Dutch steel and aluminium producers are experiencing a sharp downturn in demand amid theNetherlands’ economic crisis and are unlikely to return to pre-recession levels over the foreseeable future,according to BMI’s latest Netherlands Metals Report.
In the first seven months of 2009, Dutch crude steel production fell 45.7% year-on-year (y-o-y) to 2.42mntonnes. Monthly production hit a low-point of 288,000 tonnes in January and remained at around320,000-340,000 tonnes in February-June. However, July saw a surge in output to 497,000 tonnes which,while down 17.9% y-o-y, was a significant rise, assisted by the resumption of production at Corus’sIJmuiden blast furnace to satisfy a rise in orders. A rise in automotive sales increased demand, withIJmuiden - at a total output capacity of 7mn tpa - a key supplier of hot rolled, cold rolled and metalliccoatedsteels to car producers and automotive suppliers. In August, Tata Steel, Corus’s parent company,stated that it would raise its European production capacity utilisation from 50% to 80%, providing yetmore hope of an upturn in output. Most of this upturn is attributed to an improvement in export marketsrather than domestic orders. Meanwhile, demand for long products has stabilised at a low level, and whilethat for stainless steel longs is growing, prices are still under pressure in this segment.
Despite the positive signs mid-year, the Dutch economy is unlikely to recover until early 2010 and thecountry’s steel industry will rely on European orders to stand a chance of securing growth. Given theNetherlands’ dependence on the export sector, much will depend on the external outlook. However, theoutlook is not entirely encouraging. We are forecasting a 4.4% contraction in the eurozone this year, withweak growth of just 0.4% in 2010. Germany and France’s forecasts have been revised up slightly on theback of more encouraging Q209 real GDP data, but growth in Spain and Italy will remain sluggish atbest. As such, BMI believes the July output figures are likely to be the peak in 2009, with the scrappageprogrammes that revived sales in the car market across Europe largely coming to an end in Q309. BMIforecasts crude steel output of 4.17mn tonnes in 2009, a fall of over 39% from 2008. Stabilisation and thebeginning of a recovery in 2010 should help stimulate output with growth of 18.5% to 4.93mn tonnes,which is still low by historical standards. Meanwhile plans to raise annual capacity at the Vlissingenaluminium smelter by 30,000 tonnes per annum (tpa) to 290,000tpa by the end of 2009 are likely to be puton hold until the European market recovers to 2007 levels of demand.
BMI doubts that output will recover to pre-recession levels over the next five years, raising the prospectof permanent capacity closures. Automotive production, a major market for Dutch steel and aluminium, islikely to be mostly concentrated on small cars and to be limited to 1.90mn units by the end of 2013. Thiswill in turn limit domestic demand for steel and aluminium flat products. As for the European markets,the autos manufacturing body Association des Constructeurs Européens d’Automobiles (ACEA)estimates that by the end of 2009 the Western European market will have contracted by at least 8% due tothe financial crisis. Most other Western European markets have stagnated or fallen considerably as aresult. Consequently, there is little sign of a revival in metals demand from this industry.
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