Romania Metals Report Q4 2011 - new market research report

 

 

In the first seven months of 2011, Romanian crude steel output grew just 1.3% year-on-year (y-o-y) to 2.27mn tonnes, following a strong performance in 2010 when output rose 41.1% to 3.72mn tonnes. From March, monthly output remained in the 340,000-350,000 range. Performance in January was worse than expected, down by over a quarter from the previous month, but production made a recovery back to the norms seen in H210. The decline in output was principally due to ArcelorMittal's decision to temporarily idle a blast furnace due to a drop in orders from Turkey, its main sales market. We have been expecting a stronger performance in H111 in light of the anticipated completion of ArcerlorMittal Galati's EUR53mn upgrade of blast furnace No.5 in January. However, the addition of 2.1mn tpa, which will double the plant's crude capacity, was put back to later in the year.

 

 

This has prompted us to revise down our full-year production forecast for 2011 from 4.29mn tonnes to just under 4.0mn tonnes, representing an increase of around 2.5%. The forecast for hot-rolled output growth has also been revised down from 22.4% to 5.0%, based on new data from the World Steel Association that puts production in 2010 above our previous estimates. The higher base from the previous year has prompted the downward revision in growth, but hot rolled output is still forecast at 3.72mn tonnes. ArcelorMittal Galati is also proceeding with the construction of a new steel mill in Hunedoara with a EUR43mn rolling mill, due to come online by 2012. Additionally, the company is increasing liquid steel production to 700,000tpa to raise output of round semis at its Tubular Products Roman plant. The steelmaker is investing over EUR25mn in upgrading and improving production quality at its plate mill No. 2. Following the mill's modernisation, the company will be able to produce new types of plate which will allow it to enter new markets. Consequently, Romania is on course for a significant increase in steel output over the forecast period.

 

 

We continue to forecast output of 7.52mn tonnes by 2015, an increase of nearly 50% over 2008 levels. ArcelorMittal's expansion will be accompanied by investment in modernisation and restructuring by TMK, Tenaris and Mechel. In 2010, Mechel's Romanian facilities reported large increases in output with steel production up 38% y-o-y to over 827,000 tonnes and the volume of wire and wire products up 38% y-o-y to over 152,000 tonnes. It reported that crude steel output at Mechel Targoviste had reached pre-crisis levels and the Braila mill tripled output of rolled profiles. Its Otelu Rosu plant was due to commence production at its modernised steel casting operations in 2011, further bolstering production. Investment continues to grow as steelmakers regard the country as well positioned to cater for a mediumterm recovery in EU demand.

 

 

In terms of the longs market, Romania's construction sector was hit particularly hard by the global financial crisis, with two years of deep recession after the 2008 global financial crisis. Poor performance in the construction sector has had a deleterious effect on the production of long steel products such as reinforced bars, construction profiles and cold roll-formed sections. As a result, according to the latest WSA data, rebar output declined 5.7% and 39.1% in 2008 and 2009 respectively, but grew 14.7% in 2010, although output was still well below pre-recession levels. The Romanian longs market is set for a rise in demand from 2012. Serious recovery in rebar is only likely from 2012 when the domestic market picks up. We expect rebar to hit a record high in 2015 with production approaching 900,000 tonnes. Romania's aluminium industry reported a recovery in output in 2010, with Alro's output at 241,000 tonnes, an increase of 30% y-o-y. A key contributor to the decline in the previous year was the automotive sector, but car assembly will also secure the sector's revival, with output set to reach 300,000 tonnes by 2015 as Ford boosts production at Craiova.