Abstract
The Czech Republic’s steel industry continues to languish in the
doldrums, according to BMI’s latest
Czech Republic Metals Report,
while its long-term potential for growth looks set to diminish as
production 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) to
1.3mn tonnes, according to statistics from the World Steel Association. April
marked a new low with
output down 55.9% y-o-y to just 265,000 tonnes. This
comes on top of a 9.5% fall in volume to 6.39mn
tonnes in 2008. The
principle causes of the contraction in the Czech steel industry were the
slowdown in
construction 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 some
production relocated to Poland. By May, two of four furnaces at Ostrava had
been shut down and a third
was 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
in
southern Poland. At the same time, production will be moved from a
rolling mill in Dąbrowa 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 the
crisis in the car
industry. Overleveraging in the steel industry will also be a major obstacle
to industry
expansion, 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 bound
to have a negative impact on
Czech car production, although this will only have a short-term effect on
the
metals industry. Construction will also be temporarily depressed but
by 2013, the value of construction
activity in local currency terms will
be over 29% up on 2008. Strong long-term demand should give
domestic
steelmakers hope of improved medium- to long-term performance. 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 in East Asia – are seeing a rapid
rise in
domestic steelmaking capacities at a time of moderating demand
growth. As such, we do not foresee a
rapid return to pre-recession levels.
By 2013, crude steel output will be up by just 8% over 2008 levels at
6.90mn tonnes while hot rolled production will rise 6.1% to 5.57mn tonnes.
Heavy sections output will be
particularly disappointing, with growth of
just 2.4% over 2008-2013 to 463,300 tonnes in 2013 as a result
of a more
competitive environment in supplies to the shipping industry. Rebar and wire
rod are set to be
the key stimulants of growth, rising 28.7% and 17.2%
over the period, largely due to the resumption in
demand from the
construction industry in Czech Republic and European markets. Exports of semis
and
finished steel products will grow by an estimated 8.5% over the
2008-13 period to 5.73mn tonnes, while
imports will are forecast to grow
9.0% to 6.42mn tonnes, leading to a modest rise in the steel trade deficit
from US$380mn to US$420mn.
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