A Strategic Market Review and Outlook for the Middle East and North African Steel Industry to 2013 Sample Extract pages inside +44 (0) 20 7779 7999 marketing@metalbulletinresearch.com
+44 (0) 20 7779 7999 marketing@metalbulletinresearch.com Metal Bulletin Research offers authoritative reports that address topical issues in the raw materials and metals sectors. The most comprehensive research done to date about the Middle East steel market. George Matta, Ezz Steel l Current, historic and forecast production, trade and consumption by major product in each country (2005-2013) l Raw material availability and balances for scrap, iron ore and DRI by country (2005-2013) l Current and forecast by-product steel capacity by producer out to 2013 l Price forecasts out to 2013 Sample Extract
Contents 1 GLOBAL AND MENA 2009 MARKET REVIEW AND 2010 OUTLOOK 1.1 2009 GLOBAL MARKET REVIEW 1.2 2010 GLOBAL OUTLOOK 1.3 KEY DEVELOPMENTS IN CORE MENA MARKETS 1.3.1 REGIONAL SUMMARY 1.3.1.1 ECONOMIC OUTLOOK 1.3.1.2 STEEL MARKET 1.3.1.3 KEY TRENDS 1.3.1.4 RAW MATERIALS 1.3.1.5 LONG PRODUCTS 2 COUNTRY-BY-COUNTRY DATA 3 CAPACITY SUMMARY List of Charts CHART 1. YEAR-ON-YEAR CHANGE IN CRUDE OUTPUT 2009 CHART 2. FORECAST CHANGE IN CRUDE OUTPUT 2010 List of Tables TABLE 1. MENA STEEL MARKETS (000 TONNES) TABLE 2. MENA RAW MATERIAL BALANCE (000 TONNES) The following pages contain sample extracts from the full report. Please note these are not full text, chapters and sections are incomplete but are provided in this free download document to offer an example of the breadth and depth of the information and analysis covered in the full report.
1 GLOBAL AND MENA STEEL MARKET REVIEW AND 2010 OUTLOOK 1.1 2009 GLOBAL MARKET REVIEW According to World Steel Association data, global crude steel output dropped 8.3% year-on-year in 2009 to 1.19bn tonnes the second successive year-onyear decline. We can characterise the global industry in two distinct parts. Firstly China saw strong growth, with crude steel o utput up 13.8% year-onyear to 566m tonnes. Demand was up by an even greater extent as net exports of finished and semi-finished products shrank from 44m tonnes to 7m tonnes. We estimate that finished steel demand grew from 426m tonnes to 519m tonnes an increase of 22%, and accounting for 49% of total global finished demand. Steel consumption was driven by a combination of direct stimulus funds that were directed into infrastructure and construction or into sales incentives for steel-containing goods such as autos and white goods and a massive government-directed expansion of credit via the banking system. This was then utilised by the private sector and was directed into capital investment projects and construction. The combined effect was to drive steel consumption sharply higher from the second quarter onwards. However, there has also been some inventory accumulation through China. Crude steel output in the rest of the world dropped 22% year-on-year. Given that net exports from China fell, we estimate that finished steel consumption slumped by 30% to 540m tonnes. This was led by the mature economies of North America and Europe and Japan, where demand fell by 30-40% year-on-year. Measures of apparent consumption are more volatile than underlying consumption as apparent consumption does not take into account changes in inventory. We estimate that underlying consumption in the core economies dropped approximately 15-20% in 2009, while apparent consumption dropped in excess of 30%. This is because there was excess inventory accumulated in the second half of 2008 and consequently production in 2009 had to be cut more deeply to work this off. In addition, the absolute level of inventories could be lower in 2009 because consumers measure inventories in terms of number of days supply. If they are operating at lower levels, then the per-day consumption is much lower, and so consequently are their inventory requirements. This was exacerbated by restraints on credit availability, which resulted in firms seeking to minimise working capital (i.e. inventory). Crude steel output in MENA as measured in this report only fell marginally in year-on-year terms. This reflects additional output in certain economies such Iran and the UAE, while only limited reductions in output in Egypt, Turkey and KSA.
CHART 1. Year-on-year change in crude output 2009 Source: WSA, Metal Bulletin Research 1.2 2010 GLOBAL OUTLOOK As we move into 2010, the global economy is gaining strength underpinned by massive government-driven stimulus. Following the deepest global downturn in recent history, economic growth solidified and broadened to advanced economies in the second half of 2009. In 2010, the IMF in January forecast that global GDP is expected to rise by 4%, after falling 0.8% in 2009. This represents an upward revision of 0.7% from its October 2009 World Economic Outlook. In most advanced economies, the recovery is expected to remain sluggish by past standards, whereas in many emerging and developing economies, activity is expected to be relatively vigorous, largely driven by buoyant internal demand. Global steel production and trade bounced back in the second half of 2009. Confidence rebounded strongly on both the financial and real fronts, as extraordinary policy support forestalled another Great Depression. In advanced economies, the beginning of a turn in the inventory cycle and the unexpected strength in U.S. consumption contributed to positive developments. Final domestic demand was very strong in key emerging and developing economies, although the turn in the inventory cycle and the normalization of global trade also played an important role. Output in the advanced economies is now expected to expand by 2%in 2010, following a sharp 3.2% decline in output in 2009. High unemployment rates and public debt, as well as not-fully-healed financial systems, and in some countries, weak household balance sheets are presenting further challenges to the recovery in these economies. Growth in emerging and developing
economies is expected to rise to about 6% in 2010, following a modest 2% in 2009. The varying economic outlook as in 2009 means we believe that there will be two divergent trends taking place in the global steel market. The Chinese government has now begun the process of tightening credit via the introduction of increased loan reserve ratios and the direct restraint of loan growth. This will dramatically reduce the availability of capital for investment purposes. Through the first half of 2010, we expect steel consumption to remain at elevated levels as previously issued credit is put into the system in terms of construction or purchasing of manufactured goods. However, by the second half of the year, we expect consumption of manufactured goods by domestic consumers to slow, although this will probably be slightly offset by higher export demand. Crucially we expect private sector and state-affiliated investment in construction activity will begin to fall in the second half. While the direct government stimulus funds will continue to flow through 2010, we do not expect any growth compared to 2009 and by the second half of the year and certainly by 2011, the withdrawal of stimulus funds will be a negative, as will a reduction in credit availability to the private sector. As construction accounts for around 65% of Chinese steel demand, we expect steel demand to flatten or possibly begin to decline in year-on-year terms in the second half of 2010. For the year as a whole, we are forecasting growth of 4.5%. This will be lower than production capacity growth and we expect to see net exports higher at an estimated 25m tonnes. Outside of China and in mature economies, there is little inventory left to be cut in 2010, and therefore apparent consumption will be signif icantly higher than in 2009 even if there is no change in underlying consumption. In fact, demand is expected to grow at least 5-10% on an underlying level. In addition, inventories will have to be replenished as consumers per-day consumption rises. We are therefore forecasting growth in apparent consumption in the world outside of China in 2010 of 11.6% and 7.5% in 2011. However in 2011, we are still only forecasting consumption outside of China at approximately 775m tonnes still below the peak of 857m tonnes in 2007. It is our view that the construction market in mature economies will be in a down-cycle for an extended period, with markets such as Spain or Dubai remaining significantly below peak demand, while some manufacturing capacity such as in the automotive sector will be permanently lost. The combination means we are forecasting global consumption growth of 8.4% in 2010. In terms of a regional outlook, we are expecting almost a mirror image of 2009 output forecasts, with the strongest recovery in the mature economies of the EU and NAFTA compared to a relatively weak China.
CHART 2. Forecast change in crude output 2010 Source: WSA, Metal Bulletin Research Overall, we see the first half of the year as being a stronger market and rising prices as demand accelerates. However, a slowing China in the second half of the year could lead to rising exports, while sharply higher output in the mature economies could overwhelm sluggish demand growth. 1.3 KEY DEVELOPMENTS IN CORE MENA MARKETS 1.3.1 REGIONAL SUMMARY 1.3.1.1 ECONOMIC OUTLOOK Individual country outlooks vary enormously and are addressed in the individual country outlooks, but we highlight some key issues in this summary. Oil and gas prices appear to have stabilised in the $70-80/barrel range, with most forecasters suggesting that this relatively narrow trading range is likely to remain in place through the year. Early in 2009, prices dipped to below $40/barrel and this triggered significant cuts in revenue (both volume and price) in most oil producing nations. As a result, many states ran budget deficits last year. Private sector income was also impacted in most oildependent nations, which reduced overall business activity. However, thanks to several years of high prices, most states were running fiscal surpluses and this facilitated short-run deficit expenditure. In fact, most states undertook some form of domestic economic stimulus and pushed up expenditure by the second half of the year.
Most of the stimuli were highly beneficial to steel consumption as they focused on steel-intensive construction activity into infrastructure, housing or projects. To a large extent, these offset weakness in private sector expenditure and in some economies added to ongoing private sector investment in construction activity. Going into 2010, the more stable government revenue (thanks to the stable oil and gas prices) should reduce budget deficits in most economies. In turn, private sector activity is also expected to improve. Moreover, as many of the projects are medium-term, the stimuli should still be having a positive impact through at least the first half of the year, and as inflation does not appear an immediate threat in most economies, we expect that this will last through the second half of the year. However, we are somewhat more uncertain of this and caution that some countries could begin to withdraw stimulus at this point and tighten monetary policy. While collapsing oil and gas prices were one issue, the other major g lobal issue with an impact on MENA economies was the financial crisis. However, with the exception of Dubai in the UAE, most regional economies have a relatively unsophisticated banking climate with limited exposure to global financial instruments. As such, the banking system was relatively unscathed and domestic lending to the private sector has been maintained. Coupled with a looser global monetary environment (as most economies seek to track the US dollar), this has allowed most economies to run a loose monetary policy which has encouraged private sector borrowing that is typically then invested at least partly into construction or capital goods a strong environment for steel consumption. However, as we note above, we would expect global monetary policy to tighten through 2010, which may reduce this effect. The non-energy manufacturing sectors in MENA were impacted primarily through the trade channel in 2009. Export-oriented manufacturers in North Africa or textiles in Jordan for example were impacted by reduced demand for their goods from export destinations in mature economies such as EU and North America. With the mature economies expected to see a sluggish return to growth, we expect to see some improvement here through 2010. Other sectors such as tourism that are also reliant on mature economies should also pick up from low levels in 2009, but are unlikely to return to peak 2007 rates. Non-energy commodity exporters are far more dependent on China and here after an initial correction in prices in the first half of 2009, volumes and pricing accelerated quickly in the second half. This resulted in postponed investment plans returning. We expect to see continued strength for these through the first half of 2010, but indicate some concerns in the second half as Chinese growth may slow. Key points can be summarised as: Stable oil and gas prices in 2010 in narrow trading range This should reduce government deficits or facilitate surpluses
Continuing positive impact of state stimulus packages through at least the first half of 2010 and probably into the second half heavily oriented towards construction Limited financial disruption in MENA in 09 with exception of Dubai, UAE Loose monetary policy and financial stability in 09 will continue through first half of 2010, facilitating private sector borrowing and investment in construction and capital goods Tightening global monetary policy in the second half may lead to slowing of this trend Non-energy export manufacturing output should improve slowly Non-energy commodity exporters maintain strength through first half, but caution on Chinese growth in the second half 1.3.1.2 STEEL MARKET In summary, 2009 can be viewed as a year of two halves for the region, although there are some exceptions to this analysis that we cover in more detail in individual country s analysis. The first half was characterised by sharply lower oil and gas prices, weaker exports of manufactured goods, lower non-energy commodity prices and concerns over financial stability. As a result, lending collapsed, business profits collapsed, investment dropped. For the steel industry this meant that demand was much lower. In addition, a very strong market in the first half of 2008 had led to greater steel requirements through the supply chain and a slow reaction to the lower demand levels from the steel industry saw inventory accumulate through the second half of 2008. As a result, steel output was slashed as producers responded to lower steel consumption and the need to reduce inventory. This was particularly prevalent in GCC economies, but much less so in North Africa, where inventory accumulation had been less and there had been less of an impact from the financial crisis on domestic economies that were still undertaking longer-term investment programmes. By the second half of the year, government stimuli, a very loose monetary policy, rising energy and non-energy commodity prices thanks to Chinese economic growth saw investment and construction activity return and even grow in some markets. As inventories were depleted (at varying times), demand and output returned to higher levels. Finished steel consumption in MENA markets dropped 3.5% in 2009 much less than the global average. Even here however, there were divergent trends with strong growth in North African consumption offset by weak consumption in Gulf economies, where massive de-stocking took place. We are forecasting a strong performance in 2010 as Gulf economies see significant improvements in apparent consumption levels while many North African countries continue to grow. Positive effects of short-term government stimuli (mainly in the Gulf) will be a factor in the first half of the year, while longer-term growth plans (more relevant to North Africa) will have a longer impact.
TABLE 1. MENA steel markets (000 tonnes) 2005 2006 2007 2008 2009 2010 2011 2012 2013 Crude Steel Total Long Total Flat Total Finished Output 44,775 48,674 53,374 54,349 52,802 59,750 65,380 72,460 78,860 Output 37,394 40,321 44,760 47,400 44,721 49,277 53,060 57,214 60,825 Net 3,058 712 4,055 4,229 5,826 4,849 5,892 5,437 5,134 Imports AC 40,451 41,033 48,815 51,629 50,547 54,126 58,952 62,651 65,959 Output 13,307 13,585 14,790 14,985 15,048 17,959 19,256 22,263 24,928 Net 9,906 10,680 13,818 12,270 10,527 9,416 9,865 9,608 9,081 Imports AC 23,213 24,265 28,608 27,255 25,575 27,375 29,121 31,871 34,009 Output 50,700 53,905 59,549 62,385 59,769 67,236 72,316 79,477 85,753 Net Imports 12,964 11,392 17,873 16,499 16,353 14,265 15,757 15,045 14,215 AC 63,664 65,297 77,422 78,884 76,122 81,502 88,073 94,522 99,969 % Change 2.6% 18.6% 1.9% -3.5% 7.1% 8.1% 7.3% 5.8% Source: Metal Bulletin Research Tightening monetary policy in the second half of the year as US and mature economies exit recession may dampen private sector investment, while a slowing China (as it seeks to limit the impact of inflation) may limit further gains in energy and non-energy commodity pricing and investment. With investment in new capacity undertaken since 2004, we expect domestic production to gain significantly higher market share and net imports of finished products to decline in 2010. However, the region will still be largely dependent on imported semis with a net deficit in the region of 8m tpy. 1.3.1.3 KEY TRENDS End of de-stocking in Gulf economies, particularly UAE, but construction expenditure will remain well below peak levels. Apparent consumption will rise. Ongoing de-stocking in some countries, notably Egypt, Yemen and Sudan and potentially in Iran, will limit apparent consumption growth, but underlying performance should remain strong Some North African economies, notably Algeria, Libya and Egypt, but also Iraq, are in a long-term strong steel demand growth period thanks to infrastructure and housing investment First-half steel demand in the region will probably be stronger than in the second half as tighter dollar monetary policy, slowing Chinese demand and
a waning impact of government stimuli offset improvement in demand in mature economies Returning output in the mature economies, new capacity in the Gulf region and potentially rising Chinese exports will also tend to deflate the steel market in the second half of the year 1.3.1.4 RAW MATERIALS Regional markets performed comparatively well in 2009 compared to weakness in global markets. Regional crude steel output fell just 2.8% year-on-year in 2009. Gains in Iran, Iraq, Morocco and UAE were offset by small declines in Egypt, KSA and smaller Gulf economies and a bigger fall in Turkey. Reflecting the relative performance of individual countries, DRI output in fact grew by an estimated 2.7%, while scrap consumption fell. Weaker prices for ferrous scrap also reduced scrap generation and exports. Iron ore demand also rose, reflecting the higher DRI output and increased output from Iranian and Turkish blast furnaces. MBR is forecasting a sharp increase in output in 2010. This reflects new capacity, increased capacity utilisation at facilities that came on-stream in 2008/09 but operated below capacity and a return to higher output levels at other sites. Scrap and DRI consumption will be higher, but DRI will show the stronger performance reflecting the location of the additional capacity. TABLE 2. MENA raw material balance (000 tonnes) 2005 2006 2007 2008 2009 2010 2011 2012 2013 Iron Ore Output 26,066 27,812 31,567 36,898 33,915 36,015 39,765 43,215 47,515 Import 26,011 19,160 21,163 21,802 25,234 28,980 32,190 35,948 40,072 Export 5,416 7,324 7,356 13,194 11,152 11,015 12,015 13,015 14,642 AC 46,661 39,648 45,374 45,504 47,997 53,980 59,940 66,148 72,945 DRI Output 15,850 16,120 17,261 17,819 18,938 21,700 24,900 29,050 33,300 Import 381 369 357 438 375 643 1,372 1,782 2,032 Export 428 470 712 690 1,263 1,380 1,550 1,550 1,850 AC 15,803 16,019 16,906 17,567 18,050 20,963 24,722 29,282 33,282 Scrap Arising 9,274 13,399 14,606 13,775 11,388 15,088 16,899 17,683 18,957 Import 15,440 16,439 16,031 21,313 18,136 17,861 18,031 19,906 20,716 Export 3,400 3,494 3,222 4,363 3,300 2,757 2,887 2,617 2,322 AC 21,314 26,347 27,415 30,725 26,244 30,192 32,043 34,972 37,351 Output 44,775 48,674 53,374 54,349 52,802 59,750 65,380 72,460 78,860 % Change 8.7% 9.7% 1.8% -2.8% 13.2% 9.4% 10.8% 8.8% Source: Metal Bulletin Research
1.3.1.5 LONG PRODUCTS Billet output dropped by an estimated 2.2m tonnes, while net billet imports dropped by a further 0.7m tonnes. In fact sections and wire rod output were essentially flat to slightly higher, while rebar output slumped by 3m tonnes. Total long product consumption fell 2.1% year-on-year in 2009 overall, but this obscures significant differences. UAE, Qatari, and smaller GCC countries demand fell by more than 40% year-on-year, while Saudi demand was down by more than 20%. This weakness in Gulf demand was offset by large gains in North African consumption. Egyptian, Libyan and Algerian demand was up in excess of 50%, while Moroccan, Iranian, Sudanese and Syrian demand was also sharply higher year-on-year... to read more and access this independent report, A STRATEGIC REVIEW AND OUTLOOK FOR THE MIDDLE EAST AND NORTH AFRICAN STEEL INDUSTRY TO 2013, please call the our hotline +44 (0) 20 7779 7999 for more information on how to purchase this report.. About Metal Bulletin Research Metal Bulletin Research (MBR), the world's leading independent provider of market analysis for the global metals and mining industry publishes a vast array of in-depth strategic forecast studies on all aspects of the metal industry including carbon steel, steel raw materials, stainless, ferro-alloys, tube & pipe, aluminium and other niche sectors. Through MBR s global network of analysts, economists, contributors and business partners, we are able provide the most up-to-date and accurate data and analysis, along with detailed forecasts and justified recommendations to assist multinationals in their strategic decision making. 4 easy ways to order: 1. Tel: +44 (0) 20 7779 7999 2. Email: marketing@metalbulletinresearch.com 3. Web: 4. Online store: www.metalbulletinstore.com Price: US$8000 5760 4995
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