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UPDATE 2-European Debt Crisis Hits German Steel Industry

Industry News 10:19:18AM Nov 09, 2011 Source:SMM

* German steel group says debt crisis impacting industry

* Says will miss this year's crude steel output forecast

* Says unable to give an outlook for 2012 output (Adds further comments, background)

Nov 9 (Reuters) - Europe's largest steel producer, Germany, will likely produce less crude steel this year than expected as the euro zone debt crisis creeps its way into the real economy.

"In the past few weeks business in the steel industry has become bleak, mainly due to the euro zone debt crisis," German Steel Federation President Hans Juergen Kerkhoff said on Tuesday.

"Crude steel production in 2011 will tentatively be below the forecast level of 45.5 million tonnes but will exceed the previous year's volume of 43.8 million tonnes," he said.

He reaffirmed that he expects demand for rolled steel products for next year to grow by 1.5 percent but said he was unable to provide an outlook for crude steel output.

The chief executive of Salzgitter , Germany's second-largest steelmaker, said last week that demand from carmakers and other end-users was intact despite signs of a slowdown in the economy.

ThyssenKrupp , Germany's biggest steelmaker, and Salzgitter said in September they started slashing their output in the third quarter.

ArcelorMittal , the world's largest steelmaker, said last week a summer dip in demand is deepening into a second-half slump and customers were increasingly cautious due to economic uncertainties.

Ratings agency Moody's last week cut its outlook for the European steel industry to "negative" and said it expects demand to weaken by up to 4 percent in the next 12 months as the industry faces economic strain and weak construction and auto markets.


NEW ORDERS DOWN

Kerkhoff said contrary to the normal business cycle, new orders of German steelmakers have not recovered from the usual summer lull and were down 6 percent year-on-year in September.

In the third quarter, new orders were "around" the same level as the same period last year at 8.76 million tonnes, he said.

The order backlog has been declining since mid-year, and while it was up 8 percent year-on-year in the third quarter, it had shrunk 6 percent from the second quarter, he added.

"The steel industry... is experiencing the consequences of uncertainty in the markets, which has arisen due to the continuing worsening of the debt crisis," Kerkhoff said.

Kerkoff said buyers of steel products were in wait-and-see mode and were avoiding stocking up their inventory too much in case the economy plunges into a recession.

But he noted that new orders in the machine engineering sector and production in the automotive industry showed the steel processing industry remained in robust condition even though it has slowed down slightly.

He said another positive factor was that inventory in the steel distribution sector, which is a good indicator of real demand for steel products, was very buoyant.

In September, unit sales of rolled steel products among steel traders and service centers were still above the 1-million level recorded in August and were 8 percent higher than last year, Kerkhoff said.

Last week the country's largest trade union, IG Metall threatened strike action over wage increases at steel companies.

The union has been in collective bargaining talks for steel-sector workers in the German regional states of NRW, Lower Saxony and Bremen at about 60 companies including ThyssenKrupp, Salzgitter and ArcelorMittal.
 

UPDATE 2-European Debt Crisis Hits German Steel Industry

Industry News 10:19:18AM Nov 09, 2011 Source:SMM

* German steel group says debt crisis impacting industry

* Says will miss this year's crude steel output forecast

* Says unable to give an outlook for 2012 output (Adds further comments, background)

Nov 9 (Reuters) - Europe's largest steel producer, Germany, will likely produce less crude steel this year than expected as the euro zone debt crisis creeps its way into the real economy.

"In the past few weeks business in the steel industry has become bleak, mainly due to the euro zone debt crisis," German Steel Federation President Hans Juergen Kerkhoff said on Tuesday.

"Crude steel production in 2011 will tentatively be below the forecast level of 45.5 million tonnes but will exceed the previous year's volume of 43.8 million tonnes," he said.

He reaffirmed that he expects demand for rolled steel products for next year to grow by 1.5 percent but said he was unable to provide an outlook for crude steel output.

The chief executive of Salzgitter , Germany's second-largest steelmaker, said last week that demand from carmakers and other end-users was intact despite signs of a slowdown in the economy.

ThyssenKrupp , Germany's biggest steelmaker, and Salzgitter said in September they started slashing their output in the third quarter.

ArcelorMittal , the world's largest steelmaker, said last week a summer dip in demand is deepening into a second-half slump and customers were increasingly cautious due to economic uncertainties.

Ratings agency Moody's last week cut its outlook for the European steel industry to "negative" and said it expects demand to weaken by up to 4 percent in the next 12 months as the industry faces economic strain and weak construction and auto markets.


NEW ORDERS DOWN

Kerkhoff said contrary to the normal business cycle, new orders of German steelmakers have not recovered from the usual summer lull and were down 6 percent year-on-year in September.

In the third quarter, new orders were "around" the same level as the same period last year at 8.76 million tonnes, he said.

The order backlog has been declining since mid-year, and while it was up 8 percent year-on-year in the third quarter, it had shrunk 6 percent from the second quarter, he added.

"The steel industry... is experiencing the consequences of uncertainty in the markets, which has arisen due to the continuing worsening of the debt crisis," Kerkhoff said.

Kerkoff said buyers of steel products were in wait-and-see mode and were avoiding stocking up their inventory too much in case the economy plunges into a recession.

But he noted that new orders in the machine engineering sector and production in the automotive industry showed the steel processing industry remained in robust condition even though it has slowed down slightly.

He said another positive factor was that inventory in the steel distribution sector, which is a good indicator of real demand for steel products, was very buoyant.

In September, unit sales of rolled steel products among steel traders and service centers were still above the 1-million level recorded in August and were 8 percent higher than last year, Kerkhoff said.

Last week the country's largest trade union, IG Metall threatened strike action over wage increases at steel companies.

The union has been in collective bargaining talks for steel-sector workers in the German regional states of NRW, Lower Saxony and Bremen at about 60 companies including ThyssenKrupp, Salzgitter and ArcelorMittal.