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Romania Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Romania's metals industry.
The Romanian steel industry's poor results are set to lead to a 42.5% year-on-year (y-o-y) decline in crude steel output in 2009, but BMI's latest Romania Metals Report forecasts a rapid recovery from a very low base - though it will be 2015 before the industry reaches pre-recession levels.
In H109, Romanian steel production fell 61.6% y-o-y to 1.11mn tonnes, the second worst performance in the EU after Belgium (-66.0%). Monthly production hit a low of 160,000 tonnes in February (-67%), but made a gradual recovery in the following months, reaching 210-215,000 tonnes in May and June, although output was still down by around 55-57% y-o-y.
There are signs that the steel industry has passed its low-point and cautious optimism is starting to return to the sector. At end-2008, ArcelorMittal closed one of three operating furnaces at Galati, the country's largest steelworks. However, by mid-2009, production was being revived, thereby helping to dampen speculation that the plant could be closed. In July, it produced 100,000 tonnes and 200,000 tonnes per month was expected by the year-end. This is still well below the 350,000 tonnes peak seen in 2008. As such, BMI estimates that 2009 output will total 2.91mn tonnes, down 42.5% over 2008. This is a downward revision from the 27% fall we forecast in our previous quarterly report.
Romania's competitive advantages in steel production should assist rapid growth from a very low base from 2010, but despite compound annual growth in crude steel production of nearly 20% in 2010-13, output will not recover to pre-recession levels over the forecast period. Two factors will mitigate against higher rates of growth in steel. The construction industry is not expected to return to the rate of growth witnessed in the post-accession boom years of 2004-2007 when steel output exceeded 6mn tonnes per annum (tpa) and production of hot-rolled longs grew 25% to just under 1.5mn tonnes. According to BMI's infrastructure team, real growth in the construction industry will decline from 31.6% in 2008 to -4.3% in 2009, and will fail to rise above 4% over the remainder of the forecast period. Meanwhile, output at Dacia has reached its limit and is unlikely to provide for any further rise in demand for flats, which represent 70% of hot-rolled output in Romania. This means flats production for the automotive sector will rely on Ford's investment in automotive production at its newly-acquired plant in Craiova, which could serve as an important growth driver. BMI forecasts 2013 output at 5.99mn tonnes, an 18% increase over 2008 but still below the peak of 6.29mn tonnes reached in 2006.
In terms of products, heavy sections will be the worst affected segment with output expected to fall 26.4% to 177,000 tonnes due to the slowdown in the global shipbuilding industry. BMI expects the cut in orders in 2009 to have an impact on heavy section production in 2010, with the decline in output set to continue. An upturn is expected from 2011 but we do not expect a return to 2008 production levels until 2013. According to BMI forecasts, a collapse in real estate will lead to a 36% fall in rebar production to just over 495,500 tonnes in 2009. However, a quick rebound should ensure that the segment rebounds strongly in 2010 and by 2013 output should be approaching 713,000 tonnes. The strength of growth in Romanian rebar production will be bolstered by both its competitiveness on European markets as well as domestic demand.
Romania's aluminium industry is also set to see a sharp downturn in output. Romanian aluminium producer Alro produced 56,196 tonnes of primary aluminium in Q109 (down 20% over Q408) and 6,076 tonnes of flat rolled products (up 0.5%). Alro plans to produce 201,225 tonnes of electrolytic aluminium in 2009, down 24% over 2008 with an operating rate at around 70%. This reduction is largely related to the shutdown of one pot line, implemented at the end of 2008. BMI believes that Alro may suffer a bigger fall in output, based on our pessimistic outlook for key export markets and the poor performance of the car industry, a major aluminium consumer. BMI estimates that primary aluminium production growth was flat in 2008, totalling around 263,000 tonnes. A 30% fall is expected in 2009, with output down to just under 171,000 tonnes. A key contributor to the decline will be the automotive sector, but car assembly will also secure the sector's revival, with output set to reach 290,000 tonnes by 2013 as Ford boosts output at Craiova.