Romania Iron and Steel Report - H2, 2013

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Romania Iron and Steel Report - H2, 2013

This report covers the developments in Romania’s iron and steel industry in the second half of 2013. Key statistics data up to November 2013 for some of the indicators (overall foreign trade, industrial output, and industrial turnover) and up to September 2013 for the rest of them (particularly detailed foreign trade) are analyzed. Current market trends—including developments for firms ArcelorMittal, TMK, and COS Targoviste (formerly Mechel; now owned by Russian investor Nikarom)—are summarized, and a long-term QuERI forecast up to 2025 is also included.

Rising energy prices on the local market and global oversupply partly caused by China’s rising steel output are the key broad drivers for the country’s iron and steel industry. Local energy prices are still low by EU standards and should further rise in line with the single-market concept, which put pressure on local steel companies (particularly those involved in basic iron and steel production). In the longer term, however, the abundant energy resources can turn into a real strength for the sector, according to the QuERI model for the industry and the related forecast. While metal processing is expected to be driven by the robust local and regional need for steel manufactured goods, the production of raw iron and steel goods has the potential to increase sharply, in particular after 2020.

At a microeconomic level, ArcelorMittal, the major steel group on the market, is downsizing its crude steel output but is increasing the capital of its Tubular Products division in Iasi. The move is in line with the steel mill's shift toward higher value-added segments. The group of five steel plants abandoned by Mechel and currently under the ownership of a small Russian investor (Nikarom), is struggling to continue operations. The group has drafted a strategy under which three of the plants would continue to operate. But the new, tighter insolvency regulations complicate the situation of the companies—all of them facing insolvency, since they set a one-year (instead of three-year) payback period for their dues to the state budget. Pipe-maker Artrom, part of the TMK group, reported January–September financial results far from the full-year targets. Nonetheless, the company remains in the profit area.

Key Points:

• January–September crude steel production is down 15% year on year to 2.2mn tons.

• Romania’s 2012 apparent steel use is down 12% year on year to 166kg per capita, and down 40% from 2007, standing at 55% of EU27 average, according to WorldSteel.

• Romanian steelmakers have asked for fiscal allowances and lower energy prices.

• Industrial output in metallurgy saw a two-digit quarterly contraction in Q2 and Q3, 2013; its 2013 level is nearly 25% below its 2008 level and 36% below 2007.

• Romania remains a net importer of iron and steel (raw and processed products) for the seventh year in a row; notably, the deficit widened by 130% year on year to EUR 654mn in the 12 months ending in September 2013.

Table of Contents

Executive Summary
i. QuERI Forecast

1. Industry Update
1.2 Jan-Sep crude steel production down xx% down y/y to x.xmn tons

2. Industry Overview
2.1 2012 WorldSteel Statistics
2.1.1 Romania’s 2012 apparent steel use down xx% y/y to xxxkg per capita; xx% down from 2007, xx% of EU27 average – WorldSteel
2.1.1 Eurofer expects gradual recovery, x% higher output in 2014 driven by higher levels of activity in the steel using sectors
2.1.3 Romanian steel-makers ask for fiscal allowances, lower energy prices

2.2 Stylised Structure Of Metal Industry
2.2.1 IntelliNews model of Romanian steel market – recent developments

3. Industry Indicators
3.1 Industrial Output Index [2010=100]
3.2 Sales Index [2010=100]
3.3 Utilisation Balance

4. Foreign Trade Balances

5. Corporate Update
5.1 ArcelorMittal
5.2 TMK
5.3 Mechel (formerly; now COS Targoviste)
5.4 Independent

Appendix
Appendix 1: Romania’s Crude Steel production – monthly, 2004-2013
Appendix 2: Romania’s Industrial Activity Indices – annual 2006-2013*, quarterly 2012- 2013
Appendix 3: Romania Steel Industry – detailed exports&imports – annual 2002-2012 [USD/EUR, tons]
Appendix 3: Romania Steel Industry – detailed exports&imports – Jan-Sep 2013 [EUR, tons]

Number of pages: 39
Release Date: Fri, 07 Feb 2014