France Metals Report Q1 2013

the government would carry through with itsthreat to nationalise the facility.

Over the last quarter, BMI has revised the following views and forecasts:

While France has been one of Europe's better performing steel-producing nations, output wasstill 20% below typical pre-2008 levels in 2012 and BMI estimates that utilisation levels areaveraging 70-75%. Cuts in crude steel-making capacity are therefore inevitable in order toensure the long-term stability of both the French and EU steel industries.

With the steel industry facing output cuts, an economy set to grow by just 0.9% in 2013 andcrude steel consumption set to fall 1.8% to 16.03mnt, BMI forecasts just 0.1% growth in crudesteel output to 15.87mnt. This is a downward revision from the 16.18mnt previously forecast andBMI warns of considerable downside risk.

The French steel industry will undergo the same process of 'delocalisation' as other industrialsectors that the government will be largely powerless to stop. By 2017, crude production andconsumption should reach 17.5mnt and 17.1mnt, respectively, which is still well down on prerecessionlevels.

Cuts in aluminium production mean that we have estimated a 3% decline in primary aluminiumoutput to 429,000 tonnes in 2012, which offsets the growth reported over the previous two years.Modest 0.2% growth is expected in 2013 as the industry remains under pressure due to poormarket performance.