Posted in | News

Quarterly Research Report on Canada Metals

Download PDF Copy

Nov 16 2009

Research and Markets (http://www.researchandmarkets.com/research/44d558/canada_metals_repo) has announced the addition of the "Canada Metals Report Q4 2009" report to their offering.

Canada Metals Report provides industry professionals and strategists, corporate analysts, metals associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Canada's metals industry.

Canadian steel mills are finding it increasingly difficult to compete in an adverse environment, as well as being unable to tap into the US market, where the main impetus for demand is related to state-funded infrastructural projects that utilise US steel under the Buy America programme, according to the latest Canada Metals Report.

In the first eight months of 2009, Canadian crude steel output was down by just over 51% year-on-year (y-o-y) to 5.54mn tonnes, as all the main consumers of Canadian metals, notably domestic and US construction and automotive industries, witnessed steep declines in orders and high inventories. In August, output fell 52% y-o-y and 12.5% month-on-month (m-o-m) to 700,000 tonnes, indicating that the industry had yet to begin its recovery. In 2008, Canadian steel production fell 3.8% y-o-y to 15.13mn tonnes, with the decline largely the result of the aftermath of the international financial crisis that began in September. By Q309, the industry, along with the rest of the manufacturing sector, was suffering from idle or shuttered plants due to the global economic downturn. Steel plant capacity utilisation had fallen below 50%.

According to the Metals Service Centre Institute, shipments of steel and aluminium from metals service centres in Canada in August 2009 rose slightly from weak July levels, but destocking continued. Steel inventory to sales ratios fell as depleted quantities of the metal reduced stocks to nearly a two month supply. Metals service centre shipped 415,500 tons of steel, down 18.8% y-o-y but up 4.3% m-o-m. Shipments for the first eight months of the year, of about 3.3mn tons, were down by 32.1% y-o-y. Canadian metals output will be helped by increased investment in infrastructure in H209 and 2010 as a result of the government's stimulus plans. Provincial budgets are allocating massive amounts to infrastructure, sometimes on a shared-cost basis with the federal government. The government's CAD40bn fiscal plan will have a bit of an impact on economic activity, but not nearly as much as that of the US, which is nearly US$800bn. If Canada can secure some form of exemption from the 'Buy America' clause in the US fiscal stimulus package, the domestic steel industry could share in the resulting increase in demand in the US.

Given the protracted nature of the recession in North America and the impact of Buy America on Canada's steel industry and economy as a while, the authors have revised down the crude steel output forecast for 2010 from 15.0% to 8.7%. However, output growth is likely to reach 21.4% in 2011. There are a number of medium- and long-term challenges facing Canadian metals producers. A rapid expansion in global steel production capacity, particularly in China, is a chief concern for the Canadian industry. The declining domestic and NAFTA manufacturing base will limit the size of the industry and serve as a barrier to expansion. With these factors in mind, the authors doubt that annual crude steel production will exceed 16mn tonnes in the foreseeable future and will reach just 13.58mn tonnes in 2013. The report also expects imports to grow at a faster rate than exports, with Canada's trade surplus with the US set to shrink and increased competition on the global market, particularly from Asia.

Key Topics Covered: