Germany Metals Report Q4 2009

Germany Metals Report Q4 2009

German metals industries are set for a massive downturn in 2009 and recovery will be a slow process,
further hampered by deterioration in the competitiveness of domestic production, according to BMI’s
latest Germany Metals Report.
Government stimulus measures such as the car scrappage scheme were crucial to reviving the economy in
H109 and are beginning to filter through into increased steel and aluminium output. According to the
World Steel Association, in the first seven months of 2009, German crude steel output fell 41.4% yearon-
year (y-o-y) to 16.53mn tonnes. Despite output being down 28.8% y-o-y in July, it was up 7.2%
month-on-month (m-o-m) at 2.69mn tonnes, the highest monthly level since November 2008. The Federal
Statistical Office (Destatis) reported that steel production rose to 2.9mn tonnes in August. Nevertheless,
the overall macroeconomic picture remains weak in Germany, with real GDP now expected to contract by
6.0% in 2009. In this context, BMI forecasts output falling by around 34% to 30mn tonnes, which is more
pessimistic than the 31-33mn tonnes and 30% decline forecast by Wirtschaftsvereinigung Stahl
(German Steel Federation, WV Stahl).
BMI’s automotive team is not optimistic about sustained growth in the German car industry beyond the
artificially inflated domestic demand created by the government’s car scrappage scheme. Although we
expect some recovery in the commercial vehicle sales in 2010, the fall in the passenger car market will act
as a drag on overall sales, taking end of year sales down 20% y-o-y and dragging output down by 5%.
This will feed into the steel and aluminium markets, with the German flat products markets likely to
remain depressed throughout H110. In the other main market for metal, construction, the German
government’s EUR70bn stimulus plans for infrastructure projects are expected to have some positive
impact on the country’s construction sector in 2010, giving encouragement to longs producers.
Aside from the current market downturn, the main risk factor facing German aluminium smelters and to a
lesser extent the steel industry – principally in electric arc furnaces – is the high price of electricity, which
makes up more than 40% of the cost of primary aluminium production. Producers claim that this is a
greater long-term threat than the recession and undermines German competitiveness. BMI believes that,
as a result, German producers will be unable to take full advantage of the growth in domestic and
European consumption over the next five years.
BMI forecasts apparent crude steel demand falling 38.8% y-o-y to 29.6mn tonnes in 2009, with finished
steel demand falling at a similar rate to 27.5mn tonnes. As such, crude steel output will fall 35% to just
under 30mn tonnes and hot-rolled production will decline 34.6% to 27.6mn tonnes. A modest rebound in
2010 should see crude and finished steel consumption rise by around 5.7% to 31.3mn and 29.1mn tonnes
respectively, leading to 4.6% and 3.5% growth in crude and hot-rolled output. Meanwhile, in 2009 a
41.7% decline in aluminium consumption to 2.03mn tonnes will lead to a 42.4% fall in production and
42% drop in imports to 318,761 tonnes and 2.21mn tonnes, respectively. However, the recovery in
aluminium will be stronger than seen in the steel sector as a result of increased demand for new
applications as a lightweight substitute for steel, particularly in the automotive industry. Consequently,
2013 primary aluminium output will approach 550,000 tonnes, close to pre-recession levels, and exports
should reach 1.62mn tonnes. However, apparent aluminium consumption will surge to 3.92mn tonnes,
with most of the increase supplied by imports which will increase to 3.87mn tonnes.

Executive Summary ....5
SWOT Analysis............7
Germany Political SWOT .. 7
Germany Economic SWOT 7
Global Market Overview...8
Table: World’s Top 10 Steel Producing Countries ......... 10
Aluminium Outlook.......... 11
Table: BMI Aluminium Forecast ... 11
Table: Global Primary Smelter Aluminium Production, 2008-2010 (’000 tonnes) 13
Copper Outlook . 14
Table: BMI Copper Forecast......... 14
Metals Price Outlook....... 16
Table: Stock Levels At London Metal Exchange Warehouses (tonnes) ............. 18
Regional Overview ....19
Industry Forecast Scenario ..........21
Table: Metals Industry – Historical Data & Forecasts, 2006-2013.... 21
Table: Metals Industry – Historical Data & Forecasts, 2005-2013.... 23
Economic Outlook.....24
Table: Germany Macroeconomic Forecasts, 2008-2012 26
Competitive Landscape.27
Aluminium..... 27
Table: Aluminium Industry – Key Facilities ..... 27
Steel 28
Table: Steel Industry – Key facilities, 2007....... 29
Company Monitor......30
ThyssenKrupp AG............ 30
ArcelorMittal 31
Norsk Aluminium............. 32
Trimet Aluminium............ 33
Global Assumptions .34
Table: Global Assumptions, 2007-2013............ 34
Table: Developed States GDP Growth, 2008-2010 ........ 36
Table: Emerging Markets GDP Growth, 2008-2010 ...... 37
Table: Commodity Prices, 2007-2010. 38
BMI Methodology ......39
How We Generate Our Industry Forecasts ....... 39
Petrochemicals Industry .. 39
Cross Checks 40