Research and Markets: Sweden Metals Report Q3 2009

DUBLIN--(BUSINESS WIRE)--Research and Markets (http://www.researchandmarkets.com/research/61b6d1/sweden_metals_repo) has announced the addition of the "Sweden Metals Report Q3 2009" report to their offering. Sweden Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Sweden's metals industry. The Swedish steel and aluminium industries will see output slashed by 40-50% as Sweden and its 10 largest export markets endure a deep economic recession, according to this latest Sweden Metals Report. In the first five months of 2009, Swedish crude steel output dropped 54% year-on-year (y-o-y) to 1.14mn tonnes. This was on top of a drop of 8.4% to 5.2mn tonnes in 2008, with the decline largely attributed to the sharp economic slowdown from September. Output had averaged around 488,000 tonnes per month in H108, but by December output had dipped to just under 275,000 tonnes and in the January-May period of 2009 it was running at an average of 227,400 tonnes per month. There has been no perceptible recovery in output, with demand for Swedish steel products remaining depressed. Declining orders came as a result of a sharp fall in sales to the automotive, consumer goods and engineering industries. In response, steel and aluminium producers halved output in H109. Steel producers SSAB and Outokumpu and Sweden's only primary aluminium smelter Kubal reduced production by 50%. SMT has said its order intake rate declined in April and May to a level 40-50% down y-o-y. The company has closed 10 production facilities. In Q109, Svenskt Stahl AB (SSAB) recorded an operating loss of SEK134mn (US$17mn), in contrast to operating earnings of nearly SEK2.75bn in Q108, as a result of the downturn in the steel market. Sales fell by 38% y-o-y to SEK8.35bn. The company continues to cut costs and said it will continue with its plans to stop production at its plants in Sweden in order to avoid a build up of inventories. The Swedish steel industry will follow overall economic trends. The country is heading for its largest economic contraction in at least 30 years, with our revised real GDP growth forecast set at -4.3%. Not only will there be deep recessions in all 10 of Sweden's largest trading partners, but constricting credit conditions from a weakened domestic banking system will weigh heavily on domestic consumption and therefore demand for housing, household goods and vehicles, which are the lifeblood of the steel industry. The report forecasts a 43% fall in crude steel output to 2.96mn tonnes in 2009, with a recovery beginning in H210 when full-year output will rise by nearly 9% to 3.23mn tonnes. In terms of primary aluminium production, we forecast a 50% y-o-y drop in aluminium production to 50,000 tonnes. We caution that the most likely alternate scenario to our core forecast is for a 'double-dip' recession, with a mild recovery in H209 preceding a return to negative growth in 2010. In this event, while there would be a blunter contraction in 2009, the recovery process would be prolonged, resulting in years of below-trend growth. Amid a collapse in key markets, the situation facing the Swedish steel and aluminium industries is dismal, affecting all products. Export markets are equally gloomy. Bearing in mind the trends projected in the automotive and construction industries and the response so far taken by domestic manufacturers. Recovery will be slow and by 2013, steel output should be around 4.75mn tonnes, which is still lower than the level seen in recent years. A major medium-term challenge will be the lack of domestic demand coupled with increased competition as foreign producers step up output, particularly in special niche areas which had driven growth in Swedish metallurgy. Aluminium production is, however, expected to return to full capacity of 100,000 tonnes per annum (tpa), although domestic production will continue to represent a diminishing proportion of the Swedish market.