Eurometal News Letter Nr 27 Steel Markets in Central and Eastern Europe

EUROMETAL NEWS LETTER NR 27OCTOBER 2009

1

STEEL MARKETS IN CENTRAL AND EASTERN EUROPE

FACTS, BACK GROUND INFORMATION AND TRENDS IN VIEW OFEUROMETAL STEEL NET FORUM BUCHAREST 21 OCTOBER 2009



2

CEE ECONOMIES: KEY INDICATORS ON ECONOMICS AND STEEL


3 / 21

Czech Republic

• GDP Growth : 24%

• IP: 2009 July :-18.2 %

• C. Steel Prod. : 7.1 m.t

• ASU (C. Steel Eq.): 7.6 m.t

Poland


• IP: 2009 July :-4.6 %


• ASU (C. Steel Eq.):13.9 m.t

Hungary


• IP: 2009 July :-19,4 %



Slovakia


• IP: 2009 July : -18,0 %



Bulgaria


• IP: 2009 July : -19,0%



Romania


• IP: 2009 July : - 4,5 %



Industrial production increase percentages are on a y-o-y basis.;GDP growth rates with constant prices between 2004-2008

KEY INDICATORS ON ECONOMICS AND STEEL OF MAIN CENTRAL EUROPEAN ECONOMIES

SOURCE: MB CEE STEEL CONFERENCE PRAGUE 2009: ERDEMIR PRESENTATION


Ukraine


• IP: 2009 July :-26.7 %


• ASU (C. Steel Eq.): 9.4 m.t.

Russian Federation


• IP: 2009 July :-10.8 %



SOURCE: BLOOMBERG & WSA

Industrial production increase percentages are on a y-o-y basis.;GDP growth rates with constant prices between 2004-2008

KEY INDICATORS ON ECONOMICS AND STEEL: RUSSIAN FEDERATION AND UKRAINE

SOURCE: MB CEE STEEL CONFERENCE PRAGUE 2009: ERDEMIR PRESENTATION


Turkey


• IP: 2009 July :- 9.2 %

• C. Steel Prod. : 25 m.t


SOURCE: BLOOMBERG, WSA & TSI

KEY INDICATORS ON ECONOMICS AND STEEL: TURKEY

MB CEE STEEL CONFRENCE PRAGUE 2009: ERDEMIR PRESENTATION


66

A COMPARISON OF EUROPEAN REGIONAL APPARENT STEEL CONSUMPTION SHOWS THAT GROWTH TOOK PLACE IN CENTRAL AND EASTERN EUROPE AS WELL AS IN THE BLACK SEA

AREA, BUT NOT IN THE WESTERN PART OF EUROPE

-1,5%

1,4%

3,1%

4,1%

5,3%

6,2%

-0,6%

BRITISHISLANDS

WESTERNEUROPE

SOUTHERNEUROPE

SCANDINAVIA EUROPEANCIS

CENTRALEUROPE

BLACK SEA

EUROMETAL CHART BASED ON WORLDSTEEL FIGURES

CAGR 2000 - 2008


7% 32% 4% 15% 10% 9%23%

5% 27% 22% 4% 17% 12% 13%

A QUIET REVOLUTION BETWEEN 2000-08: CENTRAL EUROPE, BLACK SEA AND EUROPEAN CIS MARKETS HAVE EMERGED AS MAIN STEEL USERS, ACCOUNTING FOR

42 % OF 2008 EUROPEAN STEEL USE (34 % IN 2000)

UK &IRELAND

WESTERNEUROPE

SOUTHERNEUROPE

SCANDINAVIA

EUROPEANCIS

CENTRALEUROPE

BLACKSEA

2000 TOTAL:216 MLN TONS

= 100%14 2071 51 31 218

12 5768 11 3245 312008 TOTAL:

= 100%256 MLN TONS


4,3

0,4

4,0

6,911,4

0,6

1,0

1,40,6

1,2

1,1

0,4

0,4

1,96,5

4,0

0,5

2,30,3

2,0

21,30,1

35,4

EUROMETAL CHART BASED ON WORLDSTEEL FIGURES AND EUROMETAL ESTIMATES

CEE 2008 APPARENT STEEL CONSUMPTION FINISHED STEEL PRODUCTS :RUSSIA, TURKEY AND POLAND ARE THE MAIN STEEL MARKETS IN THE AREA


9

- 16,6

- 4,4 - 7,4

- 5,3

- 8,8

+ 1,9

- 3,4

- 3,5

-0,2

- 18,2

- 22,2

-9,0

-5,7= % CHANGE IN GDP, 2.QUARTER 2009

YEAR-ON-YEAR COMPARISON 2.Q.2009 / 2.Q 2008

SOURCE : EUROMETAL CHART BASED ON EIU AND EUROSTAT FIGURES

WITH THE EXCEPTION OF POLAND, MAIN CENTRAL EUROPEAN ECONOMIES HAVE BEEN STRONGLY HIT BY THE GLOBAL ECONOMIC CRUNCH DURING

FIRST PART OF 2009


10

- 11,4 -19,4

- 4,6

-18,2

- 9,2

-10,8

- 9,2

-26,7

-5,7 = CHANGE IN INDUSTRIAL PRODUCTION, LATEST AVAILABLE FIGURES AS OF JULY 2009YEAR-ON-YEAR COMPARISON

SOURCE : EUROMETAL CHART BASED ON EIU AND EUROSTAT FIGURES

EXCEPT FOR POLAND, ROMANIA, GREECE AND TURKEY, JULY 2009 INDUSTRIAL PRODUCTION IN CEE REGRESSED BY TWO DIGIT FIGURES

-27,9

-17,7

-14,7

- 4,5-20,4

-19,0

- 18,0

- 9,2


THE FINANCIAL CRUNCH 2008/09: A SEVERE HIT AT STEEL DEMAND IN CEE ECONOMIES


12

CRUDE STEEL PRODUCTION AUG 2009COMPARED TO AUGUST, 2008:

WESTERN EUROPE - 28 %

SOUTHERN EUROPE - 44 %

BLACK SEA - 14 %BALTIC SEA - 48 %

EUROPEAN CIS - 19 %

CENTRAL EUROPE - 24 %

- 28%

- 44 %

- 48 %

- - 14 %

- 19%

- 24 %

- 30 %

UNITED KINGDOM - 30 %

EU-27 AUGUST PRODUCTION DECREASED -4,1 % COMPARED TO JULY.CIS: +/- 0%; TURKEY: -3,2 %

AUGUST 2009 PRODUCTION IN WESTERN EUROPE WAS AT -28 % COMPARED TO AUGUST 2008. CIS AND TURKEY HAVE FURTHER EASED OUTPUT CUTS.

IS A BATTLE FOR MARKET SHARES LOOMING?


13

IN THE LAST DECADE, EU-12 STEEL MARKETS BECAME GRADUALLY INTEGRATED INTO MULTILATERAL INDUSTRIAL AND COMMERCIAL

NETWORKS


EU-12 STEEL INDUSTRY OWNERSHIP IS NOW BY 80 % CONTROLLED BY INTERNATIONAL PLAYERS

Ownership of steel industry in the 12 countries that have joined the EU since 2004(weighted by volume of crude steel production in 2008):

Data: Integer Research

Major West European- based producers:

ArcelorMittalCelsaSidenor

Major North American-based producers:

US SteelCommercial Metals

Major CIS-based producers

SeverstalMechel

TMKInd Union of Donbass

Ind Metallurgical Holding

Still locally / independently owned


EU 12 STEEL INDUSTRY IS NOW CONTROLLED FOR 80 % BY INTERNATIONAL PLAYERS

• In the last two decades, CEE Steel Industry has been gradually integrated in the industrial and commercial networks of multinational steel groups

• Over the past decade, the Eastern European steel sector has become an integral part of the EU / Western European steel industry, with major assets acquired by ArcelorMittal and other significant players. The Eastern European steel industry no longer really exists as a separate entity

• Acquisitions in the region by US, Russian and Ukrainian producers have even more closely linked the Eastern European steel sector to the global steel industry

SOURCE: INTEGER RESEARCH


SALZGITTER HANDEL

RUUKKI

THYSSENKRUPP MAT

VA STAHLHANDEL

BE GROUP

KLOECKNER

TIBNOR

CORUS SERVICES

AM DISTRIBUTION

ARCELOR SSC

IMS

SLSK ROHU BG BALTICS

LOCAL HEROES FERONA, ZLOMREX, MERSTEEL FIGURE AMONG TOP 20 EU STOCKISTS

BALKANSCZPL

INTEGRATION CONTINUED DOWNSTREAM:WESTERN EUROPEAN DISTRIBUTORS MOVED SIGNIFICANTLY INTO CEE MARKETS CHALLENGING THE LOCAL HEROES


17

STEEL DEMAND PATTERNS IN CENTRAL AND EASTERN EUROPE TEND TO TURNSTEEL DEMAND PATTERNS IN CENTRAL AND EASTERN EUROPE TEND TO TURN COMPARABLE TO COMPARABLE TO EUEU--15 MARKETS, EXCEPT FOR THE HIGHER IMPACT OF CAR INDUSTRY IN WEST15 MARKETS, EXCEPT FOR THE HIGHER IMPACT OF CAR INDUSTRY IN WESTERN EUROPE AND ERN EUROPE AND

OIL & GAS IN CIS MARKETSOIL & GAS IN CIS MARKETS

42 %

25 %

16 %

10 %2 %5 %

CONSTRUCTION

MACHINERY

TRANSPORT VEHICLES

METAL PRODUCTS

OIL & GAS

OTHER END USE

SOURCE :EUROMETAL CHART, MCKINSEY

46 %

23 %

12 %

15 %

2 %2 %

43 %

5 %

23 %

9 %

7 %

9 %

9 %

WEST EUROPE EAST EUROPE CIS

165 MIO T 33 MIO T 49 MIO T



18

CEE STEEL END USE SECTORS: MARKET CHANCES AND MARKET RISKS


19

-23,2

-28,0

+1,0

+26,3

-36,5

-5,8

- 20,5

-10,8

-79,2

+9,0

-2,3

-33,5

- 45,8

-16,1

+ 3,9

2007-2011 FORECASTED CHANGE IN NEW RESIDENTIAL BUILDING

-76,6

-61,5

-43,0

-8,1

IN CENTRAL EUROPE CONSTRUCTION ACTIVITY WILL BE LESS MARKED BY THE CRISIS AND EVEN WILL GROW IN POLAND, AND AUSTRIA

BUT BASICALLY A GROWING UNCERTAINTY REGARDING DEMAND AND FINANCING WILL AFFECT CONSTRUCTION FORECASTSIN A NEGATIVE WAY.

RENOVATION MARKET OFFERSFAIR CHANCES FOR INCREASEDBUSINESS

EUROMETAL CHART BASED ON EUROCONSTRUCT

NEW RESIDENTIAL CONSTRUCTION STARTS FORECAST 2007 -2011: MAIN CEE ECONOMIES


20

-1,8

NORDIC+ 9,9

+6,3

-1,5

+3,9

-3,8

+0,3

-6,5

-5,8

+21,4

+5,5

-3,2

+7,0

FOR 2009, EUROCONSTRUCT IS FORECASTING SIGNIFICANT GROWTHIN CIVIL ENGINEERING WORKS IN MAJOR CEE ECONOMIES

2009 FORECAST OF YEAR-ON-YEAR CHANGE IN CIVIL ENGINEERING WORKS

+4,3

+3,1

+14,5

CIVIL ENGINEERING WILL BE HELPED BY PUBLIC SPENDING PROGRAMMES TO IMPROVE INFRASTUCTURES OF EUROPEAN ECONOMIES AND BY INVESTMENTS LINKED TO MAJOR EVENTS.

RAILROAD DEVELOPMENTS FOR HIGH SPEED TRAINS, ENHANCING EUROPEAN MOTORWAYS NETWORK.

FURTHERMORE CIVIL ENGINEERING WILL HAVE TO DEAL WITH ALL KIND OF MORE EFFICIENT INVESTMENTS TO COPE WITH THE CONSEQUENCES OF GLOBAL WARMING

FAVOURABLE DEMAND FORECASTS FORCENTRAL EUROPE

EUROMETAL CHART BASED ON EUROCONSTRUCT


INDEXED COMPARISON OF EUROPEAN APPLIANCE PRODUCTIONINDEXED COMPARISON OF EUROPEAN APPLIANCE PRODUCTION

00

200200

300300

350350

250250

150150

100100

5050

19941994 19951995 19961996 19971997 19981998 19991999 20002000 20012001 20022002 20032003 20042004 20052005 20062006

EASTERN EUROPE

WESTERN EUROPE

AS THE INDUSTRY HAS TO LOOK FOR LOWER PRODUCTION COSTS

CEE WHITE GOODS INDUSTRY HAS STARTED TO REPLACE WESTERN EUROPEAN PLANTS


SHIPBUILDING IN POLAND AND ROMANIA: ORDERBOOKS REACH INTO 2011 FOR ROMANIA AND INTO 2010 FOR POLAND.

22 Source: RCG based on Lloyds, ClarksonFor 2009-2011 delivery schedule of order book as for March 2009

0.00.20.40.60.81.01.2

DE

0.00.20.40.60.81.01.2

IT

0.00.20.40.60.81.01.2

PL

0.00.20.40.60.81.01.2

RO

0.00.20.40.60.81.01.2

FI

0.00.20.40.60.81.01.2

DK

0.00.20.40.60.81.01.2

BG

2007200820092010

Ship completion, years [mCGT]

Major European shipyards

1.Odense Lindo DK2.Stocznia Gdynia PL3.Meyer Werft DE4.Szczecin Nowa PL5.De l'Atlantique FR6.Aker Ostsee DE7.Aker Finnyards FI8.Sestri Cantieri IT9.Daewoo Mangalia RO10.Brod Uljanik CR11.JJ Sietas DE12.Fincantieri Monfalcone IT13.Volkswerft DE14.Brod Split CR15.Brod 3 Maj CR16.Flensburger DE17.Fincantieri Castellammare IT18.Volharding NL19.Barreras SA Vigo ES20.Damen Shipyards NL21.Damen Galati RO22.Bulyard Varna BG23.Izar Sestao ES

2011+

0.00.20.40.60.81.01.2

ES

0.00.20.40.60.81.01.2

FR

0.00.20.40.60.81.01.2

NL


23

+ 8 %

-40%

- 5 %

+ 4 %

-52 %

-5,7 = CHANGE IN CAR DEMAND 2009 / 2008 IN %

SOURCE : EUROMETAL CHART BASED ON J D POWER FORECAST

MIXED OUTLOOK FOR MAJOR CEE CAR MARKETS IN 2009

-46 %

- 0,3 %

- 73 %

KEY ISSUES 2009:

UKRAINE: CREDIT SQUEEZE; HIGHER DUTIES

RUSSIA: LOAN SUBSIDY SCHEME STARTED IN 04-2009

ROMANIA: SCRAPPAGE SCHEME, TAX CUTS

HUNGARY: CREDIT SQUEEZE, VAT INCREASE

POLAND: RE-EXPORT OF 20% OF SALES

TURKEY: TEMPORARY TAX CUT

SLOVAKIA: SCRAPPAGE SCHEME

CZECH REP.: VAT REFUND, SCRAPPAGE SCHEME?


ESPECIALLY IN EASTERN EUROPE (RUSSIA, UKRAINE & TURKEY)

15 PLANTS WITH MORE TO COMECAR ASSEMBLY PLANTS IN CENTRAL & EASTERN EUROPE


25

Source:

OEM PRODUCTION SPLIT BETWEEN EU-15 AND EU-12 :COMPARISON 2005 – 2012

EU - 15 EU - 12

CHANGES IN CAR VEHICLES CUSTOMER PATTERNS:MID SIZE CARS AND LOW COST CARS PRODUCTION IS GRADUALLY SHIFTED TO

EU-12 COUNTRIES AND OTHER EAST EUROPEAN LOCATIONS

SOURCE : ALPHAMETRICS


26

INVITATION TO ALL ASSOCIATIONS AND STEEL STAKEHOLDERS: THE MAJOR 2009 EVENT IN EUROPEAN STEEL DISTRIBUTION: TOP THEMES & TOP SPEAKERS AT A VERY CRUCIAL MOMENT OF A CHANGING STEEL CYCLE (PLEASE RELAY THIS INVITATION TO ALL STEEL PROFESSIONALS)

COMPLETE INFORMATION AND REGISTRATION FORM AVAILABLE ON THE EUROMETAL WEBSITE AT www.eurometal.net OR MAIL TO: [email protected]


27

CONFERENCE PROGRAMME

FROM CRISIS TO CHANCES


28


SESSION 1

CHRISTIAN PARVANSECRETRY GENERAL, AOAR

BUSINESS IN AND AFTER THE CRISIS

AUREL SARAMETPRESIDENT, NATIONAL LOAN GUARANTEE FUND FOR SME

SOLUTIONS FOR FINANCING PROCESSORS AND DISTRIBUTORS OF METALS

COSTEL MIRONPRESIDENT MAIRON, PRESIDENT ARDIMET

DISTRIBUTION OF STEEL PRODUCTS IN ROMANIA


29


SESSION 2

DR. BENEDIKT ZEUMERDIRECTOR METALS & MINING, MCKINSEY & COMPANY

WHAT WILL CHANGE IN THE STEEL SECTOROUTLOOK BEYOND 2009/2010

DR. THOMAS LUDWIGCEO, KLÖCKNER & CO - VICE PRESIDENT, EUROMETAL

A EUROPEAN PLAYERMANAGING THE CHANGES OF STEEL DISTRIBUTION

GEORGES KIRPSVICE PRESIDENT, EUROMETAL

COPE WITH THE CHALLENGES, MAKE USE OF THE CHANCESEUROPEAN STEEL DISTRIBUTION 2010


30


SESSION 3

JACQUES DHAMCHAIRMAN, ARCELORMITTAL DISTRIBUTION SOLUTIONS - PRESIDENT, EUROMETAL

EUROPEAN STEEL STOCKHOLDING DISTRIBUTIONWITH A FOCUS ON NEW BUSINESS PROFILES

STEVAN SEFERGROUP REPRESENTATIVE, THYSSENKRUPP

PIERRE MANGERSDIRECTOR, PRICEWATERHOUSECOOPERS

QUO VADIS STAINLESS STEEL: CRASH OR CASH?

OPPORTUNITIES FOR STOCKHOLDING DISTRIBUTION IN THE WESTERN BALKANS REGION


31


SESSION 4

JOSE PABLO RIVADULLA GRACIADIRECTOR GENERAL, BAMESA

FLAT STEEL SERVICE CENTERSFOLLOWING STEEL CONSUMING INDUSTRIES

WERNER GOTTWALDCEO, VOESTALPINE SERVICE CENTERS

THE SERVICE CENTER STRATEGY OF A CENTRAL EUROPEAN STEEL PRODUCER

JUERGEN NUSSERPRESIDENT, EASSC - VICE PRESIDENT, EUROMETAL

THE EUROPEAN SSC INDUSTRY CHALLENGES, CHANGES AND CHANCES

Documents

Eurometal News Letter Nr 27 Steel Markets in Central and Eastern Europe