than the recession. Heinz-Peter Schlüter, Trimet Aluminium’s Chairman of theBoard, said that the industry was highly competitive, but was being undermined by government policyand the “massive distortion of competition due to the one-sided, high electricity rates in Germany.” Thechief concern is the emissions trade for CO2 certificates, which is leading to an enormous increase in theprice of German electricity. Trimet pays around EUR33mn for the CO2 costs included in the electricityrate, and it is likely to increase to EUR90mn in 2011 and EUR120mn in 2013. In contrast, producers inmost other EU states are subject to state-regulated tariffs that spare them from the CO2 costs andguarantee them additional electricity rate advantages of the same magnitude. Table of Contents
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