Turkey and South Africa Metal Market Q4 Research Report to 2012

2012 Turkey Metal Market Q4 Research:

RnR Market Research’s Turkey Metals Report Q4 2012 examines how the steel industry has performed in the face of external headwinds and warns some segments are facing increased pressure as a result of decreased manufacturing activity in the EU. It examines the latest plant projects and whether output is keeping pace with the ongoing increases in capacity. The report also analyses the investment strategies being employed by the leading players in the Turkish steel industry, as they seek to maximise the growth opportunities offered by the regional market.

In the first seven months of 2012 Turkey produced 21.1mn tonnes (mnt) of steel, up 9.3% y-o-y. This followed a strong 2011 when output grew 17.6%. As a result, Turkey represented 24% of global output growth, the largest single contributor. BMI believes Turkey is still on course for its forecast 6% growth in crude steel output to 36.1mnt. Meanwhile, Turkey is increasingly self-sufficient in a broad range of steel products as a result of increased capacity and moderation in domestic demand growth. In H112, Turkish flat steel imports were down 5% y-o-y to 2.43mnt with hot-rolled imports declining 4% and coated steel imports falling 23%, offsetting rises of 14% in cold rolled flats and 2% in strip. At the same time, growth in exports is improving the country’s steel trade surplus. Total steel exports grew 9% y-o-y to 11.7mnt with revenue increasing 4% to US$9.3bn.

In the aluminium sector, the country’s sole 60,000tpa Seydisehir smelter – which has been operating at maximum capacity over the past five years – is unable to fulfil all the country’s aluminium requirements. Smelters will also face increased competition from re-melters.

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2012 South Africa Metal Market Q4 Research:

RnR Market Research View: The key immediate threat to the South African metals industry is the disruption of raw material supplies from strikes in the mining sector, but long-term structural problems such as high electricity prices are proving to be more deleterious to investment, according to RnR Market Research’s Q4 12 South Africa metals Report. The report examines how producers are minimizing investment risk and also explores the impact of the increasingly precarious external macroeconomic environment on exporters and their ability to realize returns. The report also analyses the trends in end markets, such as construction and the automotive industry, which are experiencing varying levels of success and growth.

In terms of the domestic market, metals consumption will track the economic trend. A downturn in GDP growth in 2012, caused in large part by the slowdown in Europe, will weigh heavily on the local market. Economic growth in South Africa is expected to be slow but steady with a modest recovery expected over following years. We maintain our core view that economic growth in South Africa will be driven by consumer spending, while manufacturing continues to remain weak.

While industrial action has increased uncertainty, the greatest risks to the South African metals industry come from downward pressure on prices, a decline in domestic demand and electricity costs. The outlook for the South African steel market is unchanged. A dearth of new infrastructure projects, coupled with a decline in residential building activity has been cited as the cause of the slowdown. We expect a contraction in metals exports in 2012, given the external headwinds. Growth will continue to be restrained by an expected slowdown in the Chinese economy and the government’s attempts to prevent overheating, while the European market will experience continuously low growth.

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