Abstract
Economic recession, the collapse in the automotive and construction industries
and soaring electricity
prices will lead to a massive slump in German
metals production in 2009, with BMI’s Germany Metals
Report
forecasting a 40.9% drop in crude steel production to 27.09mn tonnes and a 56%
slump in
aluminium production to 220,000 tonnes. However, a recovery in
output is expected in 2010 as the
industry’s main users start
restocking and demand recovers.
Germany has four aluminium smelters with
total capacity of 613,000 tonnes per annum (tpa). German
aluminium
producers have cut capacity utilisation in response to the market downturn. In
January, Norsk
Hydro announced that it would cut production of primary
aluminium at the country’s largest smelter, the
220,000tpa Neuss
smelter, by 30,000tpa – equivalent to 13% of the plant’s annual
capacity. However, by
February the situation had worsened considerably and
the company announced that it was preparing to
mothball the electrolysis
facility within two months. The plant’s casthouse would continue
remelt
operations, producing sheet ingots to serve nearby customers.
Trimet Aluminium also cut aluminium
output by about 30% at its
smelters.
Germany produced 45.83mn tonnes of crude steel in 2008, of which
69.1% was produced by the oxygen
method 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 in
September 2008, leading to a big decline in
steel output and triggering a large fall in prices. In the
German steel
industry alone, new orders slumped by 47% y-o-y in Q408, the worst drop since
1945. For
2008 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 6.42mn
tonnes,
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 a
lesser extent the steel industry – principally in electric arc furnaces
– is the high price of electricity, which
makes up more than 40% of
the cost of primary aluminium production. Producers claim that this is a
greater long-term threat than the recession. Heinz-Peter Schlüter, Trimet
Aluminium’s Chairman of the
Board, said that the industry was highly
competitive, but was being undermined by government policy
and the
“massive distortion of competition due to the one-sided, high
electricity rates in Germany.” The
chief concern is the emissions
trade for CO2 certificates, which is leading to an enormous increase in
the
price of German electricity. Trimet pays around EUR33mn for the CO2
costs included in the electricity
rate, and it is likely to increase to
EUR90mn in 2011 and EUR120mn in 2013. In contrast, producers in
most other
EU states are subject to state-regulated tariffs that spare them from the CO2
costs and
guarantee them additional electricity rate advantages of the
same magnitude.
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