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Report on the Swedish Metal Market

Research and Markets has announced the addition of the "Sweden Metals Report Q4 2009" report to their offering.

Sweden Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive Sweden's on Brazil's metals industry.

Swedish crude steel and primary aluminium production is set for double-digit growth in 2010 and 2011 as the metals industry recovers from a disastrous 2009 performance, but the latest Sweden Metals Report predicts that it will take until at least 2013 before output in all segments approaches pre-crisis levels, though there is a distinct risk of a double-dip recession even then.

In H109, Swedish crude steel output fell 53.7% year-on-year (y-o-y) to 1.36mn tonnes. This was in addition to a drop of 8.4% to 5.2mn tonnes in 2008, with the decline largely attributed to the sharp economic slowdown from September. Output had averaged around 488,000 tonnes per month in H108, but by December output had dipped to just under 275,000 tonnes and in the January-June period of 2009 it was running at an average of 226,170 tonnes per month. There has been no perceptible recovery in output, with demand for Swedish steel products remaining depressed. Declining orders came as a result of a sharp fall in sales to the automotive, consumer goods and engineering industries. In response, steel and aluminium producers halved output in H109. Steel producers SSAB and Outokumpu and Sweden's only primary aluminium smelter Kubal reduced production by 50%. SSAB mothballed all its Swedish blast furnaces in Q209 and the company's output remains at only half of capacity.

The Swedish steel industry will follow overall economic trends. The country is heading for its largest economic contraction in at least 30 years, with our revised real GDP growth forecast set at -4.3%. Not only will there be deep recessions in all 10 of Sweden's largest trading partners, but constricting credit conditions from a weakened domestic banking system will weigh heavily on domestic consumption and therefore demand for housing, household goods and vehicles, which are the lifeblood of the steel industry. The authors believe that the Swedish metals industry will slowly return to market from Q409 with metallurgical and trade companies already announcing a rally in European demand for some segments in late July. In flat steel sector, hot-rolled coil and coated steel showed signs of revival in late July, but cold-rolled steel and plate had yet to increase. However, by the end of August, the liquidation of excess stockpiles of European companies had not been completed and flats demand in general remained poor and an end to stimulus programmes for the automotive industry in September will dampen prospects for growth.

Longs should be stimulated by increased construction activity largely associated with state infrastructure programmes. Nevertheless, Swedish producers should start feeling the effects of the economic recovery in Germany and France in Q409, but it could take up to a year for the recovery to pick up momentum. The report forecasts a 47% fall in crude steel output to 2.77mn tonnes in 2009, with a recovery beginning in H210 when full-year output will rise by nearly 17% to 3.24mn tonnes. In terms of primary aluminium production, we forecast a 51% y-o-y drop to around 47,450 tonnes, but the industry should see high levels of growth from this low base with output up 27% in 2010 and 33% in 2011; by 2013,

The authors forecast output at just under 93,250 tonnes, which is still 3.6% down on 2008 levels. We caution that the most likely alternate scenario to our core forecast is for a 'double-dip' recession, with a mild recovery in H209 preceding a return to negative growth in 2010. In this event, while there would be a less sharp contraction in 2009, the recovery process would be prolonged, resulting in years of below-trend growth.


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