Italy Metals Report Q1 2012

The Italian steel industry continues to enjoy one of the strongest performances in the EU, contributing a fifth of overall EU growth in output. However, we have a cautious view on the future of the sector, in line with our below consensus views on eurozone economic growth, which we expect to dip into recession in 2012.
In the first eight months of 2011 Italian crude steel output grew by 5.5% year-on-year (y-o-y) to 17.2mnt (mn tonnes), representing 19% of the increase in EU steel output over the period. Output is set to rise further through the rest of 2011 following the restarting of No.4 blast furnace, operated by Riva Group subsidiary Ilva, in Taranto in April 2011. The blast furnace has been completely rebuilt with new technology, reducing its energy consumption and coking coal needs thereby raising profitability. The rebuild cost is estimated to be EUR240mn.
The state of the Italian metals industry will mirror that of the overall industrial sector. Italy has thus far been unable to counter the losses in production endured during the global economic crisis, unlike Germany, which has enjoyed somewhat of an industrial renaissance on the back of strong demand from emerging markets.
Longs consumption appeared to hold up in Q111, with output and imports both up, although growth remained stronger in the flat segment. A lacklustre performance in the construction sector will continue to weigh on Italian steel consumption. Italian metal production has some way to go before recovering to previous levels and is likely to lag behind domestic consumption, with imports benefiting from any growth in the market. As such, there is still plenty of potential for the domestic metals market to grow.
The Italian economy remains anchored on the road to recovery, but a return to previous trend growth rates seems unlikely for now. The Italian economy continues to distance itself from recession, although the latest data highlight the weakness of the recovery with growth rates lower than trend growth before the global financial and economic crisis and compared with the recovery from the recession in the mid-1990s. Clearly this time around the Italian economy is struggling to regain momentum. As such, we believe the economy will grow at a tepid 1.1% in 2011. Consequently, we see Italian consumption of steel moderating in H112, although a downturn is unlikely. Political uncertainty may hinder steel production as the new government has yet to announce any stimulus plans for the steel sector. Indeed, the new government's austerity measures will probably lead to a lack of capital for the steel sector and may restrict growth opportunities.

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Executive Summary 5
SWOT Analysis 6
Italy Political SWOT 6
Italy Economic SWOT 7
Italy Business Environment SWOT 8
Global Market Overview – Steel Forecast 9
Table: BMI’s Steel Forecast 9
Table: Steel Price Data 10
Commodities Forecast 15
Copper 15
Aluminium 16
Lead 17
Nickel 18
Tin 19
Zinc 20
Europe Overview 21
Forecast Scenario 25
Table: Italy's Steel Production, 2009-2016 ('000 tonnes unless stated otherwise) 28
Macroeconomic Outlook 29
Table: Italy – GDP By Expenditure, Current Prices Breakdown, 2008-2016 (EURbn, unless otherwise stated) 31
Competitive Landscape 33
Company Profiles 35
Alcoa 35
Sapa Profili 36
Global Assumptions 37
Table: Global Assumptions, 2009-2015 37
Table: Global And Regional Real GDP Growth, 2010-2013 (% y-o-y) 38
Table: Selected Developed Market Exchange Rates, 2010-2013 (average) 38
Table: Selected Emerging Market Exchange Rates, 2010-2013 (average) 39
Developed States 39
Table: Developed States Real GDP Growth Forecasts, 2010-2013 (% y-o-y) 40
Emerging Markets 41
Table: Emerging Markets Real GDP Growth Forecasts, 2010-2013 (% y-o-y) 41
Consensus 43
Consensus 43
Table: Real GDP Growth Consensus Forecasts, 2011-2012 (%chg y-o-y) 43
Country Snapshot: Italy Demographic Data 44
Section 1: Population 44
Table: Demographic Indicators, 2005-2030 44
Table: Rural/Urban Breakdown, 2005-2030 45
Section 2: Education And Healthcare 45
Table: Education, 2002-2005 45
Table: Vital Statistics, 2005-2030 45
Section 3: Labour Market And Spending Power 46
Table: Employment Indicators, 2001-2006 46
Table: Consumer Expenditure, 2000-2012 (US$) 46
Table: Average Annual Manufacturing Wages, 2000-2012 47
BMI Methodology 48
How We Generate Our Industry Forecasts 48
Cross Checks 48
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