Production has increased again in 2017, but competitiveness of the domestic steel and metals industry remains negatively impacted by high power costs.
- According to the World Steel Association, Spanish steel production decreased 8% year-on-year in 2016, to 13.7 million tons, while exports decreased 3%. This setback after years of sustained recovery was mainly due to lower global demand, strong competition from China and lower sales prices. Domestic steel consumption also decreased in 2016 (down 1.3%).
- However, with increasing sales prices and higher demand since H2 of 2016, especially from the automotive sector, Spanish steel production rose again in 2017, by 2.2% year-on-year between January and August 2017. Profit margins recovered in H2 of 2016 and in H1 of 2017, and are expected to remain stable in the coming months as steel and metals prices are not forecast to decrease for the time being.
- The competitiveness of the domestic steel and metals industry is negatively impacted by power costs, which are among the highest in the EU. This is of major importance for the sector, given that 75% of Spanish steel producers work with electric furnaces.
- Both payment delays and insolvencies have remained stable in 2016 and H1 of 2017, and are expected not to increase in the coming months. Our underwriting stance for the steel sector remains neutral to cautious, while we are more open for businesses in the non-ferrous metals segment.
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Market Monitor Steel November 2017
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