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France Metals Report Q3 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: July 2009 Product Code: R302-7368 Description French steel and aluminium production will plunge in 2009 as key sectors - automotive, construction andplant machinery - experience a severe contraction in output, according to BMI’s France Metals Report.In the first five months of 2009, French crude steel output fell 42% year-on-year (y-o-y) to 4.75mntonnes. This sharp decline came on top of a 7.2% fall in output to 17.87mn tonnes in 2008. The steelindustry has recovered from its December 2008 low in H109 but crude steel production has not risensubstantially above 1mn tonnes per month and in May output was down 41% y-o-y. Output had recoveredto 1.05mn tonnes in March but fell sharply in April to 821,000 tonnes before rising again to 992,000tonnes in May. Some increase in output has been dedicated to restocking, although an increase inproduction is always expected towards mid-year with the seasonal increase in demand for constructionsteel. BMI expects output to drop off again in August. The recovery will be slow as the constructionindustry will continue to struggle; BMI’s infrastructure team forecasts real industry value growth of -5.5% in 2009 and -4% in 2010 before staging a recovery in 2011. With BMI’s economic analysisexpecting growth of -2.4% y-o-y in 2009 - followed by a small recovery of 0.2% y-o-y growth in 2010 -we do not see any substantial increase in demand from domestic steel users during 2009 and 2010. The European market situation for flat products remained unchanged throughout H109, characterised byweak demand and destocking with buyers only purchasing for immediate needs. However, by mid-2009there were signs of price stability, indicating that the market had reached its bottom. Demand for longproducts has stabilised at a low level with stainless steel longs growing although prices are still underpressure in this segment. Demand for flats remains weak, with no significant improvement expected in2009 due in large part to the collapse in the automotive industry. BMI’s automotive team warns thatFrench auto production could continue to be eroded eastwards by companies moving operations tocheaper Eastern European bases, although the government’s five year loan to carmakers and theconsequent carmakers’ commitments will ensure that the fall in output is not too drastic. A strong upturn in demand from metals consumers is expected from 2011. This will have a knock-oneffect on French steel and aluminium production, although it will be limited by cheaper supplies fromEastern Europe, in particular Ukraine and Turkey, which are set to stage rapid recoveries from 2011. Based on trends in H208 and into 2009, BMI forecasts show steel output will decline by around 32% to12.13mn tonnes in 2009. This low-point has not been seen for at least three decades, demonstrating thedepth of the European recession and its impact on French manufacturing. Our forecasts anticipate a 40%decline in aluminium output to around 300,000 tonnes, reflecting the downturn in the automotive,machinery and packaging segments. Our forecasts are more pessimistic than the previous quarter due tosigns that the economic downturn in France and Western Europe will be deeper and longer than weoriginally thought. Indeed, Metals output is expected to stagnate in 2010, before making a slow,unspectacular recovery. A restraining factor will be increased global output at a time of slower Chineseconsumption. By 2013, steel output should be 15.19mn tonnes, still 15% below 2008 levels. Aluminiumshould fare better, helped in part by its use in lighter and more fuel-efficient vehicles. By 2013,aluminium production should have recovered to 2008 levels. Table of Contents
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