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New Report Available: Spain Metals Report Q1 2014

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2013-12-27 09:05:00 - New Materials market report from Business Monitor International: "Spain Metals Report Q1 2014"

The outlook for Spain's metals sector is bleak, with few opportunities for growth in either production or consumption until beyond 2017. The effects of the eurozone crisis and domestic recession on the steel industry means the sector will see a protracted downturn that could permanently affect its structure. Indeed, we believe economic growth in Spain will prove moribund and the local steel market will fail to return to pre-recession levels of consumption. In 2012 domestic crude steel consumption is estimated to have fallen 2.2% to 13.69mnt (mn tonnes). In order to compensate for poor domestic demand, recovery in the Spanish steel industry will largely depend on growth in exports of manufactured goods. Germany has been the chief target for Spanish

steel exports, but the decline in the performance of the German manufacturing sector from mid-2011 is having a deleterious effect on export performance.

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In early August 2013 ArcelorMittal announced its intension to restart coke oven batteries 7 and 8 in Aviles, northern Spain by mid-November, following their hot shutdown in December 2011, due to the fall in steel demand in Spain and Europe. This will help provide steel to the local automotive industry. This indicated growing optimism that the export-oriented Spanish automotive industry was set for growth in 2013. Acerinox is also predicting a recovery in the global stainless steel market in 2013, bolstered by the automotive industry. However, the Spanish flat steel market is unlikely to recover its full momentum over the medium-term with packaging and consumer durables hit by high unemployment. At the same time, the long steel market has been hit by the collapse in residential construction.

ArcelorMittal Flat Carbon Europe is to invest EUR17.2mn in several improvement projects at the Aviles site. The main improvements resulting from these investments are related to product quality, internal logistics and customer service. The investments include a new tinplate inspection line, an upgrade of the roll shop, the revamping of hot-rolled coil yard #15, the revamping of the electrical system of galvanising line #2 and several mechanical improvements in the pickling line.

Moe good news on the corporate front came when local-based steel producer Tubacex announced that its January-September 2013 net profit grew by 26.5% y-o-y to EUR11.85mn (US$16mn). Sales revenue for the same period was up by 4.4% y-o-y to EUR411.9mn (US$556.8mn). The company has attributed this performance to strong sales of high value-added products to the oil and gas sector.

Over the long run we believe economic growth in Spain will prove moribund and the local steel market will fail to return to pre-recession levels of consumption. In 2012 domestic crude steel consumption is estimated to have fallen 2.2% to 13.69mnt (mn tonnes) and demand will remain at least 50% down on pre-crisis levels. Given current trends in terms of both output and the state of domestic and external markets, the industry is unlikely to return to pre-2011 levels of output until 2017, when gradual growth should see the industry producing 15.90mnt, which is still over 3mnt lower than the 2007 peak.

On an intercontinental level, the European Commission unveiled in June an action plan revive Europe's steel industry, hurt by tumbling demand and plant closures. The EU steel action plan aims to cut red tape, boost apprenticeship schemes and innovation, create a level international playing field and study ways to lessen the burden of energy costs, which account for about 40% of steelmakers' operating expenses. It says existing EU funds should be used to ease the social cost of restructuring, which has caused the loss of 40,000 jobs in recent years, including the planned closure of most facilities at ArcelorMittal in Liege, Belgium. 'The Action Plan is a good starting point, but there still is a lot of work to be done until our sector will substantially benefit from the proposals,' said Gordon Moffat, director general of European steelmakers association Eurofer. Over time, this could prove to be a boost for Spain's steel industry.

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