New Market Report: 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.

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