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Romania Iron and Steel Report - H1, 2014

  • October 2014
  • -
  • Emerging Markets Direct Media Holdings
  • -
  • 40 pages

This report covers the developments in Romania's iron and steel industry in the first half of 2014 - plus revised 2013 data. Key statistics data up to June 2013 for part of the indicators are analysed. A summarisation of the current market trends is included, as well as a long-term QuERI forecast by 2025.



The broad picture for Romania's steel industry has not changed dramatically since our previous report eight months ago [February 2014], and shares pretty much the same patterns with the European steel industry: the high energy prices remain the main issue faced by local companies. While in Europe on average domestic demand is expected to rise moderately this year, domestic demand in Romania remains volatile and features definitely no upward pattern; the external drivers remain critical for overall demand. Indeed, the domestic sales of iron and steel processed goods increased in H1 of 2014 by 6% y/y after but this occurred after 8% contraction in 2013.



SEPARATE DYNAMICS FOR INDUSTRY'S TWO LEVELS. The two levels of the local steel industry - raw steel production and steel processing, evolve along very different patterns: while the steel making loses ground pressured by high energy prices, more value-added segments in the steel processing are doing much better.



Key Points:

oIndustrial output in metal production eases by 9% y/y in 2013 and loses further ground by 1% y/y in H1, 2014.

oIndustrial output in metal processing segment increases by 3% y/y in 2013, despite the 2% contraction in sales. The differential has been driven by a combination of inventory build-up and prices declining -- most likely on the domestic market, following weak demand;

oLater in 2014, H1, output expanded even stronger, by 5% y/y, while the companies' turnover has recovered robustly by 10% y/y.

oOutput of crude steel down some 10% y/y to 3.06mn tonnes in 2013 from 3.42mn tonnes in 2012 and around 6.2mn tonnes in 2005-2007; H1, 2014 brings further decrease

oDomestic demand for raw steel goods [intake] contracts by 12% y/y to 3.72mn tonnes in 2013; recovers partly by 9% y/y in H1, 2014

oQuarterly exports of iron&steel products above EUR 400mn in Q2, 2014 - the highest level in past decade, one third above Q2/08 peak level and double Q2/09 level

Table Of Contents

Romania Iron and Steel Report - H1, 2014
Executive Summary5

QuERI Forecast6

Industry Update10

2013 crude steel production down 10% y/y to 3.1mn tonnes;10

Slowdown eases to 1% y/y in H1, 2014 - when crude steel output was 1.45mn tonnes.10

Industry Overview11

2012 WorldSteel Statistics12

Romania's 2012 apparent steel use down 12% y/y to 166kg per capita; 40% down from 2007, 55% of EU27 average - WorldSteel. [to be updated November 2014]12

EU steel imports continue to rise in July and August, offsetting the modest rise in demand.13

EC agrees to waive green energy surcharge for large Romanian industrial consumers.13

STYLISED STRUCTURE OF METAL INDUSTRY14

IntelliNews model of Romanian steel market - recent developments.14

Industry Indicators15

A. INDUSTRIAL OUTPUT INDEX [2010=100]15

Main drivers over past six quarters: Mechel selling Romanian units and high energy cost.16

Main driver for next six quarters: energy cost and expected recovery of constructions sector.16

Industrial output in metal production eases by 9% y/y in 2013 and loses further ground by 1% y/y in H1, 2014.17

Industrial output in metal processing segment increases by 3% y/y in 2013, despite the 2% contraction in sales. The differential has been driven by a combination of inventory build-up and prices declining -- most likely on the domestic market, following weak demand;17

Later in 2014, H1, output expanded even stronger, by 5% y/y, while the companies' turnover has recovered robustly by 10% y/y.17

Industrial output, metallurgy: quarterly - two-digit contraction in Q2 and Q3, 2013; 2013 level is nearly 25% below 2008 year and 36% below 2007 level.17

Industrial output, fabricated metal products: quarterly - foreign demand gradually gains ground to 13% y/y growth in Q3, 2013; 2013 level is still 14% below the peak 2008 level.17

B. SALES INDEX [2010=100]17

Industrial turnover in metallurgy shrinks by 16% y/y in 2013, in euros; edged up by 7% y/y in H1, 2014.18

2013 contraction is roughly equal for domestic and foreign market; recovery is stronger for domestic market.18

In the fabricated metal products sector, the turnover expressed in euros edges down by only 2% y/y in 2013; gains massive ground, by 10% y/y, in H1, 2014.18

External demand for metal products remains particularly robust; while the domestic sales narrowed by 8% y/y in 2013, the revenues from exports increase by 11% y/y; later in H1, 2014, the exports surged by 18% y/y.18

C. UTILISATION BALANCE19

IntelliNews model of Romanian steel market - utilisation balance.19

Output of crude steel down some 10% y/y to 3.06mn tonnes in 2013 from 3.42mn tonnes in 2012 and around 6.2mn tonnes in 2005-2007; H1, 2014 brings further decrease22

Domestic demand for raw steel goods [intake] contracts by 12% y/y to 3.72mn tonnes in 2013; recovers partly by 9% y/y in H1, 201422

Net imports of raw steel goods thus widened to 0.74mn tonnes in 2013 - not far from the 0.75mn tonnes in 2018, when the demand was particularly strong22

Domestic demand of processed iron and steel goods eases by 13.6% y/y to 3.52mn tonnes in 2013 and partly recovers by 7% y/y in H1, 2014.22

Net exports of processed iron and steel surges by 39% y/y to 0.2mn tonnes in 2013 and further by 59% y/y in H1, 2014.22

Foreign Trade Balances23

IN VALUE TERMS [EUR]25

Exports of ironandsteel [raw products] down 18% y/y to EUR 1.7bn in 2013, another 18% y/y in H125

Exports of ironandsteel products on the opposite up, yet marginally -- by 1% y/y to 1.5bn in 2013 ; growth accelerates to 9% y/y in H1, 201425

Quarterly exports of ironandsteel products above EUR 400mn in Q2, 2014 - the highest level in past decade, one third above Q2/08 peak level and double Q2/09 level25

Import of ironandsteel [raw products] up by 4% y/y to EUR 1.7bn in 2013, further accelerates by 10% y/y in H1, 201425

Import of ironandsteel products down in 2013 for the third year in a row, to EUR 3.7bn, but increase again by 8% y/y in H1, 201425

Romania remains a net importer of ironandsteel [raw and processed products] for the ninth year in a row25

The deficit narrowed by 43% y/y in 2013 to widen again by 33% y/y in H1, 201425

Foreign Trade - Detailed26

Corporate Update32

EC agrees to waive green energy surcharge for large Romanian industrial consumers32

ARCELORMITTAL32

ArcelorMittal Hunedoara considers closing down steel processor in Romania32

Romanian steel maker ArcelorMittal Galati to boost output by 25% in 201533

Romanian unit of steel maker ArcelorMittal scarps power delivery contract with Nuclearelectrica33

TMK34

Output of TMK Artrom pipe maker up 2% y/y in Jan-Sep34

MECHEL [formerly]34

Former Mechel wire maker in Romania breaks even in H1 201434

Appendix35

Appendix 1: Romania's Crude Steel production - monthly, 2004-201335

Appendix 2: Romania's Industrial Activity Indices - annual 2006-2013, quarterly 2012- 201436

Appendix 3: Romania Steel Industry - detailed exportsandimports - annual 2002-2012 [USD/EUR, tonnes]37

Appendix 3: Romania Steel Industry - detailed exportsandimports - H1, 2014 [EUR, tonnes]40





Figure 1: Demand, Output and Foreign Trade for Romania's iron and steel production sector - 1995 USD mn7

Figure 2: Demand, Output and Foreign Trade for Romania's steel product manufacturing sector - 1995 USD mn7

Figure 3: Demand, Output and Foreign Trade for Romania's integrated iron and steel sector - 1995 USD mn7

Figure 4: Romania's exports of total iron and steel sector8

Figure 5: Steel benchmark prices [global] starting 200311

Figure 6: Romania's total steel balance [tonnes] - 2007-201311

Figure 7: Average steel export and import prices 2007-2013 [EUR/ton]11

Figure 8: Apparent use of steel per capita, by region vs. Romania12

Figure 9: Stylised IntelliNews model of Romania's metal industry14

Figure 10: Romania's industrial production index, metal and metal processing industries 20015

Figure 11: Industrial production index, metal PRODUCTION industry - seasonal pattern15

Figure 12: Industrial production index, metal PROCESSING industry - seasonal pattern15

Figure 13: Sales volume index, metal PROCESSING industry [EUR, 2010=100]17

Figure 14: Sales volume index, metal PRODUCTION industry [EUR, 2010=100]17

Figure 15: EUR sales per industrial production unit in metal production and metal processing sectors [2006-2013]18

Figure 16: Trade Balance of Steel (thous. tonnes) - 2002-14, annually, quarterly21

Figure 17: Trade Balance of Steel Products (thous. tonnes) - 2002-14, annually, quarterly21

Figure 18: Market Balance, Steel (thous. Tonnes), 2012-2014; annually, quarterly22

Figure 19: Trade balance, iron and products23

Figure 20: Romania's quarterly ExportsandImports of metal and metal products [EUR] 2001-201324

Figure 21: Romania's quarterly Exports and Imports of metal. [EUR], 2001-1324

Figure 22: Romania's quarterly ExportsandImports of metal products [EUR], 2001-201324

Figure 23: Detailed structure of Romania's exports in 2007 vs. 2013 EUR thous28

Figure 24: Detailed structure of Romania's exports in 2007 vs. 2013 tonnes28

Figure 25: Detailed exports for main items [tonnes], 2007-201430

Figure 26: Detailed exports for main items [EUR thous], 2007-201430

Figure 27: Export prices for export items, quarterly, 2007-2013 [EUR/ton]31





Table 1: QuERI Forecast - Romania iron and steel sector - 1995 USD mn8

Table 2: QuERI Forecast - Romania iron and steel sector - y/y9

Table 3: Price for main steel products [global] starting 200311

Table 4: Romania Sales / Industrial Activity Indices (2010=100)16

Table 5: Romania Balance of Steel, 2002 to 2014 -- annual19

Table 6: Romania Balance of Steel, 2011 to 2014 -- quarterly20

Table 7: Export, import, balance, annual, iron and iron products separately; annual23

Table 8: Export, import, balance, annual, iron and iron products separately; quarterly23

Table 9: Romania's metal industry - detailed exports - annual, 2007-2014 [tonnes]26

Table 10: Romania's metal industry - detailed exports - annual, 2007-2014 [thous EUR]27


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