Poland Metals Report Q4 2012

Includes 3 FREE quarterly updates

BMI's Poland Metals Report for Q4 2012 examines how trends in external markets as well as domestic manufacturing, particularly the automotive sector, will influence production of steel, copper and lead. It assesses how producers are responding to the short-term depreciation of the zloty as well as long-term issues of resource supply and the latest developments in investment and corporate strategy.

In the first seven months of 2012, Polish crude steel output grew 3.4% y-o-y to 5.3mn tonnes (mnt), which continued the trend seen in 2010 and 2011 when production rose 12.1% and 10.0%, respectively. Growth rates are falling as domestic consumption and fixed investment failed to make up for the expected shortfall in exports, which were still below 2008 levels in 2011. Growth has been stimulated by the competitiveness of Polish steelmaking, shored up by a weak zloty against the euro that has enabled the industry to compete effectively on external markets.

In the first seven months of 2012, refined copper production declined 2.6% y-o-y to 335,000 tonnes. Output suffered as a result of a sharp decline in production in February, but the industry has subsequently sustained a recovery, reaching 49,000 tonnes in July, the best monthly result in over a year. Over the same period, refined lead output rose 10.1% y-o-y to just under 53,400 tonnes. However, after April 2012 monthly output was in decline, reaching 5,700 tonnes in July, the lowest level for a year. The exportoriented automotive industry – the main consumer of lead – is facing a highly challenging environment with lacklustre growth.

Over the last quarter BMI have revised the following forecasts/views:

• BMI maintains its forecast of 2% growth in crude steel output to 8.97mnt in 2012. However, the recovery from 2013 is set to be brisk as Polish industry benefits from the likely stabilisation of the EU market. By 2017, Polish consumption should exceed 14mnt for the first time and increase by 26% over 2011 estimates. This should help push up crude steel output to over 12mnt, up 36% over the same period.
• Subdued manufacturing growth will tame domestic crude steel consumption, which is forecast to rise just 1.9% in 2012 to 11.27mnt following estimated growth of 10% in 2011.
• Performance in the copper refining sector justifies BMI’s forecast of near zero growth with output at 572,000 tonnes in 2012. The copper industry is faced with falling ore grades and a lack of expansion plans in the Polish copper mining sector. BMI does not envisage significant output growth over the forecast period due to capacity constraints with output unlikely to move much beyond 2011 levels. As such, while copper ore exports will increase, refined copper exports will decline by around 8% in total over 2012-16 reaching around 307,000 tonnes by 2016.
• BMI believes refined lead production will grow 1% to around 112,700 tonnes in 2012. Output should see steady but unremarkable growth over the rest of the forecast period, reaching 118,000 tonnes by 2016.