Resource News
UPDATE 2-Salzgitter sees fragile European steel market
By resourceINTEL · November 12, 2009 · 5:43 am · Leave a Comment
FRANKFURT, Nov 12 (Reuters) – Salzgitter (SZGG.DE), Germany’s second-biggest steelmaker, warned on Thursday that overproduction could smother a tentative recovery in the European steel market.
“We anticipate that the European steel market will continue to stabilise moderately, to varying degrees depending on the product group,” it said on Thursday as it reported a third-quarter pretax loss that missed market expectations.
“Fundamentally speaking, however, the recovery is fragile and might come to a halt, for instance, if there is a renewed incidence of an oversupply in the market as a result of the reactivation of temporarily unused capacity.”
ArcelorMittal (ISPA.AS), the world’s largest steelmaker, had dampened recovery expectations on Oct. 28 with a muted forecast for the final three months of 2009 after a return to profit in the third quarter. [ID:nLQ682729]
Salzgitter said its Steel division expected monthly results to improve in the fourth quarter mainly owing to better capacity utilisation of plants and more favourable prices.
The group swung to a third-quarter pretax loss of 66.1 million euros ($99.04 million), lagging the average estimate of a 43 million loss in a Reuters poll of analysts. [ID:nL659525]
It cited the impact of plants idled for maintenance and investments and lower capacity utilisation.
Equinet analysts focused on a drop in the operating margin at its Tubes division, which had until now helped cushion depressed profits. Equinet kept a “reduce” rating on the stock.
MARKET GLUT
Chief Executive Wolfgang Leese had already cautioned against premature optimism in the steel sector, warning that recent signs of recovery were unlikely to be sustained
Germany’s steelmakers’ federation on Monday said there would be no recovery for the domestic industry until at least 2011, following a very difficult 2010. [ID:nL9414575]
The entire sector is watching with concern as record steel output from China starts spilling over into global markets.
Steel Market Intelligence pointed out that October exports from China had doubled from the year’s low in May. “We expect Chinese exports to continue to rise through the fourth quarter as recent domestic price increases will drive still greater production in the region. Exports will continue as the supply ‘safety relief valve’,” it said in a research note.
Germany’s steelmakers’ federation on Monday said there would be no recovery for the domestic industry until at least 2011, following a very difficult 2010. [ID:nL9414575]
The global economic downturn has hit Germany, Europe’s largest steelmaking nation, forcing consumers in the automotive, shipbuilding, construction and mechanical engineering sectors to shave output and cut thousands of jobs.
Salzgitter shares slipped 0.9 percent to 62.69 euros by 0956 GMT, lagging a 0.5 percent dip by the German blue-chip DAX index .GDAXI.
Salzgitter shares trade at about 20 times its estimated 12-month earnings, a premium to rival ThyssenKrupp’s (TKAG.DE) multiple of 16.2, according to Thomson Reuters StarMine, which weights analysts’ estimates according to their track record…read more at the Reuters
