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Czech Republic Metals Report Q4 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: September 2009 Product Code: R302-8097 Description European car scrappage schemes designed to boost the automotive industry had only a modestly positiveeffect on Czech steel production, but were not sufficient to prevent further year-on-year (y-o-y) declinesin Q209 or, according to BMI’s latest Czech Republic Metals Report, enough to make more than atemporary impression.In H109, Czech steel production fell 43.1% y-o-y to 2.05mn tonnes, hitting a monthly low point of295,000 tonnes in April (down 50.9% y-o-y). Capacity utilisation has been slashed across the steelindustry, and comes on top of a 9.5% fall in volume to 6.39mn tonnes in 2008. Semis production fell by10% to 5.6mn tonnes in 2008, with rolled products falling by 5% to 5.8mn tonnes according to figuresproduced by the Czech Steel Federation (HZ). In 2009, steel output in June totalled 386,000 tonnes, the highest monthly output since November 2008and up 17% over May, although the overall production was still down 31.4% y-o-y. This was due in alarge part to a boost to the car industry, and the fact that June had one more working day than the samemonth in the previous year. Total production of road vehicles in the Czech Republic in H109 fell by11.3% y-o-y to 473,644 units across all categories. While the economic crisis has hit Czech carmakersbadly, car scrappage programmes introduced in a number of European countries to incentivise consumerspending on cars has ameliorated the situation compared with Q209. BMI believes the scrappage schemeshave simply stalled the slump and as they come to an end in Q309, crude steel production will againreturn to their pre-scrappage levels of around 350,000 tonnes per month. On the upside, signs ofeconomic recovery in Germany, the Czech Republic’s largest export market, provide hope of aturnaround in the industry’s fortunes in Q4. Strong long-term demand should give domestic steelmakers hope for improved medium- to long-termperformance. Yet, domestic steel consumers can easily source from neighbouring Poland and Slovakia,which means that Czech mills will be under pressure to compete, while export markets - particularly inEast Asia - are seeing a sharp rise in domestic steelmaking capacities at a time of moderating demandgrowth. With ArcelorMittal set to close its Ostrava operations, we do not foresee a rapid return to prerecessionlevels. BMI forecasts that output will fall 32% to 4.43mn tonnes in 2009. Overleveraging in the steel industrywill also be a major obstacle to industry expansion, making it difficult to persuade banks to finance newprojects. By 2013, crude steel output will be down 4.1% compared with 2008 levels of 6.13mn tonnes,while hot rolled production will rise 0.3% to 5.23mn tonnes. Heavy sections output should recovermomentum due to an expected increase in ship orders, with growth of 9.3% over 2008-13 to 494,800tonnes, although a more competitive environment in supplies to the shipping industry could underminethe recovery in this segment. Rebar and wire rod are set to be the key stimulants of growth, rising 28.3%and 16.0% over the period, largely due to the resumption in demand from the construction industry in theCzech Republic and European markets. Exports of semis and finished steel products will grow by anestimated 8.5% over the 2008-13 period to 5.73mn tonnes, while imports are forecast to grow 4.8% to6.17mn tonnes, leading to a 75% decline in the steel trade deficit from US$389mn to US$99mn. Table of Contents
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